5.6: Economic Growth

Question 1

What do economists use to measure economic growth and standard of living?

Answer 1

Real GDP per Capita

Question 2

Why isn’t Nominal GDP a good way to measure for economic growth?

Answer 2

Doesn’t account for inflation

Question 3

Why isn’t real GDP good to measure for standard of living?

Answer 3

Doesn’t account for population

Question 4

Why do some countries have more growth?

Answer 4

1. Economic System: Capitalism promotes innovation & provides incentives to improve productivity
2. Rule of Law: Political Stability = more economic growth
3. Capital Stock: more machines = more productive
4. Human Capital: Better education & training = more productive
5. Natural Resources: More access to natural resources= more productive

Question 5

Productivity

Answer 5

Output per unit of input

Question 6

Aggregate Production Function

Answer 6

Graph that shows that an increase in the amount of inputs causes an increase in the amount of output, but not at a constant rate.

Physical Capital per worker by Real GDP per worker

Productivity eventually levels off because of diminishing returns

Question 7

What happens to the Aggregate Production Function when there is improvement in technology

Answer 7

The productivity shifts up

Question 8

An advance in technology will cause the
A. aggregate demand curve to shift to the right
B. aggregate demand shift to the left
C..SRAS shift to the left
D. LRAS shift left
E. LRAS shift right

Answer 8

E

Question 9

An increase in which of the following is most likely promote economic growth?

A. Consumption spending
B. Investment tax credit
C. The natural rate of unemployment
D. The trade deficit
E. real interest rate

Answer 9

B

Question 10

An increase in which of the following would be most likely to increase long-run growth?
A. pension payments
B. unemployment compensation
C. Subsides to businesses for purchases of capital goods
D. tariffs on imported capital goods
E. tariffs on imported oil

Answer 10

C