Deck 16: Economic Growth

Question 1

Economic growth is measured as:

A) the quarterly percentage change in nominal GDP.
B) total output per year divided by the inflation rate.
C) total nominal GDP at the end of each year.
D) the percentage change in population growth per year.
E) the annual percentage change in real GDP.

Answer 1

the annual percentage change in real GDP.

Question 2

To calculate the time required for real GDP to double, we _____.

A) divide the annual growth rate by 72
B) divide 72 by nominal GDP
C) divide real output by 72
D) divide 72 by the annual growth rate
E) multiply real GDP by 72

Answer 2

divide 72 by the annual growth rate

Question 3

If real GDP in Korea amounted to 448.3 trillion wons in 1999 and 473.7 trillion wons in 2000, compute the growth experienced by this country in 2000?

A) 5.4%
B) 5.66%
C) 2.54%
D) -1.05%
E) -9.4%

Answer 3

5.66%

Question 4

Per capita real GDP is:

A) equivalent to the real GDP level.
B) a measure of the value of output produced and available to an average person.
C) higher in developing countries than in developed countries.
D) a measure of an economy's income distribution.
E) a measure of the GDP per country.

Question 5

Assume that you invest $550 in a certificate of deposit that has an annual interest rate of 4.5 percent. According to the rule of 72, what will your investment be worth after 16 years?

A) $550
B) $3,960
C) $1,100
D) $797.5
E) $1,200

Question 6

The income of the town of Kennebunkport has been growing by 2 percent per year. If this growth continues into the future, how long will it take until the town's income has doubled?

A) About 36 years
B) About 24 years
C) About 96 years
D) About 50 years
E) About 144 years

Question 7

Which of the following is accounted for when we measure economic growth in terms of per capita real GDP?

A) Changes in the quality of life
B) Changes in income distribution
C) Changes in standards of living
D) Changes in price level
E) People's nonmonetary needs

Question 8

If the average annual growth rate of a developing country is 7.2 percent, real GDP will double in _____.

A) 2 years
B) 7.2 years
C) 14.4 years
D) 10 years
E) 15 years

Question 9

Using the rule of 72, calculate the average annual growth rate of GDP needed for a country to double its size in just four years?

A) 12 percent
B) 4 percent
C) 18 percent
D) 72 percent
E) 28 percent

Question 10

Suppose the real GDP in an economy in the year 1999 was $2,000 and the total population was 500. The economy experienced a 5% growth in real GDP and a 2% growth in its population in 2000. Calculate the change in per capita income of the economy during this period.

A) +1%
B) +2.5%
C) -3%
D) +3%
E) -4%

Question 11

If an investment of $400 increases to $800 in 16 years, the annual interest rate of the investment must be _____.

A) 18%
B) 10%
C) 9%
D) 4.5%
E) 1.8%

Question 12

If Korea's average annual growth rate is 9 percent and that of the United States is 4 percent, the time required for Korea's real GDP to double will be ____ less than the time required for the GDP of the United States to double.

A) 3 years
B) 6 years
C) 12 years
D) 15 years
E) 10 years

Question 13

What is the annual rate of economic growth in Japan if real GDP at the beginning of the year is 11.9 trillion yen and real GDP at the end of the year is 11.1 trillion yen?

A) 0.65%
B) -6.7%
C) 1.9%
D) 0.008%
E) -6.25%

Question 14

If real GDP for Mexico was 19.8 trillion pesos at the end of 1999 and 21.3 trillion pesos at the end of 2000, then Mexico's economy grew at an annual rate of _____.

A) -0.015%
B) 4.4 %
C) 4.2%
D) 7.57%
E) 3.8%

Question 15

If you invest $1,000 in a savings account and the annual interest rate is 3.6 percent, your account balance will double in value in approximately _____.

A) 185 years
B) 72 years
C) 34 years
D) 20 years
E) 3.4 years

Question 16

Which of the following is true of the rule of 72?

A) The rule of 72 is used to approximate annual real GDP.
B) The rule of 72 determines the time required for any value to double if it grows at a constant annual rate.
C) The rule of 72 is used to calculate the number of years it takes for any quantity to treble in size.
D) The rule of 72 refers to the fact that real GDP doubles every 6 years.
E) The rule of 72 refers to the fact that capital growth has consistently contributed 72 percent to the U.S. real GDP.

Question 17

In 2000, the real GDP for Malaysia was 93.15 trillion ringgit (MYR) and the population size was 20.5 million, then per capita real GDP for the year was approximately equal to _____.

A) MYR 4.54 million
B) MYR 45.9 million
C) MYR 1,909.5 million
D) MYR 191 million
E) MYR 9,315 million

Question 18

What is the approximate per capita income of the US if the population is 3,405,813 and its GDP is $24 million?

A) $8.17
B) $1.41
C) $7.05
D) $0.08
E) $6.18

Question 19

If the real GDP of a developed country doubles in 48 years, the average annual growth rate in real GDP must be _____.

A) 1.5%
B) 3.5%
C) 0.67%
D) 0.012%
E) 24%

Question 20

The per capita real GDP in Sri Lanka is likely to be lower than the United States because Sri Lanka's economy is characterized by:

A) a more equitable income distribution system.
B) a high population growth.
C) a low regard for political freedom.
D) a higher level of consumption spending.
E) a high budget deficit.

Question 21

Other things remaining equal, total factor productivity will fall if _____.

A) labor input grows more slowly than total output
B) capital input grows faster than total output
C) the economy's output divided by total inputs increases
D) the ratio of total output to the stock of labor and capital changes by zero percent
E) the ratio of total output to the stock of labor and capital increases

Question 22

Other things equal, a country's long-run aggregate supply will shift to the left when _____.

A) the aggregate expenditure on education rises
B) the productivity of labor rises
C) the quantity of natural resources rises
D) the mortality rate rises
E) the amount of investment rises

Question 23

In developing countries, the labor force typically grows _____.

A) as rapidly as in industrial countries
B) less rapidly than in industrial countries
C) more rapidly than in industrial countries
D) at a diminishing rate
E) at a constant rate

Question 24

Which of the following statements about technology is true?

A) It is a sufficient but not necessary condition for economic growth.
B) Management techniques are irrelevant to technological growth.
C) Industrial countries follow the lead of developing countries in implementing new technology.
D) Technological change is inversely related to a nation's ability to save.
E) Low levels of education can impede technological progress.

Question 25

An expansion in a country's capital stock is associated with a(n) _____.

A) increase in potential GDP
B) decline in future consumption
C) increase in human capital
D) decline in the rate of investment
E) increase in national debt

Question 26

If real GDP remains unchanged, the population size is stationary, and people have more leisure time, then per capita real GDP will _____.

A) overstate actual economic growth
B) understate actual economic growth
C) be the most accurate measure of actual economic growth
D) show that actual economic growth was negative
E) show that actual economic growth was positive

Question 27

Which of the following statements about the economic concept of land is not true?

A) Land includes forests, minerals, and other natural resources.
B) Countries that are rich in natural resources are not always successful in exploiting these resources to produce goods and services.
C) Land can be combined with labor and capital to produce goods and services.
D) Abundant natural resources are necessary for economic growth.
E) Countries that lack natural resources need not be characterized by limited economic growth.

Question 28

The baby boom of the post-World War II period had the greatest impact on the size of the U.S. labor force in _____.

A) the 1980s
B) the 1970s
C) the 1960s
D) the 1950s
E) the late 1940s

Question 29

_____ is the ratio of an economy's output to its stock of labor and capital.

A) Productive capacity
B) Multifactor productivity
C) Marginal product of labor
D) Workforce productivity
E) Total factor productivity

Question 30

Which of the following is a barrier to economic growth in low-income countries?

A) A shortage of labor
B) A declining population
C) Lack of investment in research and development
D) Lack of natural resources
E) An increasing amount of savings

Question 31

Which of the following will shift the long-run aggregate supply curve to the right?

A) Increase in the price level
B) Increase in the natural rate of unemployment
C) Decrease in per capita GDP
D) Increase in the rate of economic growth
E) Increase in the rate of inflation

Question 32

Per capita real GDP is a questionable indicator of the state of the economy because it does not account for:

A) growth of national income.
B) changes in inflation.
C) income distribution.
D) changes in the size of the population.
E) changes in the level of output.

Question 33

Per capita real GDP is of limited use as a measure of economic well being for all the following reasons, except:

A) it says nothing about the quality of the environment.
B) it does not reflect the degree of personal freedom in a society.
C) it is not adjusted for changes in leisure time.
D) it is not adjusted for changes in the rate of inflation.
E) it says nothing about the distribution of income.

Question 34

The total factor productivity of an economy is the ratio of the economy's _____.

A) total income to its total population
B) output to its total stock of labor and capital
C) stock of capital to its stock of labor
D) total population to its total labor force
E) total capital stock to its total population

Question 35

The ability of a country to invest in capital goods is tied to _____.

A) its ability to save
B) the size of its labor force
C) its abundance of natural resources
D) the quality of its labor force
E) the level of inflation

Question 36

Long-term economic growth requires a permanent:

A) decline in the average price level.
B) leftward shift of the vertical Phillips curve.
C) rise in the natural rate of unemployment.
D) leftward shift of the aggregate demand curve.
E) rightward shift of the vertical aggregate supply curve.

Question 37

Which of the following is considered a determinant of long-run economic growth?

A) Increase in the interest rates
B) Changing expectations
C) Increase in the money supply
D) Growth in productive resources
E) Reduction in government spending

Question 38

Technological advancement implies:

A) the increase in the quantity of inputs needed to produce a given quantity of output.
B) the reduction in the quantity of inputs needed to produce a given quantity of output.
C) the reduction in the productivity of a sector of the economy that has become obsolete.
D) an increase in the labor to capital ratio in any production process.
E) the growth in the natural resource endowment.

Question 39

Which of the following stands true for the determinants of growth?

A) The long-run aggregate supply curve is a horizontal line at the potential level of real GDP.
B) Land can be combined with labor and capital to produce goods and services.
C) The labor force typically grows more rapidly in industrial countries than in developing countries because birth rates are higher in industrial countries.
D) The ability of a country to invest in capital goods is tied to its ability to spend.
E) The size of the labor force is a function of the size of the youth in the population and the percentage of that population that is in the labor force.

Question 40

Economic growth measured in terms of an increase in per capita real GDP is a good measure of _____.

A) the average citizen's standard of living in a nation
B) the quality of labor in a nation
C) the distribution of income in a nation
D) the quality of life people experience in a nation
E) economic activity in a nation

Question 41

Which of the following stands true for technological innovation?

A) Actual changes in technology proceed as evenly as expenditures on research and development.
B) A decline in spending on research and development may indicate less of a commitment to increasing productivity.
C) The purchase of computer hardware or software as investment is not advised because of continuous innovations in the field of IT.
D) In developing countries, the benefits of IT innovations are being fully exploited because of a large population.
E) Education gives developing countries a substantial advantage over industrial countries in creating and implementing innovations because of a large percentage of skilled labor force in the population.

Question 42

By the late 1990s, the growth rate of total factor productivity in the United States _____.

A) averaged about 1%
B) averaged between 3 and 4%
C) averaged between 6 and 8%
D) averaged between 10 and 15%
E) averaged above 20%

Question 43

If natural gas is replaced by solar power as a more efficient form of energy, we should expect _____.

A) a leftward shift of the aggregate supply curve
B) higher production prices at every output level
C) a decline in the growth of total output
D) a decrease in the stock of energy-efficient capital goods
E) an increase in total factor productivity

Question 44

Increases in the prices of services due to improvement in its quality indicate a(n) _____.

A) decline in productivity.
B) decline in real GDP.
C) increase in output.
D) decline in manufacturing output.
E) increase in technological progress.

Question 45

If the growth rate of resources is zero and real output is growing at 4 percent, then _____.

A) the stock of capital has fallen by 4 percent
B) economic growth has fallen by 4 percent
C) total factor productivity has risen by 4 percent
D) the stock of labor has fallen by 4 percent
E) the percentage share of real GDP received by capital has fallen by 4 percent

Question 46

What is the growth in resources when total factor productivity grows by 3.5 percent and the economy grows by 2.7 percent?

A) 0.8%
B) -2.7%
C) 3.5%
D) -0.8%
E) 0.6%

Question 47

Which of the following contributed to a slowdown in U.S. labor productivity during the 1970s?

A) An increase in the number of skilled legal immigrant workers
B) An increase in the illegal employment of minors
C) An increase in the number of skilled illegal immigrant workers
D) The exit of the baby boom generation from the work force
E) Lower energy prices

Question 48

Labor productivity is measured as:

A) the share of wages in national income.
B) the change in labor to capital ratio.
C) real output per labor hour.
D) the change in output from hiring an additional unit of labor.
E) the growth in the quantity of labor.

Question 49

As the service sector in the U.S. economy grows, traditional productivity measures will become:

A) biased downward, because the qualitative aspects of a service tend to be understated.
B) biased upward, because quantitative improvements in the service sector tend to be overstated.
C) biased upward, because prices in the service sector always rise faster than prices in manufacturing.
D) biased downward, because service output leads to a long-run decline in the inflation rate.
E) completely inappropriate for measuring even manufacturing output.

Question 50

Economic growth is equal to:

A) total factor productivity plus amounts of resources.
B) growth in total factor productivity plus growth in amounts of resources.
C) total factor productivity minus marginal factor productivity.
D) real GDP plus national output.
E) GNP plus GDP.

Question 51

Suppose that an economy grows by 6 percent, total factor productivity grows by 4 percent, and the capital stock increases by 2 percent. If labor and capital are the only inputs used in production, and capital contributes 25 percent to GDP, then the labor force has risen by _____.

A) 1.5%
B) 2%
C) 4%
D) 6%
E) 8%

Question 52

Suppose that an economy grows by 4 percent, total factor productivity grows by 3 percent, and the labor force increases by 6 percent. If labor and capital are the only inputs and labor contributes 40 percent to GDP, then the stock of capital must have _____.

A) fallen by 5%
B) fallen by 3.33%
C) fallen by 2.33%
D) risen by 3%
E) risen by 1.8%

Question 53

Which of the following factors will increase labor productivity in the United States?

A) An aging labor force
B) A decline in the number of women entering the workforce
C) An increase in unskilled workers
D) An increase in the average level of education
E) A decrease in the number of educated immigrants

Question 54

Suppose an economy grows by 2.5 percent, the labor force rises by 3 percent, and capital rises by 1 percent. If capital takes 50 percent of real GDP and labor takes the other 50 percent of real GDP, then the growth in total factor productivity must be _____.

A) 6.5%
B) 4.5%
C) 0.5%
D) 6%
E) 10%

Question 55

Total factor productivity is the ratio of a:

A) firm's marginal revenue to its marginal cost.
B) firm's total revenues to its total costs.
C) nation's total income to its total output.
D) nation's output to its stock of labor and capital.
E) nation's savings to its capital stock.

Question 56

As more women entered the labor force in the 1980s in the United States:

A) the number of unskilled workers increased.
B) the average quality of the labor force improved.
C) the quantity of output decreased.
D) the supply of skilled labor exceeded its demand.
E) labor productivity increased.

Question 57

Labor productivity is affected by each of the following, except:

A) technological innovation.
B) change in capital stock.
C) change in average age of the workers.
D) change in educational levels.
E) cultural background and ethnicity.

Question 58

Growth in total factor productivity equals the _____.

A) sum of resource growth and economic growth
B) ratio of total output to total input
C) ratio of total input to total output
D) percentage change in per capita real GDP
E) percentage change in output minus the percentage change in resources

Question 59

Productivity in the services industry may be underestimated because ____ may not be taken into account.

A) the labor costs of providing a service
B) the quantity of the service produced
C) the capital costs of providing a service
D) the prices charged by service industries
E) the quality of the service provided

Question 60

Suppose in an economy the total factor productivity grows by 5%. Annual growth in labor and capital stock equal 2.5% and 1.5% respectively. If the labor force receives 75% of the real GDP, calculate the annual growth in the real GDP of the economy.

A) 10.5%
B) 7.25%
C) 5.50%
D) 4.76%
E) 0.05%

Question 61

Based on the rule of 72, it would require 18 years for an economy to double its real output if the annual growth rate was 4%.

Question 62

When you are calculating how long it will take your initial bank deposit to double, the rule of 72 prescribes that you divide the annual interest rate paid on the deposit by 72.

Question 63

Per capita real GDP does not give us information about the distribution of income in a country or about the nonmonetary quality of life.

Question 64

The labor force typically grows faster in developing countries than in industrial ones because mortality rates are higher in low-income countries.

Question 65

Economic growth in any country is reflected by an increase in real GDP.

Question 66

Which of the following stands true for factors that affect changes in productivity across countries and over time?

A) It is more difficult to measure changes in the quality of goods than changes in the quality of services.
B) As energy prices go up, energy-efficient capital goods become obsolete.
C) It is believed that productivity grows more slowly in manufacturing industries than in services, because of the less labor-intensive nature of manufacturing industries.
D) The key to efficient production is the allocation of resources to their best use.
E) The greater the productivity, the more efficient the allocation of resources, and the less developed a country's financial market would be.

Question 67

It is believed that the relatively high rate of labor force growth in the developing countries does not translate into a high rate of economic growth because:

A) workers in developing countries have excess capital.
B) workers in developing countries are not motivated enough.
C) workers in developing countries do not have the natural resources needed for production.
D) workers in developing countries have very little capital.
E) the high birth rate is more than offset by an enormous mortality rate.

Question 68

We can say that the potential level of real GDP is fixed because the long-run aggregate supply curve is a vertical line.

Question 69

When trying to determine the standard of living in a given country, it is not important to observe its income distribution, because what we are interested in is the income per person in the economy.

Question 70

Per capita real GDP is obtained by dividing real GDP by the number of people active in the labor force.

Question 71

Since the definition of economic growth does not take into account the growth of the country's population, the income of the average person in a country with high real GDP growth could be declining through time.

Question 72

According to the rule of 72, if you have $15,000 in an account that grows at the rate of 12 percent annually, it will take approximately six years for the $15,000 to double to $30,000.

Question 73

Other things equal, a country's long-run aggregate supply will shift to the right when the productivity of labor rises.

Question 74

If the per capita real GDP in a country grows, it definitely implies that the average citizen of that country is better off.

Question 75

The long-run growth of an economy depends on productive resources (land, labor, and capital) and on technological advances.

Question 76

Economic growth measured in terms of an increase in per capita real GDP is not a good measure of the distribution of income in a nation.

Question 77

As all available statistics show us, because the average annual population growth is 1.4 percent higher in developing countries than in industrial nations, economic growth is lower in low-income countries.

Question 78

Consumer spending is considered a determinant of economic growth.

Question 79

If real GDP in Sweden was SEK 822 billion at the end of 1993 and SEK 950 billion at the end of 1994, we can say that the Swedish economy grew at an annual rate of 7% in 1994.

Question 80

The rule of 72 is a formulation that allows us to know, in a very quick and simple manner, the approximate time it takes to double a number that grows at a constant rate.