Chapter 17 Economic Growth: Resources

Discovering and implementing new __________ is what causes economic growth, according to new growth theory.

ideas

Given the production function Real GDP = T *(L+K), and the values stated below, if the production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, what shape will the resulting curve be?

T = 0.30

L = 4

K = 5

upward sloping

The focus of neoclassical growth theory was ____________________, while the focus of new growth theory is _________________

labor and physical capital, labor, capital, and technology

When interest rates fall in an economy, business firms tend to borrow ________ funds for purchasing capital goods. The result will be a(n) ____________ in the level of capital employed in the economy. In terms of the production function, graphed with labor on the horizontal axis and Real GDP on the vertical axis), this then causes ______________, which makes the LRAS curve shift ______

more, increase, a shift upward in the production function, rightward

Consider the production function Q = T (L + K) where T = 0.50, L = 40 and K = 20. It follows that Real GDP is equal to ____________ units of output

30

A decrease in income taxes will shift the labor supply curve to the ____________ and end up raising ______________, thus shifting the LRAS curve to the _______

right, Real GDP, right

Consider the production function Q = T (L, K). If this production function is graphically portrayed with L on the horizontal axis and Q on the vertical axis, then a rise in L will

cause movement up the given production function

Meta-ideas are ideas about how to

support the production and transmission of other ideas

Suppose the population of a country decreases, but its Real GDP remains constant. As a result, there is ______________________ real economic growth

per-capita real economic growth, but not absolute

Compare Country ABC where the property rights system is very well defined and people's property rights are protected and Country XYZ where property rights are not as well protected. We would expect more entrepreneurship under ____________ system and faster real economic growth under _____________ system

Country ABC's, Country ABC's

Given the production function Real GDP = T *(L+K), and the values stated below, what is the level of Real GDP?

T = 0.30

L = 4

K = 5

2.7

When a production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, a decrease in capital causes ________________________, and a decrease in the technology coefficient causes _______________

a downward shift of the production function, a downward shift of the production function

The LRAS curve has shifted to the right. This could be brought about by

an increase in L

Growth-promoting policies _________________________a country's economic pie, while transfer-promoting policies ______________________.

enlarge the size of, redistribute the size of the slices of the economic pie received by different groups in the economy

_________________ is an economist whose name is synonymous with new growth theory

Paul Romer

Absolute real economic growth has occurred when ___________________ has increased from one period to another

Real GDP

If per-capita Real GDP rises, it could be that

population has decreased and/or Real GDP has increased

The knowledge and skills a person acquires through education, training, and experience is called

human capital

Suppose that the production function for an economy is graphed with Real GDP on the vertical axis and labor on the horizontal axis. When the level of capital in this economy rises, it causes ____________________which shifts the LRAS curve ____________ resulting in ______________

an upward shift of the production function, rightward, economic growth

Suppose labor is on the horizontal axis and Real GDP is on the vertical axis. A production function that is specified Q = T (L, K) lies between the two axes. It follows that a rise in L will

not shift the production function

Suppose that Real GDP of a country rises, but the country's population remains constant. After Real GDP increases, __________________________ occurred

absolute real economic growth and per-capita real economic growth have

Consider the production function Q = T (L, K). If we graph this production function as a curve with labor (L) on the horizontal axis and Real GDP (Q) on the vertical axis, then a change in capital (K) will

shift the production function curve upward or downward

Consider the production function Q = T (L + K) where T = 0.60, L = 80 and K = 60. It follows that Real GDP is equal to ____________ units of output

84

When interest rates rise in an economy, business firms tend to borrow ________ funds for purchasing capital goods. The result will be a(n) ____________ in the level of capital employed in the economy

less, decrease

When an economy lowers taxes on the return to capital, it causes firms to employ __________ capital goods. In terms of the production function (graphed with labor on the horizontal axis and Real GDP on the vertical axis), this then causes ____________________ which makes the LRAS curve shift ____________ resulting in economic growth

more, the production function to shift upward, rightward

Consider the production function Q = T (L, K) graphed with labor (L) on the horizontal axis and Real GDP (Q) on the vertical axis. An increase in capital (K) will end up shifting the ____________ curve to the ____________

LRAS, right

Which of the following statements is true

In the production function, Real GDP = T (L, K), the L represents labor

If an economy can increase its steady annual economic growth rate from 1.5 percent to 2.5 percent, this reduces the time it takes for the economy to double in size by approximately ____________ years

18.7

Assume that a country's production function is graphed with labor on the horizontal axis and Real GDP on the vertical axis. When taxes on the return to capital in a given economy are raised, _________________________ occurs, which makes the LRAS curve shift ____________ resulting in ______________________.

a downward shift of the production function, leftward, a shrinking economy

Upon which two resources does neoclassical growth theory place emphasis

labor and capital

An economy growing at a steady rate of 3.5 percent per year doubles in size approximately every __________ years

20

The term economic growth can be used in reference to an increase in ___________________ from one period to the next or an increase from one period to the next in per-capita___________________.

Real GDP, Real GDP

The Real GDP of country Z doubled in 15 years. It follows that

There is not enough information provided to answer the question.

__________________ is the knowledge and skills a person acquires through education, training, and experience and ______________ is different than __________ capital

Human capital, human capital, physical

If an economy can increase its steady annual growth rate from 2 percent to 4 percent, this reduces the time it takes for the economy to double in size by ____________ years

17.5 years

When income taxes are lowered, the supply curve of labor shifts ______________, which increases the amount of labor employed in the economy, which then moves us _____ a production function (curve) that is graphed with Real GDP on the vertical axis and labor on the horizontal axis. In turn, the ______________ curve shifts __

rightward, up, LRAS, rightward

Consider the production function Q = T (L, K) graphed with labor (L) on the horizontal axis and Real GDP (Q) on the vertical axis. An increase in labor (L) will end up shifting the ____________ curve to the _________

LRAS, right

Suppose that Real GDP is $500 billion and the population is 80 million in Country ABC. Then, the country's population falls to 72 million while Real GDP remains constant. Per-capita real economic growth was approximately ________ percent in Country ABC during this time period.

11

Using the production function Real GDP = T (L, K), we know that Real GDP will rise when

labor increases

When income taxes are raised, ____________labor is employed in the economy, which then _______________Real GDP and shifts the LRAS curve ______________.

less, decreases, leftward

In the production function Real GDP = T(L, K, NR, H), T stands for the technology coefficient, L stands for labor, K stands for ________________, NR stands for _______________, and H stands for ____________

capital, natural resources, human capital

When a production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, an increase in capital causes________________________ production function, and an increase in labor _______________

an upward shift of the, causes a movement up along a given production function

According to economist Mancur Olson, special interest groups are

more likely to push for transfer-promoting policies than growth-promoting policies.

The LRAS curve has shifted rightward. This could be an indirect effect of

any of the answers given can shift the LRAS curve rightward

Suppose that Country XYZ's nominal GDP has risen between year 1 and year 2. From this information we can conclude that Country XYZ

may have experienced absolute or per-capita real economic growth, but we do not know for certain without more information.

Neoclassical growth theory held technology to be ____________ while new growth theory holds that technology is ________________.

exogenous, endogenous

_________________________specifies the relationship between technology and the factor inputs to output, or Real GDP

A production function

An increase in nominal GDP indicates that absolute real economic growth has

not necessarily occurred, and neither has per-capita real economic growth