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43 Cards in this Set
- Front
- Back
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What does the business cycle refer to?
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alternating periods of recession and expansion.
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What is part of the production function?
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output, total factor productivity, labor and physical capital.
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The amount of labor input used in the production process is best measured by?
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total hours worked.
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In most countries, the Malthusian predictions have not been realized bc:
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technology is improving.
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In his Essay, Principle of Population, Malthus predicted:
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that output per capita would dcline until the population was left in poverty.
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Positioning hte subsistence line in the Malthusian growth model as a positively sloped 45 degree line thorugh the origin reflects?
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constant
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Central Banks set Monetary Policy to:
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change hte money supply
change the interest rate influence the output level |
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What can we assume under perfect competition?
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many buyers and sellers, homogenous product, perfect info, no transaction costs free entry and exit.
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According to the Malthusian growth model, improvements in technology:
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cause no escape from Malthusian Stagnation.
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The 3 principal inputs in the production process areL
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capital, labor and total factor productivity.
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What is the primary difference between the endogenous and neo classical growth theory model consists of the role played byL
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Technological change
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According to the neoclassical growth mnodel, technological change is
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endogenous and exogenous
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What are the important elements of endogenous growth theory?
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tech is nonrivalry, characterized byt he production function, partial excludability.
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According to the endogenous growth model, an increase in investment in research such as in the number of workers doing research will:
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increase growth rate of tech change, and permanenetly increase growth rate of output.
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What are some policies to stimulate growth?
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tax cut, primary, secondary, and higher education, research and development, and basic research.
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The diminishing marginal product of capital implies:
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that an extra machine generates less extra output in a country with little than in a country with much capital.
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What is a major contributor to endogenous growth theory?
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Paul Romer
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One of the main factors that encourages social development is?
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clearly defined property rights
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Which of the following is not an argument against free trade?
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economies of scale
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Income tax or Sales tax are _____ distortional than tariffs.
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less
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What are the 3 determinants of economic growth?
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labor, capital and technology.
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What are some types of physical capital?
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factories, machines, computers etc.
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Growth of Capital Stock
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-volume of phys cap is det by the investment
-capstock grows as long as net investment is pos (gross inv-dep) existing cap stock (K) |
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Growth of Labor (N)
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Growth = # of ppl available for work.
Growth in the number of hours employees worked each year. |
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Growth of Technology
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determines how much out put that can be produced fromt he amount of labor and capitual used in the production
anything that influences co productivity TECH (A) (increases total factor productivity) (labor and Capital) |
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What is the Production Function?
How the 3 determinants combine to produce output |
Y=F(N,K,A)
depends on labor for a given capital stock and given level of tech |
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What is the Marginal Product of Labor?
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add;l unit of output produced by one add'l unit of work--declines as the amount of employment increases.
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What is the marginal product of labor?
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additional output produced b one additional unit of work--declines as the amount of employment increases.
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Who is Thomas Malthus?
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Proposed a model that accounted for long run stability in living standards?
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What is the Malthusian Model?
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consistent with the lack of economici growth over the previous 2 millenia but inconsistent with with the last 2 centuries
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What are the two theories of Malthusian Stagnation?
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Diminishing Marginal Productivity of labor-ag society unchanged
Theory of fertility and mortality=pop needs a min level o output to avoid starvation. |
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Malthusian Stagnation Along the Subsistence line?
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constant output per worker (y/n)
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Above the substence line-
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(y/n) is greater than needed for subsistence (increase in brth rates and decrease in death rates (pop growth)
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Below the Subsistence line
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(y/n) below the sub level (dec in brates and with increase in death rates (disease and starvation) pop decline
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Malthusian Stagnation-Production Function
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the economy is always somewhere on the production function
no matter where the economy's starting point is, there is always malthusian stagnation |
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No output Growth
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(y/n) is just sufficient to maintain life.
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No pop growth
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pop is constant ( no econ growth)
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Malthusian Stagnation
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even with tech change there is still stagnation
the output increase is matched by a pop increase that leaves (y/n) unchanged |
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What is a balanced Growth Path
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where growth rates o capital and labor are balanced
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Solow Growth Model : Savings and Balanced Growth
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-closed econ (i=s)
no tech change labor force grows at a rate of n growth rate of labor = growth rate of cap has constant returns to scale |
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Balanced Growth Path
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net invest=n*k
net inv=change in cap stock savings=s*Y s=saving rate, fraction of income saved Y=ncome s*Y=n*k |
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Steady State Point
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the actual amount of investment is determined by saving is the amount needed to keep the cap stock growing at hte same rate as labor output.
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What happens if the econ starts away from the steady state point?
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if k<k*savings per worker>amount needed to keep K/N constant -K/N
if k>k*savings per worker<the amount needed to keep K/N constant -K/N decreases |
