Chapter 10: Economic Growth(100% Everfree answers)
Business cycle correct answersFluctuations in economic activity, such as employment and
production.
Long run economic growth correct answersThe process by which rising productivity increases
the average standard of living.
Growth rate correct answersThe percentage increase or decrease of GDP from the previous
measurement cycle. It is annualized so it can be compared to the previous year.
Rule of 70 correct answersA method for determining the number of years it will take for some
measure to double, given its annual percentage increase. Example: To determine the number of
years it will take for the price level to double, divide 70 by the annual rate of inflation.
Determinants of long run growth correct answersCapital, labor, land, and technological factors
will work to improve economic growth.
Labor productivity correct answersThe quantity of goods and services that can be produced by
one worker or by one hour of work.
Potential vs. full employment GDP correct answersThe level of real GDP attained when all firms
are producing at capacity vs. the value of total output (real GDP) produced at full employment.
Financial system correct answersThe system of financial markets and financial intermediaries
through which firms acquire funds from households.
Financial market correct answersMarkets where financial securities, such as stocks and bonds,
are bought and sold.
Financial intermediary correct answersFirms, such as banks, mutual funds, pension funds, and
insurance companies, that borrow funds from savers and lend them to borrowers.
Relationship between savings and investment correct answersSavings must equal investment to
be in equilibrium.
Public savings correct answersEquals the amount of tax revenue the government retains after
paying for government purchases and making transfer payments to households.
S(Public) = T − G − TR
Private savings correct answersEqual to what households retain of their income after purchasing
goods and services (C) and paying taxes (T).
S(Private) = Y + TR − C − T
Loanable funds market correct answersThe interaction of borrowers and lenders that determines
the market interest rate and the quantity of loanable funds exchanged.
Business cycle correct answersFluctuations in economic activity, such as employment and
production.
Long run economic growth correct answersThe process by which rising productivity increases
the average standard of living.
Growth rate correct answersThe percentage increase or decrease of GDP from the previous
measurement cycle. It is annualized so it can be compared to the previous year.
Rule of 70 correct answersA method for determining the number of years it will take for some
measure to double, given its annual percentage increase. Example: To determine the number of
years it will take for the price level to double, divide 70 by the annual rate of inflation.
Determinants of long run growth correct answersCapital, labor, land, and technological factors
will work to improve economic growth.
Labor productivity correct answersThe quantity of goods and services that can be produced by
one worker or by one hour of work.
Potential vs. full employment GDP correct answersThe level of real GDP attained when all firms
are producing at capacity vs. the value of total output (real GDP) produced at full employment.
Financial system correct answersThe system of financial markets and financial intermediaries
through which firms acquire funds from households.
Financial market correct answersMarkets where financial securities, such as stocks and bonds,
are bought and sold.
Financial intermediary correct answersFirms, such as banks, mutual funds, pension funds, and
insurance companies, that borrow funds from savers and lend them to borrowers.
Relationship between savings and investment correct answersSavings must equal investment to
be in equilibrium.
Public savings correct answersEquals the amount of tax revenue the government retains after
paying for government purchases and making transfer payments to households.
S(Public) = T − G − TR
Private savings correct answersEqual to what households retain of their income after purchasing
goods and services (C) and paying taxes (T).
S(Private) = Y + TR − C − T
Loanable funds market correct answersThe interaction of borrowers and lenders that determines
the market interest rate and the quantity of loanable funds exchanged.
