Exam 17: Market Failure: Externalities, public Goods, and Asymmetric Information

The term economic growth can be used in reference to absolute real economic growth or to per- capita real economic growth.

The knowledge and skills a person acquires through education,training,and experience is termed human capital.

Describe new growth theory.Explain how it differs from neoclassical growth theory.

According to Mancur Olson,transfer-promoting policies are more likely to be lobbied for instead of growth-promoting policies when a country has a relatively large number of special-interest groups.

Production Function Real GDP = T (L,K),such that Real GDP = T(L + K) Assume that the technology coefficient is equal to 0.40. -Refer to Exhibit 17-1.If there are 20 units of capital and 16 units of labor,________ units of output (Real GDP)will be produced.

In the production function Real GDP = T (L,K),the T represents the _____________ coefficient,the L represents ________________ and the K represents _______________.

Neoclassical growth theory placed emphasis on two resources:

Neoclassical growth theory does not emphasize how __________ contribute to growth.

Lower income taxes cause a ____________shift of the labor supply curve,which then produces__________ Real GDP.

Using the labor market,the production function Real GDP = T (L,K),and the LRAS curve,describe the process by which a decrease in income taxes impacts economic growth.

If Real GDP is $6 billion and the population is 300,000,per-capita Real GDP is

-Refer to Exhibit 17-3 Assume that the starting point on the production function is point A.After an increase in the quantity of capital,there would be a ______________________ which would shift the LRAS curve from LRAS₁ to _______________ resulting in _______________..

When income taxes fall,the supply of labor curve shifts rightward,ultimately leading to the LRAS curve shifting leftward.

Higher interest rates cause a(n)____________in capital utilization,which shifts the production function __________and thereby shifts the LRAS curve ______________.

Applying the concept of a production function to your learning,assume that the amount of learning you acquire can be summarized by the following equation (and that your motivation to learn and the quality of instruction are both rated on a scale from 1 to 10): Amount of learning acquired = 0.2(number of books read)+ 0.25(hours spent studying)+ 0.15(quality of instruction)+ 0.4(motivation to learn) -Refer to Exhibit 17-5.Based on the equation given in this exhibit,if your motivation to learn rises from 7 to 9,by how much will the amount of learning acquired rise as a result?

Real GDP in a small country is worth $8 billion.The population of the country is 200,000.What is per capita Real GDP?

Production Function Real GDP = T (L,K),such that Real GDP = T(L + K) Assume that the technology coefficient is equal to 0.40. -Refer to Exhibit 17-1.If this production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis,and capital rises from 4 units to 6 units it would cause a

Technological advances make it possible to

According to new growth theory,technological advances can be promoted

"Absolute real economic growth" is defined as an increase in __________ from one period to the next.