For each question, choose the best response: True/ false

1. Economic growth in a market society, like the US is an excellent way to

reduce the income gap between the rich and the poor.

2. Economic Growth is actually bad for a country. It makes more people poor and

widens the gap between rich and poor.

3. Economic Growth rates are very important to monitor, because there is a

level of growth we need to employ those entering the work force.

4. It is in theory possible to have economic growth without creating more jobs

with increases in productivity.

5. The savings institutions of a nation, its banks, insurance companies and

even credit unions help to convert our saving dollars into investment (the

purchase of capital.)

6. During World War II Germany and Japan sustained terrible losses, yet after

the war, both experienced higher economic growth that the U. S.

7. The Fallacy of Thrift holds that increasing savings for an individual or

family is good, but increasing saving on a national scale can be bad in the short run.

8. The New Theory of Growth places great importance on technological advance

and upon investment in human capital to achieve economic growth.

9. The Solow Growth Model differentiates between two kinds of economic growth,

(1) Catching Up Growth and (2) Cutting Edge Growth.

10. An Economic Model is a complicated framework which helps us to understand

far more simple realities.

11. Huge portions of the world?s population live on $2 per day or less, which

we refer to as abject poverty. Which is a UN standard for abject poverty.

12. The faster the population of a nation grows, as a rule, the faster their

economies grow and develop.

13. The concept of HUMAN CAPITAL is about investment in people, in education

and in training to increase the productivity of .

14. The long run aggregate supply curve is a vertical line.

15. LRAS represents the full employment GDP.

16. The curve which refers to essentially the same thing as LRAS is the

Production Possibilities Curve.

17. Shifts in the Aggregate Demand curve create short term inflationary and

Recessionary gaps.

18. According to Economist Milton Friedman, ?All inflation is a monetary

matter.?

19. Though Nobel Prize winner Milton Friedman asserts that all inflation is a

monetary phenomenon, increases in aggregate demand which are greater than our

increases in capacity to produce can cause inflation.

20. As a general rule, Thomas Malthus, who postulated about the economic

advantages of plagues and other diseases were beneficial in controlling

population growth, was wrong.

21. In a video, Herbert Hoover, was not sitting waiting for the depression to

correct itself, but by signing the Smoot Hawley Tariff into effect, he made

things worse.

22.The Real Balances effect refers to the impact assets valued in dollars,

when price levels rise.

23. When Price levels are falling, there is a tendency to increase Grosse

Private Domestic Investment.

24. In the Quantity Equation of Money, an Identity, V refers to the velocity of

money and Y refers to the Real GDP.

25. Cost Push Inflation occurs when aggregate demand changes by more than our

productive capability.

26. Demand Pull Inflation can be caused by changes in the costs of producing

output.

27. ?Demand Creates its own Supply.?

28. The Keynesian Range of the LRAS is horizontal, meaning that increasing AD

can increase GDP and employment.

29. Keynes believed that government sponsored job creation could reverse the

effects of recession.

30. Under Classical Economic theory, it was believed that Economies would

adjust to changes in AD without actions by government.

31. Classical Economic thought held that the Aggregate Supply Curve was

horizontal.

32. During the Great Depression it was believed that anything the president did

to help the economy would make it worse.

33. Unlike the Classical Economists, Keynes believed that Aggregate Demand

determines the level of GDP.

34. According to Keynes, Saving is a stock and Savings is a flow.

35. Grosse Private Domestic Investment is an injection, while saving is a

leakage.

36. Autonomous consumption is the buying we would do, even if we had no income.

37. The theory that our consumption decisions are based on our income both now

and in the future is called the Permanent Income Hypothesis. This was conceived

of by Milton Friedman.

38. All investment spending is ?planned investment spending.?

39. Any expenditures by government or business have a multiplicative impact

upon GDP.

40. Investment spending is less consistent and more effected by economic events

than consumption spending.

41. The Marginal Propensity to Consume is the portion of after tax in income

increase which you will add to spending.

42. The MPS is the portion of after tax income increases which are added to

savings.

43. In the Life Cycle of consumption, we borrow early in life, until our income

equals our expenditures.

44.During our prime, our income should exceed our consumption and saving

should be possible, and should be a priority.

45. In our older years, we consume our saved dollars to supplement our reduced

incomes.

46. The phenomenon in #45 is called Dis-Saving.

47. Milton Friedman suggested that we make our decision about spending only

based on current income realities.

48. The idea expressed in question 47 is called the Temporary Income

Hypothesis.