Long Term Economic Growth

1.According to real business cycle theory, what is the suggested approach to address deviations from the optimal growth trajectory?

Fiscal interventions are necessaryMonetary policy should be appliedSupply-side measures are importantOutput should be stabilized throughout the business cycle

2.What constraint does the fact that gross investment cannot be negative place on variations in which economic measure?

upper limit, inventory accumulationupper bound, capital market valueslower bound, production levelsminimum limit, ratio of capital to output

3.According to the multiplier-accelerator model, what is investment dependent on?

Consumption depends on anticipated future earningsInvestment is influenced by interest rate levelsInvestment relies on expected future profitsInventory accumulation is affected by interest rates

4.Which of the following is NOT considered a phase of the business cycle?

5.What does the business cycle represent in terms of output variation?

6.According to the neoclassical growth theory, the steady-state growth rate is defined as the level of necessary to maintain constant as the labor force expands?

savings, total investmentcapital per worker, technological progresslabor force growth, economic outputinvestment in capital per workeroutput per capita, labor productivity

7.Why might GDP per capita fail to fully reflect economic well-being?

It does not account for the worth of free timeIt ignores environmental and social external effectsIt excludes goods that are not bought or sold in marketsIt overlooks shifts in how income is distributedAll of these factors are excluded

8.How can governments boost overall productivity in the economy?

By increasing taxes on capital assetsBy promoting labor-heavy jobs to lower unemploymentBy cutting funding for educational programsBy fostering private sector investment

9.What term describes a productivity metric that incorporates both labor and capital inputs?

10.Which growth theory asserts that the pace of economic expansion is driven by technological advancements influenced by institutions, incentives, and government policies?

11.What is the term for the growth trajectory influenced by technological advancement at a fixed saving rate?

12.At the long-run equilibrium level of national income, what is the primary use of all investment?

There is no economic growth occurringEvery investment is directed towards the manufacturing industryThe economy is experiencing continuous growthAll investments are allocated to preserving the current capital stock

13.What is the most effective method to promote economic growth?

Raise government expendituresLower tax ratesIncrease savingsBoost individual spending

14.What does the concept of GDP convergence in Europe imply?

Every nation will become a member of the European Economic CommunityLess wealthy countries possess greater capital-to-labor ratios compared to wealthier nationsThe disparity in GDP per capita among countries will increaseEconomically weaker countries will gradually close the gap with more affluent ones

15.According to real business cycle theory, what primarily accounts for both short-run and long-run variations in economic output?

Labor market inefficienciesUse of rational expectationsIntertemporal choices made by households, businesses, and the governmentCycles caused by sunspot phenomena

16.Which of the following does NOT serve as a channel for transmitting the business cycle between countries?

Trade activities involving private sector imports and exportsGovernment economic policiesLength of mandatory schoolingVariations in labor force participation

17.Real business cycles refer to fluctuations in which of the following?

18.According to real business cycle theory, which factor is considered insignificant in accounting for short-term variations in actual output?

19.Which theory describes business cycles through the interaction between consumption and investment demands?

20.Why do economic growth rates tend to converge across countries? It is because ________ occurs more readily when capital per worker is low, combined with what other factor?

technical innovation that expands capital usagetechnology catch-up involving broader capital applicationtechnical innovation that increases capital intensitycapital intensification along with technological catch-up