Chapter 2 - Economic Growth

Chapter 2 Economic Growth

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Multiple Choice

What are capital goods?

• goods that are produced in the capital

• the factories, machinery, and technology used to produce goods and services

• goods that are produced without natural resources

• goods that are produced by the government

Multiple Choice

Why should countries invest in developing capital goods?

• they shouldn't, it is too expensive

• because capital goods cannot be sold to other countries

• when countries invest in capital goods, they are providing better facilities, resources, and/or materials for the people who perform the labor, which creates a more productive workforce leading to greater economic growth (higher GDP).

• because capital goods are less expensive than private goods

Multiple Choice

A dress bought for your daughter's birthday?

• Consumer goods

• Capital goods

Multiple Choice

A new building bought by the government?

• Consumer goods

• Capital goods

Multiple Choice

A personal computer sold in an electrical retailer for home use?

• Consumer goods

• Capital goods

Multiple Choice

Financial advice offered by a bank to person thinking of retiring?

• Consumer goods

• Capital goods

Multiple Choice

The ticket bought for a professional football match?

• Consumer goods

• Capital goods

Multiple Choice

The vehicles bought by a Coca-Cola distribution company?

• Consumer goods

• Capital goods

Multiple Choice

GDP is often measured as "GDP per capita" (_____)

• productive resources

• goods & services produced

• per person

• weaker economies

Multiple Choice

Economic growth (increase in national income) can be measured by

• GDP

• The CBI

• CPI

• MPC

Multiple Choice

The___________ a country’s GDP, the better the country’s standard of living.

• lower

• greater

• smaller

• answers 1 and 3 are correct

Multiple Choice

What does Gross Domestic Product mean?

• The total value of all final goods and services a country imports.

• The total value of all final goods and services a country exports.

• The total value of all final goods and services produced within a country in one year.

• The net loss in profits within a country due to imports.

Multiple Choice

Which of the following statement best describes Economic Growth?

• It refers to increase in Gross Domestic Product (GDP)

• It refers to the long and sustained rise in real Gross Domestic Product (GDP)

• It is characterized by fall in unemployment rate

• Rise in GDP on monetary term

Multiple Choice

When an economy produces more output per capita (per person) the economy is said to be having...

• Inflation

• High unemployment

• Balance of Payments

• Economic Growth

Multiple Choice

GDP is calculated by...

• Adding up the cost of goods used in producing the item

• Subtracting all costs from total revenue

• Adding consumption (consumer) + investment (business) + government spending + (exports sold - imports bought)

Multiple Choice

In which part of the GDP calculation does this fit?

The US military spends $5 billion on five new helicopters.

• Consumer spending

• Government spending

• Investment spending

• Net exports

Multiple Choice

In which part of the GDP calculation does this fit?

You spend $15 at AMC to see the latest Avengers movie.

• Consumer spending

• Government spending

• Investment spending

• Net exports

REVIEW: Limitations of GDP as growth measure

1. Inflation (Price increase can mean growth rates are misleading. Use Real GDP to take out inflation)

2. Population Changes (Use GDP per capita (head) to take into account population changes)

3. Statistical Errors (GDP contains errors)

4. The Value of Home Produced Goods (not traded, so not included)

5. The Hidden Economy (ex., drug dealing)

6. GDP and Living Standards (does not always correlate to higher living standards)

7. External Costs (Environmental damage not included)

Multiple Choice

Is this counted in the GDP of the US?

Your parents ask you to babysit your two younger siblings for the night.

• Yes

• No

Multiple Choice

Is this counted in the GDP of the US?

The federal government purchases a new US submarine for the US Navy.

• Yes

• No

Multiple Choice

Is this counted in the GDP of the US?

The services of a mechanic in fixing the radiator on his own car.

• No

• Yes

Multiple Choice

Is this counted in the GDP of the US?

A farmer gets an old tractor from his brother.

• No

• Yes

Multiple Choice

Is this counted in the GDP of the US?

Cars made by a US company in South Korea.

• Yes

• No

Multiple Choice

Is this counted in the GDP of the US?

Cars made by a Japanese company in California.

• Yes

• No

Multiple Choice

More people in an economy will normally result in

• Same GDP per Capita

• More resources, more growth

• Fewer resources, less growth

• More land per person

Multiple Choice

What is a method to increase economic growth?

• Increase labour productivity

• Reduce government expenditure

• Increase regulations

• Increase unemployment

Multiple Choice

A developed country often has greater economic growth than a developing country.

• True

• False

Multiple Choice

When is an economy in a recession?

• When there are 2 consecutive period of positive growth

• When an economy's revenue exceeds its expenditure

• When there are 2 consecutive periods of negative growth

• When there are 2 consecutive periods of negative capital investment

Multiple Choice

What is aggregate demand (AD)?

• The willingness and ability to purchase a product at a given price.

   

• The total spending on services in a period of time at a given price level.

• The total spending on goods and services in a period of time at a given price level.

• The total demand for a product in an industry.

REVIEW: Impacts of Economic Growth

1. Employment

2. ​Standards of Living

3. Poverty

4. Productive Potential

5. Inflation

6. Environment​