econ chapter 11

What does GDP stand for and what does it measure?

GDP stands for Gross Domestic Product, and it measures the value of all final goods and services produced in a country.

What is GDP per capita a measure of?

GDP per capita is a basic measure of average living standards.

How is economic growth defined?

Economic growth is the growth rate of real GDP per capita.

What is technological advance in the context of economic growth?

Technological advance refers to the introduction of new knowledge or production techniques that allow more to be produced using fewer resources.

What are institutions in relation to economic growth?

Institutions are official and unofficial arrangements and rules that shape decision-making and interactions between residents of a country.

What is one important institution for economic growth related to political stability?

Political stability and rule of law are crucial for creating an environment suitable for economic growth.

What were the effects of political instability in Liberia between 1980 and 2003?

Political instability led to rebel takeovers, violence, and significant misuse of international aid that was intended to support industry and infrastructure.

How do private and enforced property rights contribute to economic growth?

They provide individuals with ownership of property and resources, serving as a strong incentive for voluntary production.

What role does stable money and prices play in economic growth?

Stable money and prices reduce uncertainty about future costs, encouraging investment.

What is a key characteristic of competitive markets that benefits economic growth?

Competitive markets allow for easy entry and exit of firms, ensuring low prices and a variety of goods for consumers.

What is one challenge regarding efficient taxes?

The challenge is to find a tax level that supports effective government without impeding economic growth.

How does specialization and trade create value for countries?

Specialization and trade allow countries to consume goods they cannot produce themselves, enhancing overall economic efficiency.

What is the relationship between investment and savings in the context of economic growth?

Investment opportunities expand when there is access to savings, including savings from abroad, which can help firms grow.

What are capital controls?

Capital controls are restrictions that some countries impose on the flow of funds from abroad, which can limit the ability of firms to access foreign savings.