All Flashcards
Define Public Policy.
Government actions designed to influence the economy.
Define Economic Growth.
An increase in the amount of goods and services produced per head of the population over a period of time.
Define Real GDP per capita.
A measure of a country's economic output that accounts for the effects of inflation and the number of people in the country.
Define Human Capital.
The skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country.
Define Infrastructure.
The basic physical and organizational structures and facilities (e.g., buildings, roads, power supplies) needed for the operation of a society or enterprise.
Define Innovation.
The introduction of something new; a new idea, method, or device.
Define Supply-Side Economics.
An economic theory that advocates reducing taxes and deregulation to increase production and stimulate economic growth.
Define Short-Run Aggregate Supply (SRAS).
The total quantity of goods and services firms are willing and able to supply at different price levels in the short run.
Define Long-Run Aggregate Supply (LRAS).
The total quantity of goods and services firms are willing and able to supply at different price levels in the long run.
Define Demand-Side Policies.
Government policies that focus on shifting the Aggregate Demand (AD) curve to influence economic activity.
Define Aggregate Demand (AD).
The total demand for final goods and services in an economy at a given time.
Define Investment Tax Credit.
A tax incentive that allows businesses to deduct a percentage of the cost of new investments from their taxes.
Define Productivity.
The effectiveness of productive effort, especially in industry, as measured in terms of the rate of output per unit of input.
How does increased government spending on education affect long-run economic growth?
It improves the quality of labor, leading to higher productivity and increased output, shifting LRAS to the right.
How does government investment in infrastructure contribute to long-run real GDP growth?
It boosts overall spending, reduces transportation costs, and improves business efficiency, leading to increased productivity and output.
How do patents promote innovation and long-run economic growth?
Patents protect intellectual property, giving companies more incentive to innovate and create, thus increasing real GDP in the long run.
How does increasing employment lead to higher productivity and economic growth?
More workers contribute to increased output, leading to higher overall production and economic growth.
How do lower taxes for businesses affect the supply of loanable funds?
Lower taxes mean businesses have more money to invest, increasing the supply of loanable funds.
How do lower interest rates impact investment?
Lower interest rates make borrowing cheaper, leading to more investment by businesses and individuals.
How does an investment tax credit encourage economic growth?
It reduces a firm's taxes if it invests, encouraging more investment and growth.
How do lower taxes affect household spending and firm profits?
Lower taxes mean more income for households, leading to more spending and increased profits for firms.
How do productivity incentives boost demand?
Lower taxes incentivize people to work harder, leading to increased employment and less government dependence.
How does lower taxes affect risk-taking and investment?
With lower taxes, the expected income from investing increases, encouraging more risk-taking and investment.
Explain how improvements to roads and bridges can increase economic growth.
Better infrastructure reduces transportation costs for businesses, increases efficiency, and facilitates trade, leading to higher productivity and economic growth.
Explain how government funding for research and development (R&D) can lead to economic growth.
Government funding for R&D encourages innovation and technological advancements, leading to new products, processes, and industries, which boost productivity and economic growth.
What is the impact of cutting taxes on businesses on aggregate supply?
It increases aggregate supply by reducing production costs and incentivizing investment.
What is the impact of deregulation on economic growth?
It can stimulate economic growth by reducing barriers to entry and fostering competition.
What is the impact of increased government spending on infrastructure on AD?
It increases aggregate demand by injecting money into the economy and boosting spending.
What is the impact of increased government spending on education on long-term productivity?
It leads to a more skilled workforce and increased long-term productivity.
Evaluate the effectiveness of supply-side policies in addressing a recession.
Supply-side policies may take longer to impact the economy than demand-side policies, but they can lead to sustainable long-term growth without causing high inflation.
Evaluate the potential drawbacks of supply-side policies.
They may exacerbate income inequality and require significant time to produce noticeable effects.
What is the impact of increased government spending on unemployment benefits on economic growth?
It can reduce the incentive to work, potentially decreasing labor supply and hindering economic growth.
What is the impact of increasing the minimum wage on employment?
It may lead to job losses, particularly among low-skilled workers, as businesses reduce employment to offset higher labor costs.
What is the impact of implementing price ceilings on market efficiency?
Price ceilings can lead to shortages, black markets, and reduced market efficiency as they distort the natural forces of supply and demand.
What is the impact of increasing the money supply on inflation?
Increasing the money supply can lead to inflation if it grows faster than the economy's output, as there is more money chasing the same amount of goods and services.
What is the impact of policies that promote innovation on long-term economic growth?
Policies that promote innovation encourage the development of new technologies and processes, leading to increased productivity, higher living standards, and long-term economic growth.