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Macroeconomics
Semester 1
Lesson 13
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Matezik Sebestak
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Cards (23)
What is the definition of economic growth?
The rate of change in
real GDP
per capita
over a long period of
calendar time
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What are the four key points about the definition of economic growth?
Focus on
real GDP growth
at constant prices.
Measured in
per capita
terms to account for
population growth
.
Assessed over long periods (7 to
10
years).
Growth rates should be measured from the same point in the business cycle.
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What was the economic growth rate in the UK from 1700 to 1750?
0.6%
per annum
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What was the economic growth rate in the UK from 1750 to 1776?
0%
per annum
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What was the economic growth rate in the UK from 1776 to 1800?
8%
per annum
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What was the state of economic growth before the 18th century?
There was no economic growth until the 18th century
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Who was the originator of the Classical model of economic growth?
Adam Smith
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What were the three pre-requisites for economic growth according to Adam Smith?
Security of property, control of
primogeniture
, and state-provided infrastructure
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How does the division of labour affect productivity according to Adam Smith?
Increases output through:
Improved dexterity
of the workforce.
Time saved moving between tasks.
Employment of machinery
.
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What is the relationship between capital accumulation and wages according to the Classical model?
As capital accumulates, wages
rise
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What assumption did Smith make about population growth and output?
He
assumed
extra
population
would lead to
more
output
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What was Malthus's theory of population growth?
Population grows
geometrically
while food supply grows arithmetically
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What checks did Malthus propose to restrain population growth?
Preventive
checks (moral restraint) and
positive
checks (
misery
)
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What did Malthus believe about economic growth and living standards?
Economic growth would not raise average living standards due to
population growth
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What was Ricardo's view on the Corn Laws and economic growth?
He believed growth depended on the
repeal
of the Corn Laws
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What is the relationship between rent, average product, and marginal product in Ricardo's model?
Rent is the vertical gap between average product (AP) and marginal product (MP).
Marginal
land
determines the rental value of more fertile land.
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What happens to profits as rents increase in Ricardo's model?
Profits are squeezed as rents increase
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What is the "stationary state" in Ricardo's theory?
It is the point where
profits
fall so low that there is no
incentive
to invest
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What were the main points of Marx's critique of capitalism?
Capitalists
exploit workers by paying less than the value of their
output
.
The
organic composition of capital
rises with
mechanization
.
The
proletariat
becomes
pauperized
due to
industrial concentration
.
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What did Marx believe would lead to a socialist revolution?
The
workers
revolting and taking over the
means of production
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What evidence supports Marx's model of growth?
Decline in wages for
hand-loom weavers
in the early 1800s.
Improvement in working conditions after 1850.
The
Factory Act 1833
and
Education Acts 1870
.
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What are the key differences between Ricardo's and Marx's views on economic growth?
Ricardo saw conflict between
landlords
and
capitalists
.
Marx focused on conflict between
workers
and capitalists.
Both viewed capital as essential for growth.
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What is the overall summary of the Classical model of economic growth?
Society is divided into
classes
with specific economic functions.
Capitalists
drive growth through profit investment.
Class conflicts are inevitable in the pursuit of growth.
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