Question 1

Suppose you are a famous international economic advisor.You have been asked to asses the possibilities for growth in an African country.It is a country abundant in labor and some natural resources.The capital-to-labor ratio is low.It has a free market economy.You have found that this country does not have a very strong and healthy banking system,however the political system is stable and the government does a good job protecting property rights.Assess this country's prospects for growth.Recommend two things that would enhance the country's growth.

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The answer of Suppose you are a famous international economic...

Question 2

What is labor productivity? How does a country's standard of living relate to labor productivity?

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Question 3

The growth rate of real GDP in the United States rises from 4.2% to 4.4%.Explain and calculate how this increase in the growth rate of real GDP affects the number of years it will take for real GDP to double.

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The answer of The growth rate of real GDP in...

Question 4

A firm can fund an expansion of its operations by

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Issuing bonds allows a firm to borrow money from the investors and pay them back with interest at a later date. This can be a good option for funding expansion as it does not dilute ownership, and the interest on bonds is tax-deductible. Buying stock, paying dividends, and loaning money may not be the best choices for funding expansion, as buying stock would dilute ownership, paying dividends reduces the firm's cash reserves, and loaning money involves paying interest and principal amounts that add to the firm's cost of capital.

Question 5

When potential GDP increases,is it necessarily the case that real GDP increases as well? Explain.

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Question 6

Potential GDP is the maximum output a firm is capable of producing.

Accepted Answer

Potential GDP refers to the maximum output an economy can produce when it is operating at full employment, not just a single firm.

Question 7

Potential GDP in the United States

Accepted Answer

Potential GDP represents the maximum amount of output that an economy can produce given its resources and technology. As the economy grows and becomes more productive, potential GDP also increases. Therefore, potential GDP grows as the economy grows.

Question 8

Accumulating a greater number of inputs will ensure that an economy will experience economic growth.

Accepted Answer

Economic growth is not simply about accumulating more inputs, but also about how efficiently those inputs are used. This is known as total factor productivity, which measures how much output can be produced with a given amount of inputs. Simply accumulating inputs without improving productivity will not lead to sustained economic growth.

Question 9

The key to sustained economic growth is increasing labor productivity.

Accepted Answer

Labor productivity refers to the output of goods and services that an individual worker can produce in a given amount of time. Increasing labor productivity leads to higher economic output and ultimately sustained economic growth. This can be achieved through factors such as improvements in technology, education and training, infrastructure, and management practices.

Question 10

Market economies tend to grow more quickly than centrally-planned economies.

Accepted Answer

Market economies allow for competition, innovation, and efficiency, leading to higher productivity and economic growth. Centrally-planned economies lack incentives for innovation and are often plagued by inefficiencies and bureaucracy, leading to slower growth.

Question 11

Potential GDP is always greater than real GDP in an economy.

Accepted Answer

Potential GDP represents the maximum output an economy can produce without causing inflation, while real GDP is the actual output. Real GDP can be below, equal to, or above potential GDP depending on economic conditions.

Question 12

How has economist Robert Fogel explained that economic growth is connected to life expectancy? Based on this connection,in what country would you expect to have a longer life expectancy,the United States or India? Explain.

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The answer of How has economist Robert Fogel explained that...

Question 13

Centrally planned economies tend to grow more quickly than market economies.

Accepted Answer

This statement is actually false. While centrally planned economies may be able to mobilize resources quickly, they often suffer from inefficiencies, lack of innovation, and obstacles to entrepreneurship that ultimately hinder their long-term economic growth. Market economies, on the other hand, incentivize creativity and competition, leading to more sustained growth over time.

Question 14

Outline the various actions the government sector could take to promote growth.

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Question 15

Increases in capital per hour worked cannot sustain high rates of economic growth unless accompanied by technological change.

Accepted Answer

While increases in capital per hour worked can lead to some economic growth, sustainable high rates of growth require technological advancements to increase productivity and efficiency. Without innovation and improvements in technology, the benefits of increased capital will eventually diminish.

Question 16

Potential GDP was estimated to grow at a rate of 3.2% from 1949-2017 in the United States.Actual GDP in the U.S.

Accepted Answer

Potential GDP refers to the maximum possible level of output that an economy can achieve when all its resources are utilized efficiently. Actual GDP can fluctuate above or below this level depending on various economic factors, but it equals potential GDP when the economy is operating at full capacity.

Question 17

What factors increase potential GDP? Include a definition of potential GDP in your answer.

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The answer of What factors increase potential GDP? Include a...

Question 18

Economic growth depends more on technological change than on increases on capital per hour worked.

Accepted Answer

Technological change is the primary driver of long-term economic growth, as it leads to increases in productivity and efficiency. While increases in capital per hour worked can contribute to short-term growth, sustained economic growth is typically driven by technological advancements and innovation.

Question 19

Use the rule of 70 to illustrate how small differences in growth rates can have a large impact on how rapidly the standard of living in a country increases.

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Question 20

Explain why a centrally-planned economy might not grow as rapidly as a market economy.

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Quiz 10: Economic Growth, the Financial System, and Business Cycles