ECON 2120 - UNIT 2 ERXAM QUESTIONS WELL ANSWERED LATEST UPDATE 2026

ECON 2120 - UNIT 2 ERXAM QUESTIONS WELL ANSWERED LATEST UPDATE 2026 economic growth - Answers produces both increasing quantities of goods and services and better goods and services. through economic growth standard of living can increase Angus maddison - Answers compiled estimates for world GDP per capita begining with 1 CE. no growth at first, subsistence level Industrial revolution - Answers started in England in 1750 production of cotton cloth and steam engines (mechanical power) made sustained increases in GDP per capita and high standards of living possible. Why did the IR start in England? - Answers Glorious Revolution - Parliament Enlightenment thinkers, The Wealth of Nations led to institutional changes in gov policy that encouraged entrepreneurship small differences in growth rates are important - Answers compound interest/growth rates add up and create dramatic shift in standards of living over decades increase in income not everything - Answers rising standards of living in low-income countries have been due to increasing technology and knowledge economic growth model - Answers a model that explains growth rates in real GDP per capita over the long run focuses on the causes of long-run increases in labor productivity labor productivity - Answers the quantity of goods and services that can be produced by one worker or by one hour of work key factors in determining labor productivity - Answers 1. The quantity of capital available to workers 2. the level of technology used to explain changes in real GDP per capita Technological Change - Answers change in quantity of output firms can produce using a given quantity of inputs 3 main sources of technological change - Answers 1. better machinery and equipment 2. increases in human capital (the accumulated knowledge and skills that workers acquire from education and training or from life experiences) 3. better means of organizing and managing production the per worker production function - Answers the relationship between real GDP per hour worked and capital per hour worked, holding level of technology constant production function (aka the per worker production function) - Answers h axis = capital per hour worked v axis = real GDP per hour worked Y/L = real GDP per hour worked K/L = capital per hour worked curve = production function INCREASE AT A DIMINSHING RATE holding level of technology constant more growth vs technological change - Answers technological change helps economies avoid diminshing returns to capital (reorganizing/improving how production takes place) technological change and production function - Answers tech change shifts the economy to production function 2 (up/down original) *only experience increased standard of living in long run if experiences continued technological change New Growth Theory - Answers a model of long-run economic growth that emphasizes that technological change is influenced by economic incentives and so is determined by the working of the market system *knowledge capital knowledge capital - Answers key determinant of economic growth increases in knowledge capital reuslt from research and development and other technological advances physical capital - Answers rival and excudable (private good) resulting in diminishing returns knowledge capital is nonrival and nonexcludable (public good) resulting in increasing returns sat the economy level (not firm level) Free riding - Answers benefitting from goods and services you do not pay for government role in knowledge capital generation - Answers - protecting intellectual property with patents and copyrights - subsidizing research and development (performed by gov. directly or provide tax incentives) - subsidizing education