Question 1

Suppose the real GDP in 2021 was $$22.99 trillion and in 2022 it was 25.46 $$trillion. What is the economic growth rate between these two years? Use the formula $$	ext{Economic Growth Rate} = \frac{	ext{Real GDP}_{	ext{YR2}} - 	ext{Real GDP}_{	ext{YR1}}}{	ext{Real GDP}_{	ext{YR1}}} 	imes 100.$$

Accepted Answer

10.74%

Question 2

If the population in 2022 was 334.1 million and real GDP was $$25.46 trillion, what was the real per capita GDP in 2022? Use the formula $$	ext{Per Capita Real GDP} = \frac{	ext{Real GDP}}{	ext{Population}}$.

Accepted Answer

$76,204

Question 3

According to the Rule of 70, how many years will it take for an economy growing at 2% per year to double its real GDP? Use the formula $$	ext{Years to Double} = \frac{70}{	ext{Growth Rate}}.$$

Accepted Answer

28 years

Question 4

Which of the following best describes the difference between a movement from point A to point B and from point B to point C on a production possibilities frontier (PPF) as shown in the first image?

Accepted Answer

A to B is a return to potential GDP; B to C is economic growth.

Question 5

Which factor is most likely to cause a sustained increase in potential GDP?

Accepted Answer

An improvement in technology

Question 6

If labor productivity increases, what is the most likely effect on the labor demand curve and potential GDP?

Accepted Answer

Labor demand increases and potential GDP rises.

Question 7

According to neoclassical growth theory, what is the primary driver of long-term economic growth?

Accepted Answer

Technological change

Question 8

Which of the following is a key insight of new growth theory?

Accepted Answer

Knowledge is a public good and does not suffer from diminishing marginal returns.

Question 9

If the real wage rate (W/P) falls, what is the expected effect on the quantity of labor demanded and real GDP?

Accepted Answer

Quantity of labor demanded increases and real GDP rises.

Question 10

A country invests heavily in education and basic research. According to the theories discussed, what is the most likely long-term effect?

Accepted Answer

Sustained economic growth due to increased human capital and technological progress

Question 11

Which of the following best explains why real GDP fluctuates more than potential GDP, as shown in the second image?

Accepted Answer

Real GDP is influenced by short-term shocks and the business cycle, while potential GDP reflects long-term productive capacity.

Question 12

If a country’s real GDP per capita grows at 3% per year, how many years will it take for the standard of living to double? Use the Rule of 70.

Accepted Answer

23.3 years

Question 13

Which of the following policies is most likely to increase a country’s long-run economic growth rate?

Accepted Answer

Investing in education and encouraging international trade

Question 14

According to classical growth theory, what happens when productivity increases in the short run?

Accepted Answer

Population grows, eventually offsetting productivity gains and leading to stagnation or decline.

Question 15

If a country’s working-age population increases, what is the likely effect on the labor market and potential GDP?

Accepted Answer

Labor supply increases, real wage falls, and potential GDP rises.

Question 16

Which of the following is NOT a source of labor productivity growth?

Accepted Answer

A decrease in the working-age population

Question 17

If a country’s capital/labor ratio increases, what is the expected effect according to economic growth theory?

Accepted Answer

Labor productivity and potential GDP increase.

Question 18

Which of the following statements about knowledge as a factor in economic growth is correct according to new growth theory?

Accepted Answer

Knowledge is a public good and can lead to spillover effects that promote growth.

Question 19

A country’s real GDP per capita has remained constant for 20 years, despite increases in total real GDP. What is the most likely explanation?

Accepted Answer

The population has grown at the same rate as real GDP.

Question 20

Which of the following best explains why developing economies may not experience the same convergence in growth rates and incomes as developed economies, according to neoclassical growth theory?

Accepted Answer

Developing economies have less access to technology and capital is not perfectly mobile.

Economic Growth: Principles, Measurement, and Theories

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