• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

Card Range To Study



Play button


Play button




Click to flip

Use LEFT and RIGHT arrow keys to navigate between flashcards;

Use UP and DOWN arrow keys to flip the card;

H to show hint;

A reads text to speech;

41 Cards in this Set

  • Front
  • Back
Actual real GDP will be above potential GDP if...?
Firms are producing above capacity.
The total amount of physical capital available in a country is known as the country's
Capital Stock
Botswana's rapid growth can be explained by...?
The pro-growth policies of Botswana's government is the most important reason. But also avoiding civil wars and income from diamond exports.
Since 1900, real GDP in the United States has grown...?
From $5,600 to $42,200 (800%).
What factors are the keys to determining labor productivity?
1. The quantity of capital labor per hour worked

2. The level of technology.
If you invest $10,000 in a bond that earns 8% interest per year, how many years will it take to double your money?
Rule of 70:

Number of years to double your money = 70/Growth Rate.

So in this case it is 70/8, which equals 8.75 years.
According to the "Rule of 70", it will take 4 years for real GDP per capita to double when the growth rate of real GDP per capita is
In this case the math would be:

4 = 70/?

70/4 = 17.5

4 = 70/17.5

So the growth rate would be 17.5.
What governmental policy actions are helpful in supporting growth in an economy?
1. Protecting private property / property rights (THIS IS THE BIG ONE)

2. Establishing an independent court system that enforces contracts between private individuals.

3. Facilitating the development of of an efficient financial system, as well as systems of education, transportation, and communication.

4. Allowing press freedom and democracy

5. Avoiding political instability and corruption.
If labor productivity growth slows down in a country, this will
slow down the quantity of goods and services consumed by the average person.

If ^ is to increase, then the quantity of goods and services produced per hour of work must also increase.

Page 308, in the paragraph under the main bolded title.
Increases in real GDP since 1900 can actually underestimate growth in the standard of living for Americans since 1900 because...?
many of today's goods and services were not available back in 1900. I.E. no matter how rich you were, if you got sick, you couldnt by the medicine we can buy today.
Since 1900, real GDP per capita has ________ and this measure ________ the actual growth in standards of living in the United States over this time.
1. increased

2. understates
If the U.S. government decided to regulate the prices of airline tickets to keep them from falling when the economy
is weak, there would tend to be a ________ of airline tickets in the market and this would likely ________ the profits of U.S. airlines.
Refer to Table 10-1. Using the table above, what is the approximate average annual growth rate from 2008 to 2011? (Question #13 has the table).
You find the rate by taking the Current Real GDP minus the Real GDP in the base year, and then diving that sum by the Real GDP in the base year. This gives you your percentage.

9,280 - 8,700 = 580.

580 / 8,700 = 6.667%

6.667% / 4(total years)=1.6675%
Countries with high rates of economic growth tend to have
Human capital refers to...?
The accumulated knowledge and skills workers acquire from education and training or from their life experiences.
The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as...?
Labor productivity
If the growth rate of real GDP rises from 3% to 4% per year, then the number of years required to double real GDP will decrease from...?
From 23.333 down to 17.5, which is approximately 8 years.
Which of the following is an example of human capital?
Workers with a college education generally have more skills and are more productive than workers with only a high school education.
Refer to Table 10-1. Using the table above, what is the approximate growth rate of real GDP from 2010 to 2011? (Table is at question #20)
9,280 - 9,000 = 280

280 / 9,000 = 3.11%
According to the "Rule of 70", how many years will it take for real GDP per capita to double when the growth rate of real GDP per capita is 5%?
70/5 = 14 years.
Growth in potential GDP in the United States is estimated to be about...?
3.3% per year
What factors promote Long-run economic growth?
Labor productivity (which is determined by capital per hour worked and technological change).
There is a government budget surplus if...?
The government spends less than it collects in taxes.
Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds.
If Ebenezer Scrooge spends rather than saves his vast wealth he will...?
Slow down economic growth, by a little. He will contribute to more consumption goods being produced and fewer investment goods.
What is investment in a closed economy if you have the following economic data?

Y = $10 trillion
C = $5 trillion
TR = $2 trillion
G = $2 trillion
Refer to Figure 10-3 (Question #28). What factors explain the graph depicted above?
Page 319
If net taxes fall by $80 billion, we would expect household savings to...?
Decrease. A government budget surplus increases household savings, which increases investment spending. So if the government got $80 million less in taxes, then household savings would go down because people would have more money to spend.
Liquidity refers to...?
Is the ease with which a financial security can be exchanged for money.
If consumers decide to be more frugal and save more out of their income, then this will cause...?
A reduction in the amount of goods and services they can assume and enjoy today. It will also result in an increase in investment spending.
How will an increase in the government budget surplus as a result of lower government spending (with no change
in net taxes) affect private saving in the economy?
There is a federal budget deficit when...?
When government spends more than it collects in taxes.

T < G+TR
Increasing the amount of consumption spending and reducing the amount of savings ________ investment
expenditures, and ________ long-run economic growth in the economy.
1. Decreases

2. Slows down
In a closed economy public saving plus private saving is equal to...?
Total saving
An increase in the demand for loanable funds will occur if there is...?
A government budget surplus from reduced government spending (no change in net taxes) will ________ the level of investment in the economy and ________ the level of saving (private plus public) in the economy
If, in an economy experiencing inflation, the government decided to tax real interest income rather than nominal
interest income, this change would cause the real interest rate to ________ and the equilibrium quantity of loanable
funds to ________.
How would the equilibrium quantity of loanable funds respond to a change from an income tax to a consumption tax?
The demand for loanable funds is downward sloping because the ________ the interest rate, the ________ the
number of profitable investment projects a firm can undertake, and the ________ the quantity demanded of loanable funds.
What do we typically see as the economy nears the end of an expansion?
During a recession, spending on ________ tends to fall more dramatically than spending on ________.
1. Durables

2. Nondurables