ECON 112 - Neoclassical Model and Keynesian Goods Market Short Answer Quiz

Capital labor ratio remains constant at steady state.

If the population is growing by 'n', the aggregate capital also grows by 'n'.

Many evidences suggest that the correlation between savings and income may not imply causality.

<p>Generational Wealth refers to the accumulation of wealth over successive generations.</p> Signup and view all the answers

<p>The Golden Rule of Accumulation states that the slope of the breakeven investment is equal to the slope of the production function.</p> Signup and view all the answers

<p>Increasing savings rate leads to higher income, but savings alone do not infinitely increase welfare.</p> Signup and view all the answers

<p>Consumption = y - sy</p> Signup and view all the answers

<p>The solution is technology and education.</p> Signup and view all the answers

<p>It would lead to Y4, which is a stable equilibrium.</p> Signup and view all the answers

<p>If a negative shock occurs, the population drops and per capita income increases, leading back to Y1.</p> Signup and view all the answers

<p>Technology changes the steady state, making GDP grow at a higher rate permanently.</p> Signup and view all the answers

<p>Population grows when N grows, and Income grows when Y grows.</p> Signup and view all the answers

<ol> <li>Constant savings rate, 2. Constant population growth rate, 3. Constant depreciation rate</li> </ol> Signup and view all the answers

<p>When the savings rate per capita equals the sum of the population growth rate and depreciation rate multiplied by the capital per capita.</p> Signup and view all the answers

<p>There is a surplus as savings exceed the amount needed to maintain the capital-labor ratio, leading to an increase in the capital-labor ratio.</p> Signup and view all the answers

<p>They lead to destruction of infrastructure and capital, causing a decrease in the capital-labor ratio.</p> Signup and view all the answers

<p>Population growth necessitates a proportional increase in capital to maintain the capital-labor ratio.</p> Signup and view all the answers

<p>To counteract the natural decrease in the capital-labor ratio due to population growth and depreciation, ensuring the economy remains in equilibrium.</p> Signup and view all the answers

<p>The Malthusian Population Trap refers to a situation where population growth outpaces resources leading to poverty and stagnation in economic development.</p> Signup and view all the answers

<p>For an economy to achieve a Balanced Growth Path, the savings rate must be equal to the sum of the population growth rate and the rate of technological progress.</p> Signup and view all the answers

<p>The Golden Rule of Accumulation states that to maximize consumption in the long run, the savings rate should be set at the level that leads to the highest level of consumption.</p> Signup and view all the answers

<p>A positive shock in the Autoregressive Model leads to a new stable equilibrium with higher income and GDP growth rate.</p> Signup and view all the answers

<p>A Balanced Growth Path refers to a situation where all variables in the economy grow at a constant rate, maintaining a stable equilibrium without any fluctuations.</p> Signup and view all the answers

<p>Autoregressive models are used to analyze the behavior of key economic indicators over time by relating current values to past values.</p> Signup and view all the answers

<p>A positive shock leads to an increase in economic activity and growth, potentially altering the trajectory of the economy towards higher levels of output.</p> Signup and view all the answers

<p>Generational Wealth refers to assets passed down from one generation to the next, allowing for financial stability and security over time.</p> Signup and view all the answers

<p>Falling into the Malthusian Population Trap can lead to negative effects such as a decrease in GDP, creating an 'L' shaped function. This occurs when population growth outpaces economic resources, resulting in diminishing returns and decreased living standards.</p> Signup and view all the answers

<p>The Autoregressive Model is a statistical analysis tool used to predict future values based on past data. In the context of economic growth, it can be applied to understand how past economic trends influence future growth patterns.</p> Signup and view all the answers

<p>Surplus results from saving more than needed, leading to a higher capital-labor ratio.</p> Signup and view all the answers

<p>Inability to maintain machinery leads to a decrease in the capital-labor ratio.</p> Signup and view all the answers

<p>Natural disasters or terrorism can destroy infrastructure and capital, disrupting the economy.</p> Signup and view all the answers

<p>The capital-labor ratio remains constant when (N + S)*K is invested to maintain it.</p> Signup and view all the answers

<p>The model suggests that a savings rate higher than needed leads to a surplus, increasing the capital-labor ratio.</p> Signup and view all the answers

<p>The Savings Function is represented as S=Y-C where S is savings, Y is income, and C is consumption. It shows the relationship between income and savings.</p> Signup and view all the answers

<p>Investment at Equilibrium ensures that savings and expenditure are balanced. It represents a state where savings equal investment.</p> Signup and view all the answers

<p>Savings is equal to income minus consumption. This relationship highlights the importance of balancing spending and saving for economic stability.</p> Signup and view all the answers

<p>Government Expenditure (Gb) refers to the total spending by the government. It includes consumption, investment, and any other expenditures made by the government.</p> Signup and view all the answers

<p>Disposable Income = (1 - c(1-t)) * (Č + Ī + 𝐺𝑏). It represents the income available for spending and saving after taxes.</p> Signup and view all the answers

<p>The multiplier decreases when the government siphons a portion of income through taxation. This reduction in the multiplier reflects the impact of government policies on economic stimulus.</p> Signup and view all the answers

<p>The Keynesian Goods Market refers to the total spending in an economy, including consumption, investment, government spending, and net exports. It is crucial in understanding how changes in these components impact aggregate demand and economic growth.</p> Signup and view all the answers

<p>An explosive verdict in autoregressive models indicates an unsustainable pattern of growth where economic variables exhibit erratic behavior, potentially leading to instability and economic crises.</p> Signup and view all the answers

<p>The Real Business Cycle theory posits that fluctuations in economic activity are primarily driven by exogenous technological shocks and changes in productivity, challenging traditional Keynesian views on the business cycle.</p> Signup and view all the answers

<p>The expenditure function E = Č + cY illustrates how total spending in an economy depends on consumption and aggregate income, highlighting the relationship between consumption behavior and economic output.</p> Signup and view all the answers

<p>The Keynesian Goods Market focuses on demand-side factors such as consumer spending and government policies, while the Real Business Cycle theory emphasizes the role of supply-side shocks and technology in driving economic fluctuations.</p> Signup and view all the answers

<p>Explosive verdicts in autoregressive models suggest a breakdown in stability assumptions, indicating the potential for unpredictable and unsustainable economic outcomes that deviate from traditional equilibrium predictions.</p> Signup and view all the answers