Q: Suppose a country's real GDP increased from $$8.0 trillion to 8.4 $$trillion in one year. What is the economic growth rate for that year?

$$\frac{8.4 - 8.0}{8.0} \times 100 = 5\%$$

Q: If real GDP per person in a country was $$40,000 last year and 41$$,584 this year, what is the growth rate of real GDP per person?

$$\frac{41,584 - 40,000}{40,000} \times 100 = 4\%$$

Question 1

Suppose a country's real GDP increased from $$8.0 trillion to 8.4 $$trillion in one year. What is the economic growth rate for that year?

Accepted Answer

$$\frac{8.4 - 8.0}{8.0} 	imes 100 = 5\%$$

Question 2

If real GDP per person in a country was $$40,000 last year and 41$$,584 this year, what is the growth rate of real GDP per person?

Accepted Answer

$$\frac{41,584 - 40,000}{40,000} 	imes 100 = 4\%$$

Question 3

A country’s real GDP grew by 5% and its population grew by 1%. What is the growth rate of real GDP per person?

Accepted Answer

$$5\% - 1\% = 4\%$$

Question 4

Using the Rule of 70, how many years will it take for an economy to double its real GDP if the annual growth rate is 2%?

Accepted Answer

$$\frac{70}{2} = 35$$ years

Question 5

Which of the following best describes labor productivity?

Accepted Answer

The quantity of real GDP produced by one hour of labor

Question 6

If real GDP is $8,000 billion and aggregate hours are 200 billion, what is labor productivity?

Accepted Answer

$$\frac{8,000}{200} = 40$$ dollars per hour

Question 7

Which factor is NOT a direct source of labor productivity growth?

Accepted Answer

Growth in population

Question 8

According to the law of diminishing returns, what happens as the quantity of capital per worker increases?

Accepted Answer

The increase in real GDP per hour of labor becomes smaller

Question 9

What effect do advances in technology and growth of human capital have on the productivity curve?

Accepted Answer

They shift the productivity curve upward

Question 10

Which of the following is a key feature of economies that enjoy high incomes?

Accepted Answer

Political stability and property rights protected by the rule of law

Question 11

Which policy action is most likely to encourage faster economic growth?

Accepted Answer

Encouraging saving through tax incentives

Question 12

According to classical (Malthusian) growth theory, what ultimately limits economic growth?

Accepted Answer

Population growth outpaces resource growth, reducing real GDP per person

Question 13

New growth theory emphasizes that perpetual economic growth is driven by:

Accepted Answer

Unlimited wants and choices made in pursuit of profit

Question 14

According to Piketty, the Great Divergence in income inequality is explained by:

Accepted Answer

The interest rate $$r$$ being greater than the growth rate $$g$$

Question 15

Which of the following is NOT a precondition for economic growth?

Accepted Answer

High government intervention in markets

Question 16

If a country’s real GDP per person remains constant while real GDP grows, what must be happening to the population?

Accepted Answer

Population is growing at the same rate as real GDP

Question 17

Which of the following best explains why a lower growth rate is considered an economic waste?

Accepted Answer

It results in irretrievably lost goods and services and a permanent loss in the standard of living

Question 18

Which of the following is a plausible effect of encouraging international trade on economic growth?

Accepted Answer

It stimulates economic growth by extracting gains from specialization and trade

Question 19

If a government wants to improve the quality of education to achieve faster growth, which action would be most effective?

Accepted Answer

Funding basic education and ensuring high standards in language, mathematics, and science

Question 20

Which of the following is a multi-step calculation: If Freedonia’s real GDP increased from 75,000 to 90,090 and its population increased from 250 to 273, what is the growth rate of real GDP per person?

Accepted Answer

First, real GDP per person in 2017: $$\frac{75,000}{250} = 300. In 2018$$: $$\frac{90,090}{273} = 330. $$Growth rate: $$\frac{330 - 300}{300} 	imes 100 = 10\%$$

Economic Growth: Measurement, Sources, Theories, and Policy

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