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ECON 104 FINAL – GOFFE EXAM QUESTIONS AND ANSWERS 2024
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ECON 104 FINAL – GOFFE EXAM QUESTIONS AND ANSWERS 2024
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ECON 104, GOFFE, PSU EXAMIn order to be a rich country, you need a lot of technology and capital per worker.
To grow, these need to increase, how does this happen? - ANSWERS-Institutions.
Good Institutions provide: 1.) Vibrant Markets (2.) High Tech and K/L (3.) High Y/L
(Labor productivity) and (4.) High GDP per Person
How are lay offs essential for growth? - ANSWERS-1.) More output by fewer
workers leads to higher real wages
2.) New industries employ those who've been laid off
3.) Labor saving technology is a the key to economic prosperity
Point of Diminishing Returns - ANSWERS-A point at which the level of profits or
benefits gained is less than the amount of money or energy invested
What causes the per-worker production function curve to shift up? - ANSWERS-1.)
More education
2.) More efficient machines
3.) Ideas that improveefficiency
What government action would be most harmful to economic growth? -
ANSWERS-Fixing Prices because flexible prices help economies work more
efficiently by producing incentives. So, fixed prices don't create incentives.
,Which type of unemployment varies the most from year to year? - ANSWERS-
Cyclical. All depends on the business cycle.
Natural Rate of Unemployment - ANSWERS-Natty rate of unemployment is the
rate of unemployment when 1.) cyclical unemployment is 0% (2.) The
unemployment rate is from roughly 5-5.5 % and (3.) The economy is at "Full
employment"
What happens to potential GDP from year to year? How about during recessions?
- ANSWERS-Potential GDP GROWS from year to year, and in recessions it is MORE
THAN real GDP.
Define Okun's Law - ANSWERS-Connection between Real GDP (Y) and the
unemployment rate (u).
*Formula: %Change Y= 3-2 Delta(u)
What rate of economic growth keeps the unemployment rate constant? -
ANSWERS-3% growth
Recession definition - ANSWERS-A recession is a significant decline in economic
activity spread across the economy lasting more than a few months, normally
visible in real GDP, real income, employment, industrial production, and
wholesale-retail sales.
, GDP - ANSWERS-the market value of all FINAL goods and services produced in a
country during a period of time.
GDP equation - ANSWERS-GDP(Y)=C (consumption) + I (investments) +G (gov
purchases) +NX (net exports)
Consumption - ANSWERS-expenditures made by households (excluding the
purchase of a new house)
Investment - ANSWERS-Final goods and services purchased by business firms
(equipment for production and new buildings), changes in inventories (which is
thee difference between production and sales), and residential construction
purchased by households.
Government Purchase - ANSWERS-Spending by the federal, state, and local
governments
Net Exports - ANSWERS-Exports-imports
Real GDP - ANSWERS-Value of economic output adjusted for inflation or deflation
Nominal GDP - ANSWERS-GDP evaluated at current market prices which doesn't
account for inflation/deflation
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