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Macroeconomics > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

What is economic growth?

A

The expansion of production possibilities.

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2
Q

How is growth rate calculated?

A

Percentage change of a variable.

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3
Q

Real GDP Growth Rate Formula:

A

((Current Real GDP - GDP of Previous Year) / GDP of Previous Year) x 100

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4
Q

How does real GDP Per Person grow?

A

Real GDP grows faster than Population

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5
Q

General Growth Rate Formula:

A

((Current Year Variable - Previous Year Variable) / Previous Year Variable) x 100

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6
Q

Why might Real GDP grow?

A

Economy is reaching full employment in expansion phase of business cycle OR Potential GDP is increasing

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7
Q

Is expansion in the business cycle economic growth?

A

No, it is just picking up the slack of previous years

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8
Q

How do you figure out how long it takes for a variable to double in size?

A

The rule of 70. 70/growth rate

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9
Q

What determines Potential GDP?

A

An aggregate production function
An aggregate labour market

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10
Q

What does the Aggregate Production Function measure? What is its shape?

A

Labour, Real GDP
Upwards rising with diminishing marginal returns

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11
Q

How does an increase in the quantity of labor change Real GDP?

A

It creates a movement up along the production function. Raises Real GDP

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12
Q

What are the axis of the Aggregate Labour Market?

A

Labor on X, Real Wage Rate on Y

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13
Q

What is the Demand for labour?

A

The relationship between the quantity of labour demanded and real wage rate

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14
Q

What is Real Wage Rate?

A

Money Wage Rate / Price Level

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15
Q

What is the Supply for labour?

A

The relationship between the quantity of labour supplied and the real wage rate

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16
Q

What is employment when the labour market is in equilibrium?

A

Full employment

17
Q

What does the full employment quantity of labour produce?

A

Potential GDP

18
Q

What makes potential GDP grow?

A

Growth in Supply of Labour
Growth in Productivity of Labour

19
Q

What changes create a change in the Supply of Labour?

A

Average Hours per Worker
Employment Rate
The working-age-population

20
Q

How does an increase in the supply of labor change Real Wages and Labour hours and Potential GDP?

A

Real wages fall
Labour hours increase
Potential GDP increase

21
Q

What is Labour productivity?

A

Quantity of Real GDP produced / An hour of labour

22
Q

What are the effects of an increase in the productivity of labour?

A

Expansion of production possibilities
Increase in Demand for labour
Increase of potential GDP

23
Q

What influences the pace of the growth for the productivity of labour

A

Growth of:
Physical Capital (more stuff)
Human Capital (better quality of labour)
Technological Advancements (better stuff)

Macroeconomics (12 decks)

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