MAC2 Exam Questions And Answers Graded A+
The level of a nation's GDP measures __________ - Answer economic prosperity
The growth rate of GDP measures - Answer economic progress
How higher saving leads to a higher standard of living - Answer Higher saving -->
physical capital increases --> more investment --> profit --> higher standard of living
What deter a policymaker from trying to raise the rate of saving? - Answer Future is
unpredictable
People cannot enjoy investing in future consumption
Why would the removal of a trade restriction tend to result in faster economic growth -
Answer Because trade has similar effects as discovering new technology, which
improves productivity and living standard
Population growth rate - GDP per capita: how does it affect it? 1) Answer Over-stretching
natural resources: 200 years ago, Malthus explained that population growth burdens
society's ability to provide for itself. Since then, the world population has grown sixfold,
but living standards have increased --> Malthus has failed to consider technological
progress and productivity growth.
Rate of population growth determines the level of GDP per capita-how? 2-Answer Diluting
the capital stock: Bigger population=higher L=lower K/L=lower productivity & living
standards. Applies to K and H. Fast population growth=more children=greater stress on
educational system. Countries with fast growth tend to have lower educational
attainment. But large populations have reasons to battle this as well: many countries use
policy to control population growth - China's one child per family law
Rate of population growth influences the level of GDP per person - how? 3 - Answer
, Promoting technical progress: More people = more scientists, engineers = more frequent
discoveries = faster technical progress and economic growth
diminishing returns the property whereby the benefit from an extra unit of an input
declines as the quantity of the input increase catch-up effect the property whereby
countries that start off poor tend to grow more rapidly than countries that start off rich
financial system a group of institutions in the economy that help to match one person's
saving with another person's investment
financial markets - Answer financial institutions through which savers can directly
provide funds to borrowers
bond - Answer a certificate of indebtedness
stock - Answer a claim to partial ownership in a firm
financial intermediaries - Answer financial institutions through which savers can
indirectly provide funds to borrowers
mutual fund - Answer an institution that sells shares to the public and uses the proceeds
to buy a portfolio of stocks and bonds
national saving-the sum of income in the economy that is left over after the economy
pays for consumption and government purchases
private saving-the income a household has left after paying for taxes and consumption
public saving-the revenue the government has left after it pays its spending
budget surplus-an excess of tax revenue over government spending
The level of a nation's GDP measures __________ - Answer economic prosperity
The growth rate of GDP measures - Answer economic progress
How higher saving leads to a higher standard of living - Answer Higher saving -->
physical capital increases --> more investment --> profit --> higher standard of living
What deter a policymaker from trying to raise the rate of saving? - Answer Future is
unpredictable
People cannot enjoy investing in future consumption
Why would the removal of a trade restriction tend to result in faster economic growth -
Answer Because trade has similar effects as discovering new technology, which
improves productivity and living standard
Population growth rate - GDP per capita: how does it affect it? 1) Answer Over-stretching
natural resources: 200 years ago, Malthus explained that population growth burdens
society's ability to provide for itself. Since then, the world population has grown sixfold,
but living standards have increased --> Malthus has failed to consider technological
progress and productivity growth.
Rate of population growth determines the level of GDP per capita-how? 2-Answer Diluting
the capital stock: Bigger population=higher L=lower K/L=lower productivity & living
standards. Applies to K and H. Fast population growth=more children=greater stress on
educational system. Countries with fast growth tend to have lower educational
attainment. But large populations have reasons to battle this as well: many countries use
policy to control population growth - China's one child per family law
Rate of population growth influences the level of GDP per person - how? 3 - Answer
, Promoting technical progress: More people = more scientists, engineers = more frequent
discoveries = faster technical progress and economic growth
diminishing returns the property whereby the benefit from an extra unit of an input
declines as the quantity of the input increase catch-up effect the property whereby
countries that start off poor tend to grow more rapidly than countries that start off rich
financial system a group of institutions in the economy that help to match one person's
saving with another person's investment
financial markets - Answer financial institutions through which savers can directly
provide funds to borrowers
bond - Answer a certificate of indebtedness
stock - Answer a claim to partial ownership in a firm
financial intermediaries - Answer financial institutions through which savers can
indirectly provide funds to borrowers
mutual fund - Answer an institution that sells shares to the public and uses the proceeds
to buy a portfolio of stocks and bonds
national saving-the sum of income in the economy that is left over after the economy
pays for consumption and government purchases
private saving-the income a household has left after paying for taxes and consumption
public saving-the revenue the government has left after it pays its spending
budget surplus-an excess of tax revenue over government spending
