Q: If real GDP per capita in 2021 was $$\21.1$ trillion and in 2022 it was $$\$$21.8$$ trillion, what was the growth rate of real GDP per capita from 2021 to 2022?

$$\frac{21.8 - 21.1}{21.1} \times 100 = 3.3\%$$

Question 1

Which of the following best describes long-run economic growth?

Accepted Answer

The process by which rising productivity increases the average standard of living over time.

Question 2

If real GDP per capita in 2021 was $$\21.1$ trillion and in 2022 it was $$\$$21.8$$ trillion, what was the growth rate of real GDP per capita from 2021 to 2022?

Accepted Answer

$$\frac{21.8 - 21.1}{21.1} 	imes 100 = 3.3\%$$

Question 3

Which of the following is NOT a factor that directly affects labor productivity growth?

Accepted Answer

Increase in the price level

Question 4

Suppose a country’s real GDP per capita doubles every 14 years. What is the approximate annual growth rate? Use the Rule of 70.

Accepted Answer

$$\frac{70}{14} = 5\%$$

Question 5

Which of the following policies contributed to India’s rapid economic growth after 1991?

Accepted Answer

Scaling back central planning and reducing regulations

Question 6

Potential GDP is best defined as:

Accepted Answer

The level of real GDP attained when all firms are operating at capacity.

Question 7

Which of the following would cause the supply of loanable funds to increase?

Accepted Answer

An increase in household saving due to new tax incentives.

Question 8

If the government runs a budget deficit, how does this affect public saving?

Accepted Answer

Public saving becomes negative.

Question 9

Which equation correctly represents the macroeconomic identity for GDP in a closed economy?

Accepted Answer

$$Y = C + I + G$$

Question 10

What is the formula for private saving in the macroeconomic model?

Accepted Answer

$$S_{private} = Y + TR - C - T$$

Question 11

If $$Y = 1000$$, $$C = 600$$, $$G = 200$$, and $$I = 200$$, what is the value of savings in a closed economy?

Accepted Answer

$$S = Y - C - G = 1000 - 600 - 200 = 200$$

Question 12

Which of the following is a service provided by the financial system?

Accepted Answer

Liquidity

Question 13

What is crowding out in the context of the loanable funds market?

Accepted Answer

A reduction in private investment due to increased government borrowing.

Question 14

During a recession, which of the following typically occurs?

Accepted Answer

Firms decrease their investment spending and households consume less.

Question 15

Which of the following is a reason why the U.S. business cycle became milder after 2007?

Accepted Answer

Increased importance of services in the economy.

Question 16

If the real interest rate increases, what is the likely effect on the demand for loanable funds?

Accepted Answer

Demand for loanable funds decreases.

Question 17

Which of the following best explains why technological change is important for economic growth?

Accepted Answer

It increases the productivity of labor and capital, allowing more output from the same inputs.

Question 18

What is the main difference between actual GDP and potential GDP?

Accepted Answer

Actual GDP fluctuates with the business cycle, while potential GDP is the level achieved when all resources are fully employed.

Question 19

Which of the following is a correct statement about savings and investment in a closed economy?

Accepted Answer

Savings is equal to investment.

Question 20

If the government increases its budget deficit, what is the likely effect on the equilibrium real interest rate in the loanable funds market?

Accepted Answer

The real interest rate will increase.

Macroeconomic Growth, Productivity, and the Business Cycle: Study Notes

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