Econ 320 Ch 10 Homework Questions

1. According to a historical GDP data, among the OECD countries
2. the poorer countries have had higher growth rates than the richer ones.
3. the richer countries give away more of their output than the poorer ones.
4. the richer countries have had higher growth rates than the poorer ones
5. the procedures for measuring output per capita have been changing.
6. As capital per worker increases, output per worker ___ .
7. increases. . B. decreases.               C. does not change.
8. An increase in the standard of living of citizens of a country can be best measured by the growth rate of

A.nominal GDP                                  B. per capita nominal GDP

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1. real GDP D. per capita real GDP
2. What matters in the long run GDP is ____ while what matters in the short run GDP is ____.

A.demand, capital                               B. capital, demand

1. demand, demand D. capital, capital
2. The standard of living in the long run depends on

A.inflation                                           B. monetary expansion

1. capital accumulation D. consumption demand
2. Assume that there are constant returns to scale. Now suppose that both capital and labor increase by 10%. Given this information, output (Y) will
3. increase by less than 20% but more than 10%.
4. not change.
5. increase by less than 10%
6. increase by 10%.

7. Economic growth concerns how to

A. get out of recession                                    B. reduce inflation

C. improve economy for the next generation D. increase money supply

8. Give an example of the aggregate production function, Y = F(K, N), that exhibits constant returns to scale.
9. It is expected that the U.S. Social Security will face a financial problem in the future. Discuss the reason for the expectation, based on demographic changes.
10. Discuss how economic growth can help in solving the financial problem in question 9.

Answer Key

1. A. 2. A 3. D                 4. B                 5. C
2. D. 7.C
3. Y = √K √N
4. There will be fewer workers and more retirees.
5. Higher growth rates of GDP can increase incomes, which can increase the tax revenues for social security benefits even if the number of workers or the social security tax rate does not increase.