What is economic growth and why are growth rates so important?
What will be an ideal response?
Economic growth is measured by increases in per capita real Gross Domestic Product (GDP). Economic growth results in a higher standard of living, measured in production of new final goods and services, for the average member of society. Sustained small increases in the growth rate of per capita real Gross Domestic Product (GDP) can lead to large absolute increases in per capita real Gross Domestic Product (GDP) due to the power of annual growth compounding.
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In Figure 3-6, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S1 to S2 in the market for ice cream?
a. an increase in the price of sugar, an ingredient used to produce ice cream b. a decrease in the price of frozen yogurt, a substitute for ice cream c. abnormally hot weather that temporarily increases consumer desire for ice cream d. a decrease in the price of milk, an ingredient used to produce ice cream
The free-rider problem arises because:
A. once provided, a public good is available to all regardless of whether they paid for it. B. poor people cannot afford to contribute to public goods. C. enforcement of tax laws is inadequate. D. people disagree with how the government spends its money.
An increase in money supply causes the real interest rate to ________ and the price level to ________ in general equilibrium.
A. remain unchanged; fall B. rise; rise C. fall; fall D. remain unchanged; rise
The four important characteristics that define a perfectly competitive market are:
A. standardized good, full information, no transactions costs, participants are price takers. B. standardized information, finished good, no transactions costs, participants are price makers. C. standardized good, same information for buyer and seller, low transactions costs, participants are price takers. D. standardized good, full information, no transactions costs, participants are price makers.