ECON 102 QUESTIONS AND ANSWERS LATEST UPDATED
VERSION, GRADED A+.
if there is no foreign sector or government sector, why would saving equal investment
a person's income is divided into
-government investments
-private saving and investment
-taxes
-net total investments(1 and 2)
if there was no govt, consumers wouldn't have to pay taxes or govt investments therefore savings=net
investment
what is the difference between a trade deficit and a trade surplus and which leaves you better off in
the LR
trade surplus involves increasing exports and reducing imports in order to pay back deficits to other
countries(example for building roads)
trade deficits involves borrowing lots of money from other countries to deepen your capital stock; it can
result in the country being worse off in the long run because some things you purchase--like consumer
goods-- don't cause capital deepening and improve your GDP outout-- you don't experience that jump in
gdp to pay back your debts.
true or false: china has a lower technological rate of progress than india
false; china has higher rate
true or false: labor productivity is higher from 2007-2011 than previous years
false; productivity was high in the 60s and has been slowly declining since the oil shock in the 70s(rising
oil prices). it rose slightly with the technological innovations of the 80s and 90s but is now declining
because of the recession shocks to capital stock
what is growth accounting and how does it differ from our normal labor model
shows how labor, capital, and changes in technology impact production
what are some examples of human capital investments
investing in improving the knowledge of your employees by paying for grad school or providing
additional training
what can influence technological progress
monopolies(people want to get into the market by making a better product),
scale of the market(how big it is)
research spending(on paper, us spends more than japan on research but per capita GDP japan spending
, is geater
investments in human capital and capital deepening
MIDTERM 1 2012 SHORTFALLS1. In Economy A, the government puts workers on the payroll that
cannot find jobs for long periods, but these "employees" do no work. In Economy B, the government
does not hire any long-term unemployed but gives them cash grants. Comparing GDP statistics
between the two economies, what can you determine about measured GDP and the actual level of
output in each economy?
c. Measured GDP is higher in Economy A, though the actual level of output in each economy is the same.
Consider the economy of Eudeyville. 100 shoes are produced in 2011 but not sold. In 2012, 50 shoes
are exported to Canada and 25 are sold to households, and 10 shoes are produced. what is the real
gdp for each year
real gdp 2011: 100
real gdp 2012: 10
name the aggregate sectors affected by changes in each category above
gdp 2011:
100=consumption
gdp 2012:
50=NX(increase)
25=Consumption(increase)
Investment=(10-75)=-65 decrease
All other things being equal, the payroll tax reduction will reduce government savings. How might that
affect the US trade balance? Explain very briefly (an equation will do the trick!)
y=c+g+I+nx
(y-c-t)+(t-g)-I=NX
personal savings+public savings-Investment=NX
all savings-investment=NX
take away T and savings reduces
-savings-investments=NX
would cause trade deficit
a. Why is the banking sector an important contributor to capital deepening? Explain briefly.
Banks allocate savings from households to firms, so a healthy banking system more I which means more
capital deepening. Or can say if banks won't lend then I is low and K is low.
b. Briefly describe one policy governments might use to affect technological progress.
could talk about patents or health care or infrastructure development or subsidizing research and
development etc
VERSION, GRADED A+.
if there is no foreign sector or government sector, why would saving equal investment
a person's income is divided into
-government investments
-private saving and investment
-taxes
-net total investments(1 and 2)
if there was no govt, consumers wouldn't have to pay taxes or govt investments therefore savings=net
investment
what is the difference between a trade deficit and a trade surplus and which leaves you better off in
the LR
trade surplus involves increasing exports and reducing imports in order to pay back deficits to other
countries(example for building roads)
trade deficits involves borrowing lots of money from other countries to deepen your capital stock; it can
result in the country being worse off in the long run because some things you purchase--like consumer
goods-- don't cause capital deepening and improve your GDP outout-- you don't experience that jump in
gdp to pay back your debts.
true or false: china has a lower technological rate of progress than india
false; china has higher rate
true or false: labor productivity is higher from 2007-2011 than previous years
false; productivity was high in the 60s and has been slowly declining since the oil shock in the 70s(rising
oil prices). it rose slightly with the technological innovations of the 80s and 90s but is now declining
because of the recession shocks to capital stock
what is growth accounting and how does it differ from our normal labor model
shows how labor, capital, and changes in technology impact production
what are some examples of human capital investments
investing in improving the knowledge of your employees by paying for grad school or providing
additional training
what can influence technological progress
monopolies(people want to get into the market by making a better product),
scale of the market(how big it is)
research spending(on paper, us spends more than japan on research but per capita GDP japan spending
, is geater
investments in human capital and capital deepening
MIDTERM 1 2012 SHORTFALLS1. In Economy A, the government puts workers on the payroll that
cannot find jobs for long periods, but these "employees" do no work. In Economy B, the government
does not hire any long-term unemployed but gives them cash grants. Comparing GDP statistics
between the two economies, what can you determine about measured GDP and the actual level of
output in each economy?
c. Measured GDP is higher in Economy A, though the actual level of output in each economy is the same.
Consider the economy of Eudeyville. 100 shoes are produced in 2011 but not sold. In 2012, 50 shoes
are exported to Canada and 25 are sold to households, and 10 shoes are produced. what is the real
gdp for each year
real gdp 2011: 100
real gdp 2012: 10
name the aggregate sectors affected by changes in each category above
gdp 2011:
100=consumption
gdp 2012:
50=NX(increase)
25=Consumption(increase)
Investment=(10-75)=-65 decrease
All other things being equal, the payroll tax reduction will reduce government savings. How might that
affect the US trade balance? Explain very briefly (an equation will do the trick!)
y=c+g+I+nx
(y-c-t)+(t-g)-I=NX
personal savings+public savings-Investment=NX
all savings-investment=NX
take away T and savings reduces
-savings-investments=NX
would cause trade deficit
a. Why is the banking sector an important contributor to capital deepening? Explain briefly.
Banks allocate savings from households to firms, so a healthy banking system more I which means more
capital deepening. Or can say if banks won't lend then I is low and K is low.
b. Briefly describe one policy governments might use to affect technological progress.
could talk about patents or health care or infrastructure development or subsidizing research and
development etc
