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53 Cards in this Set
- Front
- Back
The period of modern economic growth, in which the economy grew faster than the population, began with what event A. Middle Ages. B. Renaissance. C. French Revolution. D. Industrial Revolution.
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D. Industrial Revolution
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What is the ideal long term growth rate for the United States based on its historic average? |
B. 3% |
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If one country has a growth rate that is one percent larger than another country that has an equally large economy, over the
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C. Compounding. |
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4._____ Based on the production function [ Y = f(L,K)], if the amount of capital increases, then the economy can produce ____ |
C. More, same |
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5._____ In the production function [ Y = f(L,K)], what is denoted by “f”? |
A. Technology or the production process. |
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6._____ The Solow Growth model is shown in the diagram to the right. What economic idea is |
B. Diminishing returns. |
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7._____ The Solow or the Neoclassical Growth model explains why China has a faster growth |
B. Converge with. |
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8._____ According to the Solow or Classical or the Neoclassical Growth model, why will capital poor (developing) countries attract
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D. Developing countries have higher rate of rates of growth than developed countries
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9._____ Economists (including Robert Solow) consider _______ to be the largest factor in driving growth. |
C. Technological change. |
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10._____ The Solow growth model does not consider technological change to be part of the economic process (i.e. it is not accounted |
A. An exogenous model. |
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11._____ What term did Joseph Schumpeter use to describe the process in economic growth where new technology renders older |
D. Creative destruction. |
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12._____ New Growth Theory says the government can encourage economic growth through all of the following activities except… |
D. Replace investment markets with government planning. |
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13._____ The implication of Nordhous’ study of light (and computing power) is that impact of economic growth on people’s standard |
C. Greater than. |
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Aggregate Expenditures is represented by the equation the sum of C + I + G + (X – IM). What do each of the variables represent? |
14. C : Consumption |
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18._____ The term Marginal Propensity to Consume (MPC) can be described as… |
B. How much of an additional dollar of income will be spent on consumption. |
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19._____ The nation’s disposable income increases by $400 billion and, as a result, consumer spending increases by $320 billion. |
D. 0.80 |
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22._____ If the real interest rate rises significantly, what is most likely to happen to the consumption function? |
B. It will shift downward |
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23._____ Based on the ideas of the Aggregate Expenditure model, existence of both inflationary and recessionary periods when the |
C. Coordination failures |
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24._____ When equilibrium real GDP greater than potential GDP, there is |
A. Inflationary gap |
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25._____ Recessionary gaps are most likely to be accompanied by… |
C. unemployment. |
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26. _____ The economy depicted in the graph to the right is currently |
C. A recessionary gap, shown by the line EB |
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27._____ How does the economy self-adjust from either an inflationary gap or a recessionary gap back to General Equilibrium? |
C. Changes in the price level. |
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1._____ Based on the ideas of the Aggregate Supply – Aggregate Demand model, existence of both inflationary and |
B. Coordination failures. |
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2._____ When equilibrium real GDP greater than potential GDP, there is a(n)… |
A. Inflationary gap. |
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9._____ What makes it hard for an economy to return to general equilibrium during a recession and explains why the |
A. Wage and price stickiness. |
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16._____ If the level of government spending increases by $100 and the MPC
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D. $500. |
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17._____ If the level of taxation decreases by $100 and the MPC in the economy is 0.8, then the total amount of the |
C. $400. |
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18._____ If an economy has an inflationary gap of $1 billion and an MPC of 0.75, how much the government have to |
C. $333 million |
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19._____ The multiplier effect in the 2009 economic stimulus was lower than it could have been because of all the |
B. It caused significant inflation, which reduced the impact of the stimulus on real GDP |
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20._____ Most economists prefer using monetary policy to fiscal policy for conducting macroeconomic policy for all of |
B. It affects both Aggregate Demand and Aggregate Supply, and not just Aggregate Demand. |
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21._____ Expansionary fiscal policy based on increased government spending in an open economy has a … |
C. smaller effect than in a closed economy. |
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22._____ Expansionary monetary policy based on lowering interest rates in an open economy has a |
A. greater effect than in a closed economy. |
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1._____ The use of fiscal policy in conducting macroeconomic policy is limited by all of the following except… |
C. The government does not create “real” jobs that create any value |
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2._____ Keynes said the Great Depression was a result of low Aggregate Demand and described the problem as the |
B. Too much savings. |
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3._____ One of the important insights that John Maynard Keynes made in his book “The General Theory of |
C. Psychology. |
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4._____ Milton Friedman, leader of the “Chicago School” of economics said that the problem of Stagflation in the |
A. Activist economic policies. |
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5._____ Milton Friedman criticized Keynesian fiscal policy saying that people borrow and save at different points in their |
B. The Permanent Income Hypothesis |
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6._____ The idea that fiscal policy is ineffective because people will see government deficits as a sign of future higher |
D. Ricardian.
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7._____ Based on the Quantity Theory of Money equation (MV = PQ) the primary causes of inflation and deflation are |
B. Changes in the money supply. |
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8._____ The Phillips curve shows the relationship between …
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A. The rate of inflation and the rate of unemployment |
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9._____ Keynesian economists believed that an expansionist monetary policy could be used to fight recessions because…
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B. People do not know the real value of money and see additional money as an increase in income. |
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10._____ In the 1960’s and early 1970’s, Keynesian economists and policy makers thought the Phillips curve was… |
D. Provided a structure to formulate economic policy |
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11._____ What economic event represented the breakdown of the Phillips Curve? |
B. Stagflation. |
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12._____ While Friedman accepted that the relationship of the Phillips Curve held in the short run, he believed that in the
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B. Return to the natural rate of unemployment. |
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13._____ The Luca’s idea of Rational Expectations and its impact on monetary policy was based on …
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A. The Efficient Market Hypothesis. |
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14._____ The theory of rational expectations says that…
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B. People are able to use available information to anticipate inflation and weaken the effect of monetary policy. |
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15._____ The period of the “Great Inflation”, marked by activist government macroeconomic policy and Stagflation
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A. The Great Moderation |
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16._____ The New Keynesian monetary policy rule that balances off issues of inflation with GDP growth is called… |
B. The Taylor Rule. |
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17._____ One benefit of a central bank’s commitment to low inflation (or an inflation target) is that it ________ people’s |
C. Anchors. |
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18._____ Keynesian economists say that in the current recession monetary policy has lost its effectiveness because the |
C. A Liquidity trap. |
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19._____ After the large fiscal stimulus in 2009, governments around the world began to enact austerity programs |
C. An IMF study that showed that significant increases in inflation have had the same impact as additional |
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20._____ What term describes the Federal Reserve’s policy of saying how long it will keep interest rates low so as to |
A. Forward guidance. |
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21._____ What term is being used to describe the situation in which a depressed economy is the norm and that there is |
D. Secular Stagnation. |