30 Questions
According to the text, what happens to aggregate supply when labor costs, raw material prices, and energy prices decrease?
Aggregate supply increases
From an investment perspective, what is the suggested action when there is a decline in aggregate supply (leftward shift of the SRAS curve)?
Reduce investment in fixed income
What happens to the AS curve when there is higher productivity growth?
The AS curve shifts to the right
What are the investment implications when there is an increase in aggregate supply (rightward shift of the SRAS curve)?
Favorable for most asset classes other than commodities
Which of the following is a key determinant of economic growth?
Technological progress
What does the labor share measure in the growth accounting equation?
Employee compensation
Which sector has made a significant contribution to economic growth, employment, and exports in developed countries?
Information technology
What does the growth accounting equation in per capita terms explain?
Growth in per capita GDP
Which of the following factors is NOT considered in the measurement of Total Factor Productivity (TFP)?
Physical capital stock
What is the labor force defined as?
The portion of the working age population that is employed or available for work but not working
What does human capital reflect?
The accumulated knowledge and skill that workers acquire from education, training, and life experience
What is the correlation between investment (as a percentage of GDP) and economic growth?
High
Which of the following is a characteristic of renewable resources?
They have few substitutes
Which countries have relatively high per capita incomes due to their resource base?
Brazil and Australia
What are externalities in the context of public infrastructure?
Effects of production and consumption activities on others
What is the relationship between carbon dioxide emissions and economic growth?
Carbon dioxide emissions rise with economic growth
Which of the following statements is true about economic growth?
Rapid growth in per capita real GDP can transform a poor nation into a wealthy one.
What is the neoclassical or Solow growth model based on?
The accumulation of capital, labor, and raw materials used in production.
What does potential GDP measure?
The economy's productive capacity.
Why is there a limit to how fast an economy can grow?
The costs associated with excess growth.
According to the text, what does the parameter A represent in the production function Y = AF(L,K)?
Total factor productivity (TFP)
What does the assumption of constant returns to scale in the production function mean?
If all the inputs in the production process are increased by the same percentage, then output will rise by that percentage
What does diminishing marginal productivity mean in the context of the production function?
The extra output produced from a one-unit increase in an input will decline
According to the text, what is the only way to sustain growth in potential GDP per capita in the long run?
Growth in total factor productivity (TFP)
Which factors can influence innovative activity and economic growth?
All of the above
What is potential GDP?
An unobserved concept that is approximated using a number of alternative methods
How can economists estimate potential GDP?
By measuring the productivity of the labor force
What is labor productivity?
The quantity of goods and services that a worker can produce in one hour of work
Why is understanding changes in potential GDP important for financial analysts?
It helps them forecast the economy's sustainable growth path
Why is using total hours worked important when calculating labor productivity?
To adjust for the fact that not everyone works the same number of hours
Test your knowledge on renewable and non-renewable natural resources with this quiz. Learn about the characteristics of each type and understand their impact on economic growth and sustainability.
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