Deck 8: Economic Growth

Question 1

The growth rate of real GDP equals

A)[(real GDP in previous year - real GDP in current year)÷ real GDP in previous year] × 100.
B)[(real GDP in current year - real GDP in previous year)÷ real GDP in current year] × 100.
C)[(employment in the current year - employment in previous year)/employment in previous year] × 100.
D)[(real GDP in current year - real GDP in previous year)÷ real GDP in previous year] × 100.
E)(real GDP in current year - real GDP in previous year)× 100.

Answer 1

D

Question 2

Economic growth is a sustained expansion of production possibilities,as measured by the increase in ________ over time.

A)inflation
B)real GDP
C)the price level
D)employment
E)the population

Answer 2

B

Question 3

Assume the population growth rate is 2 per cent and the real GDP growth rate is 5 per cent.The change in standard of living,as measured by the growth rate in real GDP per person,is

A)5 per cent.
B)7 per cent.
C)-3 per cent.
D)3 per cent.
E)2)5 per cent.

Answer 3

D

Question 4

If real GDP grows at a faster rate than population,then the standard of living,as measured by real GDP per person,

A)worsens.
B)cannot be measured.
C)improves.
D)remains the same.
E)either improves,worsens or stays the same,depending on the size of the population and the actual level of real GDP.

Question 5

Using the data in the table above,real GDP per person in 2009 is

A)$70 trillion.
B)$75,000.
C)$71,429.
D)7 per cent.
E)$70,000.

Question 6

If real GDP in year 1 is $72 million and real GDP in year 2 is $87 million,then the growth rate of real GDP is

A)15 per cent.
B)20.8 per cent.
C)17 per cent.
D)83 per cent.
E)$15 million.

Question 7

The Rule of ________ can be used to calculate the number of years that it takes for the level of a variable to ________.

A)20;double
B)20;triple
C)70;double
D)70;triple
E)thumb;double

Question 8

Economic growth is defined as

A)a sustained expansion of production possibilities.
B)a decrease in the rate of inflation.
C)an increase in employment.
D)an increase in the wage rate.
E)an increase in the nation's population.

Question 9

Real GDP in the country of Oz is growing at 5 per cent and its population is growing at 2 per cent.In the country of Lilliput,real GDP is growing at 4 per cent and its population is growing at 0.5 per cent.Thus,

A)real GDP per person in Lilliput is growing at a faster rate than in Oz.
B)real GDP per person in Lilliput is growing at a rate that is not comparable to that in Oz.
C)real GDP per person in Lilliput is growing at the same rate as in Oz.
D)real GDP per person in Oz is growing at a faster rate than in Lilliput.
E)We need more information to determine if real GDP per person in Lilliput is growing faster or slower than real GDP per person in Oz.

Question 10

Using the data in the table above,the growth rate of real GDP has

A)slowed from year to year.
B)increased from year to year.
C)increased more rapidly from year to year.
D)remained constant from year to year.
E)probably changed,but more information is needed about the price level to determine by how much it has changed.

Question 11

The population in the current year is 31.5 million and the real GDP is $814 million.The previous year's statistics were a population of 31 million and a real GDP of $800 million.The change in the standard of living,measured by growth in real GDP per person,is

A)0)13 per cent.
B)0 per cent.
C)7)75 per cent.
D)1)6 per cent.
E)6 per cent.

Question 12

Suppose China wants to measure how much the standard of living has changed over the last decade.Which piece of data should China use?

A)Wages
B)Real GDP
C)Inflation
D)Real GDP per person
E)Population

Question 13

The Rule of 70 states that the level of a variable will double in

A)the number of years equal to the variable's annual growth rate minus 70.
B)the number of years equal to the variable's annual rate of growth divided by 70.
C)70 years.
D)the number of years equal to 70 multiplied by the variable's annual growth rate expressed as a decimal.
E)the number of years equal to 70 divided by the variable's annual growth rate.

Question 14

If real GDP was $13.1 trillion in 2014 and $13.3 trillion in 2015,what is the growth rate?

A)2)1 per cent
B)15.0 per cent
C)-1.5 per cent
D)1)5 per cent
E)$0.2 trillion

Question 15

If real GDP grows at a rate of 6 per cent and population grows at a rate of 2 per cent,then real GDP per person grows at a rate of

A)8 per cent.
B)0)5 per cent.
C)4 per cent.
D)2 per cent.
E)-3 per cent.

Question 16

Which of the following variables is used to determine a country's economic growth?
I)Real GDP
Ii)Wages
Iii)Inflation

A)i and iii
B)i only
C)i,ii and iii
D)ii and iii
E)i and ii only

Question 17

Using the data in the table above,the growth rate of real GDP for 2010 is equal to

A)4)76 per cent.
B)9)09 per cent.
C)5)00 per cent.
D)7)00 per cent.
E)10.0 per cent.

Question 18

Suppose France's real GDP grew from $750 billion in 2014 to $821 billion in 2015.What was the growth rate of France's real GDP?

A)8)6 per cent
B)$71 billion
C)9)1 per cent
D)10 per cent
E)9)5 per cent

Question 19

If a country experiences a real GDP growth rate of 1 per cent and population growth of 2 per cent,then the growth rate of real GDP per person is

A)2 per cent.
B)0 per cent.
C)3 per cent.
D)1 per cent.
E)-1 per cent.

Question 20

To measure the change in the standard of living,it is best to use the growth rate

A)of the price level.
B)of real GDP per person.
C)of the population.
D)of real GDP.
E)from the Rule of 70.

Question 21

Approximately how long will it take Ethiopia to double its real GDP per person of $100 if its growth rate of real GDP per person is 0.9 per cent?

A)77.7 years
B)109 years
C)70 years
D)63 years
E)100 years

Question 22

The table above gives information about the economy of Japan.The economic growth rate in 1997 was ________ per cent.

A)4
B)8)0
C)0)008
D)0)08
E)0)8

Question 23

In this year,Country A has a real GDP per person that is 4 times greater than that of Country B.Country B's growth rate of real GDP per person is 3.5 per cent per year.How many years will it take for Country B's real GDP per person to reach the same level that Country A had in this year?

A)60 years
B)40 years
C)10 years
D)20 years
E)56 years

Question 24

For the world,what period of time experienced the fastest growth rate of real GDP per person?

A)Around 500 B.C.
B)Between 1500 A.D.and 1850 A.D.
C)After about 1850 A.D.
D)Between 1000 A.D.and 1500 A.D.
E)Around 400 A.D.

Question 25

Suppose that Australia has fully employed all of its resources.This situation means that Australia

A)is operating above potential GDP.
B)is growing at a faster rate than the United States.
C)is operating at its potential GDP.
D)is experiencing zero unemployment.
E)None of the above.

Question 26

Since the beginning of the 20th century the decade with the slowest real GDP per person growth rate other than the 1930s was ________ because of ________.

A)1990-2000;fear of Y2K
B)2000-2010;the 2008/2009 deep recession
C)2010-2020;Keynesian economic policies being used more frequently than in the 1930s
D)1930-1940;the Great Depression
E)2000-2010;the war on terror

Question 27

Potential GDP is the level of

A)nominal GDP that the economy would produce if it was at full employment.
B)real GDP that the economy would produce if there was no unemployment.
C)nominal GDP that the economy would produce if there was no inflation.
D)real GDP that the economy would produce if it was at full employment.
E)real GDP that the economy would produce if there was no inflation.

Question 28

According to the Rule of 70,if a country grows at 2.0 per cent per year instead of 1.5 per cent per year,how years less will it take to double its level of real GDP?

A)It will take 35 less years.
B)It will take 58.3 less years.
C)It will take 17.9 less years.
D)It will take 20 less years.
E)It will take 11.6 less years.

Question 29

If it took 20 years for real GDP to double,what was the growth rate of real GDP?

A)4)5 per cent
B)5 per cent
C)4 per cent
D)3)5 per cent
E)3)0 per cent

Question 30

The level of real GDP the economy produces at full employment is

A)real GDP.
B)called the Lucas level.
C)potential GDP.
D)never reached in reality.
E)nominal GDP.

Question 31

The factors of production that produce real GDP are

A)labour,human capital,physical capital,land and entrepreneurship.
B)labour,physical capital and entrepreneurship.
C)labour,human productivity,physical capital and entrepreneurship.
D)money,labour and capital productivity.
E)labour,human capital and entrepreneurship.

Question 32

The Rule of 70 can be used to calculate the

A)number of years it would take for the level of any variable to double.
B)population growth rate per year.
C)economic growth rate per year.
D)70 per cent level of the economic growth rate.
E)economic growth rate per month.

Question 33

Suppose that,in the future,real GDP per person grows 2 per cent a year in Australia and 4 per cent a year in China.It will take real GDP per person approximately ________ years to double in Australia and approximately ________ years to double in China.

A)35;17.5
B)70;35
C)20;10
D)50;25
E)35;8.75

Question 34

Real GDP per person averaged $150 a year (in 2009 dollars)from 1,000,000 BC until 1620.Then in ________ real GDP began to increase without limit and by 1850 had risen to twice its 1650 level because ________.

A)1650;the Pilgrims arrived in the Americas
B)1776;the United States was founded
C)1650;of the Industrial Revolution
D)1750;Columbus arrived in the Americas
E)1750;of the Industrial Revolution

Question 35

If Country A's real GDP grows at a rate of 14 per cent per year,about how many years will it take for Country A's real GDP to double?

A)10
B)5
C)30
D)7
E)14

Question 36

A nation's annual growth rate of real GDP per person is 2 per cent.Its standard of living will

A)double in 35 years.
B)fall because of its population growth.
C)double in 10 years.
D)not change because its population is growing.
E)double in 50 years.

Question 37

Economic growth is a sustained expansion of production possibilities measured as the increase in ________ over a given period.

A)real GDP per person
B)real GDP
C)capital per person
D)population
E)the standard of living

Question 38

This year,real GDP per person in Country A is eight times that of real GDP per person in Country B.If Country B's real GDP per person grows at a rate of 5 per cent,about how many years will it take for Country B to reach the level of real GDP per person in Country A in this year?

A)56 years
B)14 years
C)42 years
D)28 years
E)It will never reach Country A's level of GDP per person.

Question 39

The annual growth rate of an economy is 10 per cent.The economy's GDP will double in about ________ years.

A)14
B)10
C)7
D)20
E)12

Question 40

Real GDP per person averaged $150 a year (in 2009 dollars)from 1,000,000 BC until 1620.During this time there was a period when it rose to ________ around ________ because ________.

A)$210;1492;Columbus sailed to the Americas
B)$140;400 BC;the Roman Empire collapsed
C)a 1-million year high;the 1340s;the Black Death gripped Europe
D)$190;500 BC;of the gains from human capital while Aristotle and Plato were teaching in Athens
E)$210;1620;the Pilgrim Fathers began to arrive in the Americas

Question 41

According to the production function,as the quantity of labour employed increases,real GDP increases

A)at a constant rate.
B)at a decreasing rate.
C)at an increasing rate.
D)until it reaches potential GDP,and then it no longer changes.
E)and then eventually decreases.

Question 42

The production function describes the relationship between

A)the real wage and the quantity of labour supplied.
B)potential GDP and the real wage rate.
C)real GDP and the quantity of labour employed.
D)real and potential GDP.
E)real and nominal GDP.

Question 43

The real wage rate is the ________ divided by the ________.

A)nominal wage rate;price level
B)quantity of labour supplied;quantity of labour demanded
C)nominal wage rate;inflation rate
D)equilibrium quantity of employment;potential GDP
E)quantity of labour demanded;quantity of labour supplied

Question 44

The production function shows that potential GDP increases when the

A)price level rises.
B)the wage rate falls.
C)inflation rate falls.
D)price level falls.
E)quantity of labour employed increases.

Question 45

The above figure shows a nation's production function.Point B is ________ and ________ because ________.

A)unattainable;inefficient;the nation is using resources inefficiently
B)unattainable;efficient;the nation would be using resources efficiently if it could attain this level of production
C)unattainable;inefficient;the nation is using resources efficiently but it could be more efficient
D)attainable;efficient;the nation is using resources efficiently
E)attainable;inefficient;the nation is using resources inefficiently

Question 46

As more labour is hired,moving along the production function,diminishing returns occur because

A)there are fixed quantities of other resources.
B)the real wage rate must increase in order to hire additional workers.
C)real GDP increases more rapidly the more workers that are hired.
D)the wage rate paid is too low and so workers decrease their work effort.
E)workers are overworked and so their productivity decreases.

Question 47

The above figure shows a nation's production function.Point C is ________ and ________ because ________.

A)unattainable;efficient;the nation would be using resources efficiently if it could attain this level of production
B)attainable;efficient;the nation is using resources efficiently
C)unattainable;inefficient;the nation is using resources inefficiently
D)attainable;inefficient;the nation is using resources inefficiently
E)unattainable;inefficient;the nation is using resources efficiently but it could be more efficient

Question 48

The above figure shows a nation's production function.Point A is

A)unattainable given the state of the economy.
B)attainable if the nation uses resources efficiently.
C)the maximum amount of real GDP the nation can produce.
D)the labour market equilibrium quantity of employment and real GDP.
E)attainable if the economy is inefficient.

Question 49

The production function shows that,as employment increases,real GDP

A)decreases at a decreasing rate.
B)increases until it reaches potential GDP and then it starts to decrease.
C)increases at a constant rate.
D)increases at a decreasing rate.
E)increases at an increasing rate.

Question 50

The idea of "diminishing returns" means that real GDP ________ as the quantity of labour increases.

A)does not change
B)decreases at a faster rate
C)increases at a slower rate
D)increases at a faster rate
E)decreases at a slower rate

Question 51

The above figure shows a nation's production function.Point C is

A)the labour market equilibrium point.
B)the maximum amount of real GDP the nation can produce.
C)attainable if the nation uses resources efficiently.
D)attainable if the nation uses resources inefficiently.
E)unattainable given the nation's resource level.

Question 52

Diminishing returns means that

A)hiring more labour must lower the real wage rate.
B)each additional unit of labour produces successively less real GDP.
C)each extra unit of real GDP produced requires less labour.
D)each additional unit of labour produces successively more real GDP.
E)hiring more labour results in less real GDP.

Question 53

As additional units of labour hours are employed,holding all other factors constant,along the production function,

A)nominal GDP decreases at an increasing rate.
B)real GDP increase at a constant rate.
C)real GDP increases at a decreasing rate.
D)real GDP increases at an increasing rate.
E)real GDP initially decreases and then starts to increase.

Question 54

Based on the production function in the above figure,which of the following is an attainable combination of labour and real GDP?
I)300 billion hours of labour and real GDP of $20 trillion
Ii)300 billion hours of labour and real GDP of $8 trillion
Iii)100 billion hours of labour and real GDP of $12 trillion

A)i only
B)ii only
C)iii only
D)ii and iii
E)i and ii

Question 55

The production function displays

A)increasing returns.
B)diminishing returns.
C)normal returns.
D)real returns.
E)average returns.

Question 56

The production function is a relationship between the amount of labour employed and

A)all other resources at different levels of employment.
B)the wage rate paid to the workers.
C)the maximum quantity of real GDP that can be produced.
D)the amount of labour workers supply.
E)the maximum quantity of nominal GDP that can be produced.

Question 57

The figure above that most accurately shows a production function is

A)Figure A.
B)Figure B.
C)Figure C.
D)Figure D.
E)Both Figure A and Figure B;Figure A for an economy with an excess of labour and Figure B for an economy with a shortage of labour.

Question 58

Suppose that the Australian economy initially uses 50 billion hours of labour to produce $5 trillion of real GDP.If 50 billion more hours are employed and Australia's real GDP increases by $4 trillion,

A)Australia has no entrepreneurship.
B)Australia's production function exhibits constant returns to labour.
C)Australia's production function exhibits increasing returns.
D)Australia's production possibility frontier has a positive slope.
E)Australia's production function exhibits diminishing returns.

Question 59

The above figure shows a nation's production function.Point B is

A)unattainable.
B)attainable if the nation uses resources inefficiently.
C)the maximum amount of real GDP the nation can ever produce.
D)attainable if the nation uses resources efficiently.
E)Both answers C and D are correct.

Question 60

Diminishing returns along a production function means that each additional hour of labour employed

A)does not produce any additional real GDP.
B)produces a successively larger additional amount of real GDP.
C)produces a constant additional amount of real GDP.
D)forces the real wage rate to rise.
E)produces a successively smaller additional amount of real GDP.

Question 61

Real GDP is $700 billion,average hours worked per week is 42 and aggregate hours are 150 billion hours.What is the economy's labour productivity?

A)$1.80 per hour
B)$16.67 per hour
C)$3.75 per hour
D)$4.67 per hour
E)$4.50 per hour

Question 62

The labour market is in equilibrium whenever

A)the nominal wage rate is increasing.
B)the real wage rate is increasing.
C)the nominal wage rate is not changing.
D)the nominal wage rate is decreasing.
E)the quantity of labour demanded equals the quantity of labour supplied.

Question 63

The full-employment quantity of labour is

A)the number of people in the labour force multiplied by the average hours per worker.
B)the participation rate multiplied by the average hours per worker.
C)the working-age population multiplied by the average hours per worker.
D)the working-age population divided by the participation rate.
E)the number of people in the labour force divided by the participation rate.

Question 64

An increase in the supply of labour as a result of population growth causes

A)the real wage rate to increase.
B)the nominal wage to increase.
C)the labour supply curve to shift to the right.
D)the labour supply curve to shift to the left.
E)None of the above.

Question 65

Households increase the quantity of labour supplied when

A)the real wage rate rises because the opportunity cost of not working rises.
B)the real wage rate rises because the opportunity cost of not working falls.
C)income tax rises because an increase in income tax increases the demand for labour.
D)the nominal wage rate falls because the opportunity cost of not working rises.
E)the nominal wage rate rises because the real wage rate must also rise.

Question 66

The total labour hours that all the firms in the economy plan to hire during a given time period at one particular real wage rate is the

A)quantity of labour demanded.
B)demand for labour.
C)quantity of labour supplied.
D)quantity of jobs supplied.
E)supply of labour.

Question 67

Labour productivity is equal to the quantity of

A)real GDP consumed by the total population in one hour.
B)real GDP produced by one hour of labour.
C)workers employed during one hour.
D)workers who are gainfully employed.
E)real GDP.

Question 68

The supply of labour is defined as the relationship between the real wage rate and the

A)amount of jobs supplied by households.
B)amount of jobs supplied by firms.
C)quantity of labour supplied by firms.
D)equilibrium quantity of employment.
E)quantity of labour supplied by households.

Question 69

If the real wage rate decreases from $25.00 per hour to $22.00 per hour,the

A)supply of labour increases.
B)demand for labour increases.
C)quantity demanded of labour increases.
D)quantity supplied of labour increases.
E)equilibrium quantity of employment must decrease.

Question 70

When the labour market is in equilibrium so that the quantity of labour supplied equals the quantity demanded,

A)the economy is at full employment.
B)there is no unemployment.
C)real GDP might be more than,less than or equal to potential GDP.
D)nominal GDP equals real GDP.
E)there is no inflation.

Question 71

When all other influences on work plans remain the same,the

A)lower the real wage rate,the smaller the quantity of labour supplied.
B)lower the real wage rate,the larger the labour force participation rate.
C)lower the real wage rate,the greater the quantity of labour supplied.
D)higher the real wage rate,the greater the quantity of labour demanded.
E)lower the real wage rate,the smaller the quantity of labour demanded.

Question 72

When the labour market is in equilibrium,

A)the real wage rate falls to equal the nominal wage rate because real GDP is greater than potential GDP.
B)there is full employment but real GDP might be greater than,less than or equal to potential GDP.
C)there is full employment,which means that real GDP equals potential GDP.
D)the real wage rate rises to allow real GDP to equal potential GDP.
E)there is excess labour supplied,which keeps real GDP less than potential GDP.

Question 73

Labour productivity equals

A)the total production of labour.
B)the quantity of labour hours divided by real GDP.
C)real GDP divided by the amount of human capital.
D)real GDP.
E)real GDP per hour of labour.

Question 74

A surplus of labour is eliminated by ________ in the real wage rate and a shortage of labour is eliminated by ________ in the real wage rate.

A)a decrease;an increase
B)a decrease;a decrease
C)an increase;a decrease
D)an increase;an increase
E)None of the above answers is correct because shortages and surpluses are eliminated by changes in the demand for labour and the supply of labour,not the wage rate.

Question 75

Labour productivity is defined as

A)hours of work per person.
B)total output multiplied by the total hours of labour.
C)real GDP per person.
D)total real GDP.
E)real GDP per hour of labour.

Question 76

Growth in the supply of labour comes from

A)growth in the average hours per worker.
B)growth in the working-age population,which in the long run grows at the same rate as the total population.
C)growth in the participation rate multiplied by the average hours per worker.
D)immigration less the increase in the participation rate.
E)All of the above.

Question 77

The effect of an increase in population growth,all else remaining the same,is i.an increase in the full-employment quantity of labour.
Ii)an increase in potential GDP.
Iii)a decrease in the equilibrium real wage.

A)i only
B)i and ii
C)i and iii
D)ii and iii
E)i,ii and iii

Question 78

The benefit to the firm of hiring another worker is

A)measured as the height of the production function.
B)the extra output produced by the worker.
C)the real wage.
D)the nominal wage.
E)the price level.

Question 79

For a household,the opportunity cost of not working is the

A)nominal wage rate.
B)demand for labour.
C)real wage rate.
D)cost of living.
E)price level.

Question 80

As demonstrated by the labour supply schedule,the quantity of labour supplied depends on

A)the nominal wage.
B)the amount of labour that firms want to hire.
C)the value of the dollar.
D)workers' productivity.
E)the real wage.