All Flashcards
What is the difference between economic growth and economic development?
Economic growth is an increase in real GDP, while economic development is broader and includes improvements in living standards, health, and education.
Differentiate between renewable and nonrenewable resources.
Renewable resources can be replenished (timber), while nonrenewable resources cannot (oil).
What is the difference between short-run and long-run economic growth?
Short-run growth is an increase in actual output, while long-run growth is an increase in potential output.
What is the difference between nominal GDP and real GDP?
Nominal GDP is measured in current prices, while real GDP is adjusted for inflation.
What is the difference between absolute advantage and comparative advantage?
Absolute advantage is the ability to produce more of a good or service than another producer, while comparative advantage is the ability to produce a good or service at a lower opportunity cost.
What is the difference between capital goods and consumer goods?
Capital goods are used to produce other goods and services, while consumer goods are used to satisfy consumer wants and needs.
What is the difference between microeconomics and macroeconomics?
Microeconomics studies the behavior of individual consumers and firms, while macroeconomics studies the behavior of the economy as a whole.
What is the difference between positive and normative economics?
Positive economics is based on facts and can be tested, while normative economics is based on opinions and cannot be tested.
What is the difference between economic efficiency and equity?
Economic efficiency is the optimal allocation of resources, while equity is the fairness of the distribution of resources.
What is the difference between economic growth and sustainable development?
Economic growth is an increase in real GDP, while sustainable development is economic growth that meets the needs of the present without compromising the ability of future generations to meet their own needs.
What does a rightward shift of the PPF indicate?
Economic growth; the economy can produce more of all goods.
What does a rightward shift of the LRAS curve indicate?
Economic growth; the economy can produce more at full employment.
On a PPF, what does a point inside the curve represent?
Inefficient use of resources or unemployment.
On a PPF, what does a point outside the curve represent?
Currently unattainable production levels, given current resources and technology.
How is economic growth represented on an LRAS graph?
A rightward shift of the LRAS curve.
What does the slope of the PPF represent?
The opportunity cost of producing one good in terms of the other.
What does a movement along the PPF represent?
A reallocation of resources from the production of one good to another.
What does the vertical axis of the LRAS graph represent?
Price Level.
What does the horizontal axis of the LRAS graph represent?
Real GDP.
What does a steep PPF indicate?
A high opportunity cost of producing one good in terms of the other.
How does increased technology affect the PPF?
It shifts the PPF rightward, indicating increased production possibilities.
How does increased investment in human capital affect productivity?
It increases productivity by improving the skills and knowledge of the workforce.
How does saving relate to economic growth?
Saving provides the funds for investment, which drives economic growth.
How does an increase in physical capital affect the LRAS?
It shifts the LRAS curve to the right, increasing potential output.
How does improved technology affect the aggregate production function?
It shifts the function upward, meaning more output can be produced with the same inputs.
How does a decrease in natural resources impact a country's PPF?
It shifts the PPF inward, reducing the potential output of the economy.
How does increased government spending on education affect human capital?
It increases human capital by improving the skills and knowledge of the workforce.
How does increased automation affect productivity?
It increases productivity by allowing for more efficient production processes.
How does a recession affect economic growth?
It slows down economic growth by decreasing production and investment.
How does free trade affect economic growth?
It promotes economic growth by allowing countries to specialize in the production of goods and services in which they have a comparative advantage.