Deck 6: Economic Growth, The Financial System, and Business Cycles

Question 1

If real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate of real GDP per capita?

A)4)7%
B)7)25%
C)10.5%
D)15%
E)21%

Answer 1

4)7%

Question 2

If you invest $10,000 in a bond that earns 8% interest per year, how many years will it take to double your money?

A)1 year and 3 months
B)2 years and 6 months
C)5 years and 6 months
D)8 years
E)8 years and 9 months

Answer 2

8 years and 9 months

Question 3

A good measure of the standard of living is

A)real GDP per capita.
B)nominal GDP per capita.
C)total real GDP.
D)total nominal GDP.
E)the real interest rate.

Answer 3

real GDP per capita.

Question 4

According to the "Rule of 70," how many years will it take for real GDP per capita to double when the growth rate of real GDP per capita is 5%?

A)less than 1 year
B)5 years
C)14 years
D)35 years
E)70 years

Question 5

Technological advances generally result in

A)decreased incomes.
B)increased life expectancy.
C)increased infant mortality rates.
D)increased average number of hours worked per day.
E)rising unemployment.

Question 6

Which of the following statements describes the experiences of Bombardier since it was established in 1942?

A)strong uninterrupted growth in demand
B)growth interrupted by periods of business cycle recession
C)little or no growth in the long run, and unaffected by the business cycle
D)little or no growth in the long run, but very vulnerable to the business cycle
E)continually shrinking demand for its products

Question 7

If the growth rate of real GDP rises from 3% to 4% per year, then the number of years required to double real GDP will decrease from

A)23.3 years to 17.5 years.
B)28.0 years to 21.0 years.
C)11.2 years to 10.8 years.
D)23.3 years to 20.6 years.
E)30.4 years to 23.5 years.

Question 8

People born in wealthier countries can expect

A)to live shorter lives than those born in poorer countries.
B)to live just as long as those born in poorer countries because wealth and life expectancy are unrelated.
C)to live longer than those born in poorer countries because wealthy countries can provide more health care.
D)to live shorter lives than those born in the same country 40 years ago.
E)to live shorter lives than those in poorer countries due to the pollution associated with economic activity.

Question 9

Since 1961, real GDP per capita has ________ and this measure ________ the actual growth in standards of living in Canada over this time.

A)increased; understates
B)increased; overstates
C)decreased; understates
D)decreased; overstates

Question 10

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as

A)technology.
B)labour productivity.
C)real GDP.
D)human capital.
E)unit efficiency.

Question 11

In 2015 Bombardier received $1 billion in support from the government of Quebec, the official reason for this support was

A)the business cycle had caused demand for Bombarier's aircraft to fall.
B)the Quebec government needs new planes for members of the National Assembly.
C)Bombardier needed funds to expand to meet new orders.
D)Bombardier was being repaid for past services to the government of Quebec.
E)Bombardier was wholely owned by the Government of Quebec.

Question 12

Table 6.1
Refer to Table 6.1.Using the table above, what is the approximate average annual growth rate from 2012 to 2015?

A)2%
B)3%
C)4%
D)6%
E)8%

Question 13

If real GDP per capita measured in 2007 dollars was $16,000 in 1961 and $48,500 in 2015, we would say that in the year 2015, the average Canadian could buy approximately ________ times as many goods and services as the average Canadian in 1961.

A)0)3
B)2
C)3
D)7
E)12

Question 14

If real GDP in a small country in 2016 is $8 billion and real GDP in the same country in 2017 is $8.3 billion, the growth rate of real GDP between 2016 and 2017

A)is - 3.0 %
B)is 3.0%.
C)is 3.6%.
D)is 3.75%.
E)cannot be determined from the information given.

Question 15

China has enjoyed a rate of economic growth near 7% a year for the last several years. Based on this growth rate the Chinese economy will double in size every ________ years.

A)2
B)5
C)10
D)15
E)70

Question 16

Countries with high rates of economic growth tend to have

A)a labour force that is more productive.
B)a lower life expectancy at birth.
C)low rates of technological advancement.
D)a declining incidence of business cycle fluctuations.
E)higher levels of corruption.

Question 17

Since 1961, real GDP in Canada has grown

A)more rapidly than the population.
B)more slowly than the population.
C)as rapidly as the population.
D)in a random unpredictable manner relative to the population.
E)at exactly the same rate as population growth in all periods.

Question 18

Increases in real GDP since 1961 can actually underestimate growth in the standard of living for Canadians because

A)the level of pollution in 1961 was much higher than it is today.
B)the crime rate was higher in 1961 than it is today.
C)goods and services are more expensive today as compared to 1961.
D)the quality of health care that exists today was not available in 1961.
E)fewer women participated in the paid labour force in 1961.

Question 19

Table 6.1
Refer to Table 6.1.Using the table above, what is the approximate growth rate of real GDP from 2014 to 2015?

A)-1.5%
B)1%
C)2%
D)3%
E)4%

Question 20

If real GDP grows by 3% in 2013, 3.2% in 2014, and 2.5% in 2015, what is the average annual growth rate of real GDP?

A)2)6%
B)2)9%
C)3)1%
D)4)2%
E)5)3%

Question 21

Which of the following increases labour productivity?

A)an increase in the aggregate hours of work
B)decreases in the availability of computers and factory buildings
C)inventions of new machinery, equipment, or software
D)a decline in the health of the population
E)an increase in regulations

Question 22

If labour productivity growth slows down in a country, this will

A)accelerate the increase in real GDP per capita.
B)accelerate the increase in nominal GDP.
C)slow down the increase in real GDP per capita.
D)slow down the increase in nominal GDP.
E)maintain the current rate of nominal GDP increase.

Question 23

What two factors are the keys to determining labour productivity?

A)the business cycle and the growth rate of real GDP
B)the growth rate of real GDP and the interest rate
C)technology and the quantity of capital per hour worked
D)the average level of education of the workforce and the price level
E)investment and average number of hours worked

Question 24

India's recent rapid growth can be explained by

A)a decline in the use of central planning.
B)a decline in the importance of services in the economy.
C)accelerating population growth.
D)an increase in the portion of the population employed in agriculture.
E)increased government involvement in the manufacturing sector.

Question 25

If the federal government regulated airline ticket prices to prevent them from falling during a recession, there would be a ________ of airline tickets which would likely ________ the airline profits.

A)shortage; increase
B)shortage; reduce
C)surplus; increase
D)surplus; reduce

Question 26

Potential GDP refers to

A)the level of GDP attained when all firms are producing at capacity.
B)the level of GDP attained by the country with the highest growth in real GDP in a given year.
C)the difference between the highest level of real GDP per quarter and the lowest level of real GDP per quarter within any given year.
D)the extent to which real GDP is above or below nominal GDP.
E)the level of GDP that would be achieved if government spending did not crowd out private sector spending.

Question 27

The sustainability of India's economic growth is particularly threatened by

A)a weak public education system
B)poor access to international capital markets
C)a lack of telecommunications companies
D)a lack of access to international markets in goods and services
E)the lack of "tech" sector

Question 28

Accumulating a greater number of inputs will ensure that an economy will experience economic growth.

Question 29

Which of the following does not describe governmental policy actions that are helpful in supporting growth in an economy? Governmental policies that

A)avoid playing any role in developing communication systems.
B)provide secure rights to private property.
C)establish an independent court system that enforces contracts.
D)facilitate the development of an efficient financial system.
E)providing public education.

Question 30

The total amount of physical capital available in a country is know as the country's

A)labour productivity.
B)savings.
C)investment.
D)capital stock.
E)technology.

Question 31

Centrally-planned economies tend to grow more quickly than market economies.

Question 32

Actual real GDP will be above potential GDP if

A)firms are producing below capacity.
B)firms are producing at capacity.
C)firms are producing above capacity.
D)inflation is rising.
E)the current price level is lower than the price level in the base year.

Question 33

If labour productivity growth slows down in a country, this means that the growth rate in ________ has declined.

A)labour force participation
B)the quantity of goods or services that can be produced by one hour of work
C)the working-age population
D)nominal GDP
E)real interest rates

Question 34

Long-run economic growth requires all of the following except

A)technological change.
B)increases in capital per hour worked.
C)government provision of secure property rights.
D)political instability.
E)an impartial court system.

Question 35

Which of the following is an example of human capital?

A)a computer
B)a factory building
C)a university or college education
D)a software program
E)computers used by human resource departments

Question 36

Human capital refers to which of the following?

A)the quantity of goods and services that can be produced by one worker or by one hour of work
B)the accumulated knowledge and skills workers acquire from education and training or from their life experiences
C)manufactured goods that are used to produce other goods and services
D)physical equipment that is made by human labourers, not machines
E)the number of workers that apply for a specific job or can be hired on short notice

Question 37

The output gap is

A)negative if potential GDP is smaller than real GDP.
B)a measure of potential output.
C)negative if potential GDP is larger than real GDP.
D)constant throughout the business cycle.
E)shrinking all the time.

Question 38

According to the "Rule of 70," it will take 4 years for real GDP per capita to double when the growth rate of real GDP per capita is

A)4 percent.
B)12.25 percent.
C)17.5 percent.
D)28 percent.
E)32 percent.

Question 39

Which of the following would contribute to a sustained high rate of economic growth in the long run in an economy?

A)growth in capital per hour accompanied by technological change
B)increases in labour force participation rates as workers who are out of the labour force pursue rising wages
C)a shift of workers in the economy from the agricultural sector to the nonagricultural sector
D)an influx of immigrant labour into an economy without any accompanying technological change
E)an increase in the minimum wage to $15/hour

Question 40

Increases in capital per hour worked cannot sustain high rates of economic growth unless accompanied by technological change.

Question 41

Potential GDP is the maximum output a firm is capable of producing.

Question 42

Table 6.2
Refer to Table 6.2.Using the table above, what is the approximate average annual growth rate from 2012 to 2015?

A)-1%
B)1%
C)2%
D)3%
E)4%

Question 43

If GDP grew 3% in 1990, 2.2% in 1991, and 2.5% in 1992, what is the average annual growth rate over this period?

A)5%
B)4%
C)2)6%
D)-2.2%
E)-3.1%

Question 44

According to Robert Fogel, economic growth ________ health, and health ________ economic growth.

A)improves; worsens
B)improves; improves
C)worsens; improves
D)worsens; worsens

Question 45

Table 6.2
Refer to Table 6.2.Using the table above, what is the approximate growth rate of real GDP from 2012 to 2013?

A)-4%
B)-2%
C)2%
D)4%
E)6%

Question 46

The growth rate of real GDP in Canada rises from 4.2% to 4.4%.Explain and calculate how this increase in the growth rate of real GDP affects the number of years it will take for real GDP to double.

Question 47

What is "human capital," and how does human capital affect labour productivity and economic growth?

Question 48

The only way the standard of living of the average person in a country can increase is if ________ increases faster than ________.

A)production; population
B)population; GDP per capita
C)population; production
D)population; income
E)debt; GDP per capita

Question 49

If an economy is growing at a rate of 2.5% per year, how long will it take the economy to double in size?

A)60 years
B)43 years
C)36 years
D)28 years
E)19 years

Question 50

Which of the following describes the growth in real GDP per person in Canada from 1960 to the present?

A)It has decreased.
B)It has increased by three times.
C)It has doubled.
D)It has increased by four times.
E)It has increased by five times.

Question 51

Table 6.2
Refer to Table 6.2.Using the table above, what is the approximate growth rate of real GDP from 2013 to 2014?

A)-2.5%
B)-1%
C)1%
D)2)5%
E)3)4%

Question 52

When production in an economy grows more quickly than the population in that economy, which of the following must be occurring?

A)Real GDP is falling.
B)Incomes are growing at a slower rate than the population.
C)Real GDP per capita is rising.
D)Living standards are falling.
E)The price level is falling.

Question 53

The best measure of the standard of living is

A)nominal GDP.
B)real GDP.
C)nominal GDP per capita.
D)real GDP per capita.
E)the unemployment rate.

Question 54

If GDP grows at a rate of 3% per year, approximately how long will it take for GDP to double in size?

A)12 years
B)21 years
C)23 years
D)35 years
E)42 years

Question 55

When potential GDP increases, is it necessarily the case that real GDP increases as well? Explain.

Question 56

How is economic growth connected to life expectancy? Based on this connection, in what country would you expect to have a longer life expectancy, Canada or India? Explain.

Question 57

Suppose that real GDP for 2010 was $1,000 billion and real GDP for 2011 was $1,100 billion.What is the rate of growth of real GDP between 2010 and 2011?

A)1%
B)2%
C)5%
D)7%
E)10%

Question 58

The rule of 70 states that

A)it takes an economy 70 years to double its real GDP.
B)the number of years it takes an economy to double in size is 70 divided by the growth rate.
C)the number of years it takes an economy to double in size is the growth rate times 70.
D)the number of years it takes an economy to double in size is the growth rate divided by 70.
E)the number of years it takes an economy to shrink by half is 70 divided by the growth rate.

Question 59

What factors increase potential GDP? Include a definition of potential GDP in your answer.

Question 60

Suppose that real GDP for 2010 was $1,000 billion and real GDP for 2011 was $950 billion.What is the rate of growth of real GDP between 2010 and 2011?

A)-10%
B)-5%
C)-2%
D)-1%
E)2%

Question 61

India has enjoyed substantial economic growth over the past decade. Which of the following best captures the concerns about the sustainability of this growth?

A)Without better human capital and infrastructure , the high growth rates cannot be sustained.
B)As long as the labour force participation rate is rising, growth can still continue, despite a lack of technological progress.
C)As long as the amount of capital per hour worked continues to expand, the growth rate in India will continue to rise at an increasing rate.
D)Agricultural workers will continue to expand their productivity, thereby allowing India to achieve growth rates above those of higher-income countries.
E)India will become overly reliant on local demand and should focus more on export led growth.

Question 62

What is human capital?

A)a slang term for the underground labour market
B)manufactured goods that are used to produce other goods
C)accumulated knowledge and skills acquired by a worker
D)the manager or owner of a business
E)the number of workers a firm can hire on short notice

Question 63

Potential GDP in Canada

A)does not change over time.
B)grows as the economy grows.
C)changes over a given business cycle.
D)declines over time.
E)grows at the same rate every year.

Question 64

Which of the following is not a challenge to India's continued economic growth?

A)poor physical infrastructure
B)a lack of innovative companies
C)corruption
D)cultural, ethnic, and linguistic divisions
E)a large and growing population

Question 65

Potential GDP is always greater than real GDP in an economy.

Question 66

An increase in labour productivity

A)allows the average consumer to increase consumption.
B)will increase the labour force participation rate.
C)will create short-run, but not long-run, economic growth.
D)will increase output and decrease wages in the long run.
E)causes a decrease in the demand for labour in the long run.

Question 67

________ depend on increases in labour productivity.

A)Advances in technology
B)Increases in real GDP per capita
C)Decreases in the inflation rate
D)Decreases in the unemployment rate
E)Tax revenues

Question 68

Potential GDP is estimated to grow at a rate of 2% in Canada.Actual GDP in Canada

A)always grows at a slower rate than potential GDP.
B)always grows at a faster rate than potential GDP.
C)always grows at the same rate as potential GDP.
D)is the same as potential GDP if all firms in the economy are working at capacity.
E)is always lower than potential GDP.

Question 69

Which of the following will result in an increase in labour productivity?

A)a decrease in the number of people attending institutions of higher education
B)a decline in the amount of human capital per worker
C)an increase in technology
D)a decline in the capital stock per hour worked
E)an increase in the labour force participation rate

Question 70

Economic growth depends more on technological change than on increases in capital per hour worked.

Question 71

Labour productivity will increase if the ________ increases and ________.

A)quantity of capital per hour worked; technology improves
B)quantity of labour per unit of capital; technology improves
C)quantity of capital per hour worked; immigration increases while capital is fixed
D)quantity of labour per unit of capital; immigration increases while capital is fixed
E)quantity of labour in the economy; capital depreciates more quickly

Question 72

Market economies tend to grow more quickly than centrally-planned economies.

Question 73

The key to sustained economic growth is increasing labour productivity.

Question 74

Which of the following is most likely to be able to sustain economic growth in an economy?

A)sustained increases in the labour force participation rate
B)technological change
C)increases in capital per hour worked
D)accumulations of economic resources
E)increases in the supply of labour

Question 75

Potential GDP in Canada

A)grows as people become more educated.
B)shrinks as natural resource prices rise.
C)does not change over time.
D)grows as demand for our exports grows.
E)grows at the same rate every year.

Question 76

Labour productivity is

A)the quantity of output produced in one hour by several workers.
B)the quantity of capital one worker can produce in one day.
C)the quantity of output produced by one worker or by one hour of work.
D)the quantity of output produced in one hour by one machine.
E)the quantity of capital produced by one machine in one hour.

Question 77

If, between 2010 and 2020, the economy's real GDP grew from $20 billion to $40 billion, what was the average annual growth rate in the economy?

A)3%
B)7%
C)20%
D)100%
E)125%

Question 78

Workers in high-income countries have ________ to work with than do workers in low-income countries.

A)less physical capital
B)more physical capital
C)more labour
D)more labour and less physical capital
E)less human capital

Question 79

Potential GDP is defined as

A)the maximum GDP that the economy can produce.
B)the amount of GDP produced if there is no frictional unemployment.
C)the level of GDP attained when all firms are producing at capacity.
D)the amount of GDP produced if there is no structural unemployment.
E)the lowest level of GDP at which a country can feed its people.

Question 80

If GDP is currently $1.7 trillion and is growing at a rate of 2.3% per year, how long will it take GDP to reach $3.4 trillion?

A)about 7 years
B)about 15 years
C)about 17 years
D)about 25 years
E)about 30 years