ECON 1202 Chapter 10 Study Guide
Questions and Actual Answers 2025-
2026 Edition.
long-run economic growth - Answer process by which rising productivity increases the average
standard of living
business cycle - Answer alternating periods of economic expansion and economic recession
most commonly used measure of the average standard of living - Answer real GDP per capita
real GDP per capita - Answer the amount of production in the economy, per person, adjusted
for changes in the price level
Real GDP growth - Answer (real GDP in current year - real GDP in previous year)/ real GDP in
previous year
average annual real GDP growth - Answer ((GDP1 + GDP2 + ... GDPn)/n) x 100
Rule of 70 formula - Answer Numbers of years to double = 70 / growth rate
labor productivity - Answer the quantity of goods and services that can be produced by one
worker or by one hour of work
capital - Answer manufactured goods used to make other goods and services
factors affecting labor productivity - Answer Increases in capital per hour worked,
technological change, property rights
increase in capital per hour worked - Answer Capital is manufactured goods that are used to
produce other goods and services.
The more capital a worker has available to use (including human capital, the accumulated
, The role of entrepreneurs here is critical, in pioneering new ways to bring together the factors
of production to produce better or lower cost products.
property rights - Answer market system cannot function unless rights to private property are
secure
governments can aid growth by establishing independent court system
potential GDP - Answer the level of real GDP attained when all firms are operating at capacity
capacity (when referring to potential GDP) - Answer "normal" hours and "normal" sized
workforce
potential GDP rises - Answer when labor force expands
when nation acquires more capital stock
when new technologies are created
retained earnings - Answer An amount earned by a corporation and not yet distributed to
stockholders.
reinvesting profits back into firm
firms can finance some of their expansions through this
financial system - Answer the system of financial markets and financial intermediaries through
which firms acquire funds from households
financial markets - Answer markets where financial securities, such as stocks and bonds, are
bought and sold
Questions and Actual Answers 2025-
2026 Edition.
long-run economic growth - Answer process by which rising productivity increases the average
standard of living
business cycle - Answer alternating periods of economic expansion and economic recession
most commonly used measure of the average standard of living - Answer real GDP per capita
real GDP per capita - Answer the amount of production in the economy, per person, adjusted
for changes in the price level
Real GDP growth - Answer (real GDP in current year - real GDP in previous year)/ real GDP in
previous year
average annual real GDP growth - Answer ((GDP1 + GDP2 + ... GDPn)/n) x 100
Rule of 70 formula - Answer Numbers of years to double = 70 / growth rate
labor productivity - Answer the quantity of goods and services that can be produced by one
worker or by one hour of work
capital - Answer manufactured goods used to make other goods and services
factors affecting labor productivity - Answer Increases in capital per hour worked,
technological change, property rights
increase in capital per hour worked - Answer Capital is manufactured goods that are used to
produce other goods and services.
The more capital a worker has available to use (including human capital, the accumulated
, The role of entrepreneurs here is critical, in pioneering new ways to bring together the factors
of production to produce better or lower cost products.
property rights - Answer market system cannot function unless rights to private property are
secure
governments can aid growth by establishing independent court system
potential GDP - Answer the level of real GDP attained when all firms are operating at capacity
capacity (when referring to potential GDP) - Answer "normal" hours and "normal" sized
workforce
potential GDP rises - Answer when labor force expands
when nation acquires more capital stock
when new technologies are created
retained earnings - Answer An amount earned by a corporation and not yet distributed to
stockholders.
reinvesting profits back into firm
firms can finance some of their expansions through this
financial system - Answer the system of financial markets and financial intermediaries through
which firms acquire funds from households
financial markets - Answer markets where financial securities, such as stocks and bonds, are
bought and sold
