Deck 7: Economic Growth

Question 1

Suppose the annual growth rate of an economy is expected to be 3 percent.This implies that the economy's ________ is expected to ________ by 3 percent annually.

A) GDP per capita; increase
B) price level; increase
C) capital stock; increase
D) unemployment rate; decline

Answer 1

GDP per capita; increase

Question 2

Decreases in the standard of living are associated with what sort of economic growth?

A) Slow economic growth
B) Sustained economic growth
C) Negative economic growth
D) Zero economic growth

Answer 2

Negative economic growth

Question 3

Economic growth refers to an increase in ________.

A) prices
B) tax rates
C) population
D) GDP per capita

Answer 3

GDP per capita

Question 4

Comparing GDPs over time requires the use of a ________.

A) base year
B) recession and boom period
C) worker productivity index
D) linear growth model

Question 5

Which of the following statements is true of the U.S.economy over the past 200 years?

A) Its GDP per capita has increased.
B) Its GDP per capita has decreased.
C) There has been no contraction in the economy.
D) The growth rate of GDP has been more than 10 percent per year.

Question 6

Country A's GDP per capita at the beginning of 2005 was $22,150.At the beginning of 2006,it increased to $27,600.Calculate Country A's growth rate of GDP per capita between 2005 and 2006.

Question 7

Changes in the price level are the sole factor in determining ________.

A) nominal GDP
B) monetary policy
C) real GDP
D) trade policy

Question 8

If GDP per capita in year T is represented by YT and the GDP per capita in the following year is represented by YT₊₁,then the formula for calculating the growth rate between these two years is ________.

A) (YT₊₁/YT)/100
B) (YT₊₁ − YT )/YT
C) (YT₊₁ + YT)/YT
D) (YT₊₁ + YT)/YT₊₁

Question 9

The annual growth rate of U.S.real GDP per capita over the past 60 years has averaged around ________.

A) 0 percent
B) 2 percent
C) 4 percent
D) 6 percent

Question 10

The following table shows the GDP per capita of country X for 3 years.

Refer to the table above.At what rate did the country grow between 2015 and 2016?

A) 12.45 percent
B) 15.95 percent
C) 16.33 percent
D) 18 percent

Question 11

Suppose GDP per capita is $2,500 in 1912 and $2,550 in 1913.The growth rate of GDP per capita from 1912 to 1913 is ________.

A) 0.02 percent
B) 2 percent
C) 5 percent
D) 50 percent

Question 12

Which of the following describes the effect of the Great Depression on economic growth?

A) The Great Depression resulted in permanently lower growth rates for the United States.
B) The Great Depression halted permanently the United States' sustained growth.
C) The Great Depression began the United States' sustained growth.
D) The Great Depression was a temporary event with no long-run effect on economic growth.

Question 13

The following table shows the GDP per capita of country X for 3 years.

Refer to the table above.If country X is expected to grow by 19 percent between the years 2017 and 2018,what is the expected GDP per capita for the year 2008?

A) $1,882
B) $2,439.50
C) $2,763.90
D) $3,015

Question 14

Which statement best describes the effect of the Great Depression on U.S.growth?

A) The Great Depression reversed all growth that had been experienced over the previous 100 years.
B) The U.S. economy grew at the same rate during the Great Depression as during the rest of the twentieth century.
C) The Great Depression temporarily reversed U.S. growth, but the U.S. economy grew steadily before and after it.
D) The Great Depression led to slow growth in the U.S. for the following 50 years.

Question 15

The following table shows the GDP per capita of country X for 3 years.

Refer to the table above.At what rate did the country grow between 2016 and 2017?

A) 13.63 percent
B) 15.55 percent
C) 17.47 percent
D) 19.24 percent

Question 16

Which of the following characterized the U.S.economy in the decades following the Great Depression?

A) The price level has decreased steadily over time.
B) Despite fairly constant growth, major economic downturns have produced net negative growth.
C) The economy was permanently and irreparably damaged by the events of the Great Depression.
D) Longer-run movements have indicated sustained and steady growth.

Question 17

The advantage of using real GDP over nominal GDP is that it ________.

A) is easier to calculate
B) can be compared over time
C) takes the distribution of income into account
D) takes into account changes in the ruling political party

Question 18

Real GDP refers to GDP adjusted for changes in ________.

A) tax rates
B) prices
C) net imports
D) ruling political party

Question 19

The process by which a quantity grows at a constant proportion in every time period is called ________ growth.

A) linear
B) catch-up
C) exponential
D) logarithmic

Question 20

The ________ nature of economic growth is one of the major reasons there are large differences in GDP per capita across countries.

A) linear
B) exponential
C) logarithmic
D) quadratic

Question 21

Which characteristic of economic growth is responsible for the large differences in GDP per capita across countries?

Question 22

Refer to the scenario above.What will be the difference in the GDPs per capita of both countries at the beginning of year 3?

A) $8.99
B) $30.39
C) $99.84
D) $339.69

Question 23

Which of the following statements is true?

A) To depict variables that have exponential growth, it is more convenient to use an axis with a linear scale.
B) To depict variables that have exponential growth, it is more convenient to use an axis with a proportional scale.
C) Exponential growth refers to growth by the same amount in every time period.
D) Linear growth refers to growth by the same proportion in every time period.

Question 24

GDP per capita in Australia is $50,000.If Australian GDP per capita grows 6 percent per year for 2 years,which formula shows its GDP per capita after 2 years?

A) $50,000 × 1.06
B) $50,000 × 1.12
C) $50,000 × 1.06 × 1.06
D) $50,000 × 1.06 × 1.12

Question 25

The following figure shows graphs of various types of growth.

Refer to the figure above.The data in Graph A best represent ________.

A) linear growth
B) no growth
C) exponential growth
D) exponential decline

Question 26

Initially Country A has a greater GDP per capita than Country B,but the growth rate in Country A is only 1 percent,while it is 2 percent in Country B.If these growth rates continue forever,which of the following is correct?

A) Country A will always have a higher GDP per capita than Country B.
B) Country B will not be able to sustain such a high growth rate.
C) The GDP per capita in Country B will eventually catch up to, but not overtake, that of Country A.
D) The GDP per capita in Country B will eventually overtake that of Country A.

Question 27

The following figure shows graphs of various types of growth.

Refer to the figure above.The data in Graph C best represent ________.

A) linear growth
B) no growth
C) exponential growth
D) exponential decline

Question 28

Exponential growth implies that ________.

A) growth rates can only be positive
B) growth rates will alternate between positive and negative values in every consecutive time period
C) relatively large differences in growth rates will translate into small differences in the level of a quantity after many years of growing
D) relatively small differences in growth rates will translate into large differences in the level of a quantity after many years of growing

Question 29

Refer to the scenario above.What will be the GDP per capita of Country B at the beginning of year 3?

A) $2,450.65
B) $2,555.15
C) $2,646.00
D) $2,882.85

Question 30

Refer to the scenario above.What will be the GDP per capita of Country A at the beginning of year 3?

A) $2,410.26
B) $2,546.16
C) $2,760.24
D) $2,800.00

Question 31

When current growth builds on past growth,growth is ________.

A) exponential
B) linear
C) logarithmic
D) negative

Question 32

Refer to the scenario above.Which of the following statements is true?

A) The gap between the GDP per capita of both countries will converge over time.
B) The gap between the GDP per capita of both countries will diverge over time.
C) The gap between the GDP per capita of both countries will remain the same over time.
D) In 30 years, the GDP per capita of Country A is likely to be higher than that of Country B.

Question 33

Scenario: In 2010, world GDP per capita was $9,500. In the same year, the Economist magazine forecast that in 2020, world GDP per capita would be $15,000
Refer to the scenario above.The Economist magazine also forecasts that the rate of growth will remain constant through 2030.If this is correct,then world GDP per capita in 2030 will be closest to ________.

A) $20,000
B) $22,000
C) $24,000
D) $26,000

Question 34

Scenario: In 2010, world GDP per capita was $9,500. In the same year, the Economist magazine forecast that in 2020, world GDP per capita would be $15,000
Refer to the scenario above.If the Economist magazine's forecast is correct,then the growth rate per decade from 2010 to 2020 would be approximately ________.

A) 5 percent
B) 6 percent
C) 50 percent
D) 60 percent

Question 35

Scenario: In 2000, world GDP per capita was $5,500. In 2010, world GDP per capita was $9,500.
Refer to the scenario above.If the world sustains this growth rate,approximately what will world GDP per capita be in 2030?

A) $16,400
B) $17,500
C) $21,500
D) $28,300

Question 36

If the effects of the growth in a variable are approximately constant,then the growth is likely to be ________.

A) linear
B) negligible
C) exponential
D) logarithmic

Question 37

The following figure shows graphs of various types of growth.

Refer to the figure above.The data in Graph B best represent ________.

A) linear growth
B) no growth
C) exponential growth
D) exponential decline

Question 38

The following figure shows graphs of various types of growth.

Refer to the figure above.The data in Graph D best represent ________.

A) linear growth
B) no growth
C) exponential growth
D) exponential decline

Question 39

Scenario: In 2000, the GDP per capita in Ohio is $35,000. Ohio's GDP per capita is predicted to increase 3 percent per year for the next 5 years.
Refer to the scenario above.If the prediction in the scenario is correct,by approximately what percentage will Ohio's GDP per capita rise in 2005?

A) 15 percent
B) 16 percent
C) 17 percent
D) 18 percent

Question 40

Scenario: In 2000, world GDP per capita was $5,500. In 2010, world GDP per capita was $9,500.
Refer to the scenario above.If the world sustains this growth rate,approximately what will world GDP per capita be in 2020?

A) $13,500
B) $15,000
C) $16,400
D) $19,000

Question 41

The countries that have experienced fast growth in GDP per capita over the past 50 years are mostly located where?

A) Central America
B) East Asia
C) West Africa
D) South America

Question 42

While countries like Botswana and Singapore have experienced rapid growth rates since 1960,the growth of the Democratic Republic of the Congo is best described as ________.

A) steady
B) slow
C) negative
D) linear

Question 43

"Catch-up growth" refers to a process where relatively poorer nations increase their incomes by ________.

A) working harder than more advanced nations
B) extracting more natural resources than more advanced nations
C) having higher birthrates than more advanced nations
D) using technologies from more advanced nations

Question 44

Suppose that a nation's GDP per capita grows at a constant 4 percent per year.You graph the nation's GDP per capita on a graph with a linear time scale on the x-axis,and a linear GDP per capita scale on the y-axis.What will the nation's GDP per capita look like on the graph?

A) A horizontal line
B) A straight upward-sloping line
C) A curve that is sloped upward and increasing in slope
D) A curve that is sloped upward and decreasing in slope

Question 45

Which of the following pairs of countries has used catch-up growth over the past few decades to achieve incomes that are now comparable to that of the United States?

A) Singapore and South Korea
B) Mexico and Brazil
C) The United Kingdom and France
D) Kenya and Rwanda

Question 46

The following table shows the GDP per capita of various countries for the years 1960 and 2010 in PPP-adjusted 2005 dollars.The table also contains the implied growth rates,which show how much on average each country needed to grow each year to reach the 2010 level of GDP per capita starting from the 1960 level of GDP per capita.Use the table to answer the following questions.

a)During 1960-2010,which countries were able to reduce the gap between their GDP per capita and the U.S.GDP per capita?
b)During 1960-2010,which countries failed to reduce the gap between their GDP per capita and the U.S.GDP per capita?
c)Why have some countries reduced the gap between their incomes and that of the United States and other countries failed to do so?

Question 47

The growth process whereby relatively poorer nations increase their income by taking advantage of knowledge and technologies already invented in other,technologically more advanced countries is known as ________ growth.

A) transfer
B) catch-up
C) trade-based
D) innovative

Question 48

Catch-up growth is characterized by disparities in growth levels,magnified by the ________ nature of economic growth.

A) disproportionate
B) exponential
C) homogenous
D) linear

Question 49

Country A's GDP per capita is 80 percent of Country B's GDP per capita.If both countries experience growth of 5 percent,Country A's GDP per capita will now be what percentage of Country B's GDP per capita?

A) 75 percent
B) 80 percent
C) 85 percent
D) 90 percent

Question 50

Scenario: In 2000, the GDP per capita in Ohio is $35,000. Ohio's GDP per capita is predicted to increase 3 percent per year for the next 5 years.
Refer to the scenario above.If the prediction in the scenario is correct,what will Ohio's GDP per capita be in 2005 (to the nearest thousand)?

A) $39,000
B) $40,000
C) $41,000
D) $42,000

Question 51

China's GDP per capita is currently lower than that of Japan.If Japanese GDP per capita grows at 2 percent per year,how fast must Chinese GDP per capita grow to eventually catch up to Japanese GDP per capita?

A) At least 5 percent per year
B) At least 3 percent per year
C) Any rate above 2 percent per year
D) Any positive rate

Question 52

The following table shows the GDP per capita since 1820 in selected countries (in PPP-adjusted 2005 dollars).

a)Identify the countries that experienced sustained growth between 1820 and 2010.
b)Identify the countries that experienced sustained growth from 1920 to 2010.
c)Identify the countries that experienced catch-up growth from 1920 to 2010.

Question 53

U.S.GDP per capita has increased approximately 2 percent per year over an extended period.This is a good example of what sort of growth?

A) Catch-up growth
B) Power growth
C) Linear growth
D) Sustained growth

Question 54

Singapore had a GDP per capita of $395 in 1960.It then started taking advantage of knowledge and technologies already invented in other technologically advanced countries.In 2013,its GDP per capita had increased to $52,918.The growth in Singapore's average per capita GDP is considered to be ________ growth.

A) catch-up
B) sustained
C) instant
D) disguised

Question 55

How does the concept of catch-up growth explain the diminishing income gap between developing economies and developed economies?

Question 56

California's GDP per capita is $60,000,while Nevada's GDP per capita is $40,000.If both grow at 2 percent per year,how long will it take for the two states to have the same GDP per capita?

A) 25 years
B) 35 years
C) 50 years
D) They will never have the same GDP per capita

Question 57

Sustained growth refers to a growth process in which ________.

A) GDP per capita grows at a positive and steady rate for long periods of time
B) GDP per capita grows at a rate of more than 20 percent per year for long periods of time
C) growth in GDP per capita is primarily attributed to public sector firms and enterprises
D) growth in GDP per capita is translated into an equal increase in welfare for all citizens in a country

Question 58

Cross-country comparison of GDP per capita between 1960 and 2010 shows that countries such as ________ have grown at negative rates during this period.

A) Mexico and Brazil
B) Haiti and the Democratic Republic of Congo
C) India and China
D) South Korea and Singapore

Question 59

Suppose that a nation's GDP per capita grows at a constant 4 percent per year.You graph the nation's GDP per capita on a graph with a linear time scale on the x-axis,and a proportional GDP per capita scale on the y-axis.What will the nation's GDP per capita look like on the graph?

A) A horizontal line
B) A straight upward-sloping line
C) A curve that is sloped upward, and increasing in slope
D) A curve that is sloped upward, and decreasing in slope

Question 60

The implied growth rate for a country between 1960 and 2010 was 6 percent.This implies that ________.

A) the country grew by at least 6 percent in any of the 50 years between 1960 to 2010 to reach the level of GDP in 2010 starting at the 1960 level
B) the growth rate of GDP in the country was above 6 percent between 1960 and 2010
C) the country grew at an average rate of 6 percent per year between 1960 and 2010 to reach the 2010 level of GDP starting at the 1960 level
D) the country grew at rates above 6 percent per year between 1960 and 2010 to reach the 2010 level of GDP starting at the 1960 level

Question 61

The following table shows levels of consumption and investment in four countries.

Refer to the table above.Which country has the lowest consumption rate?

A) Country A
B) Country B
C) Country C
D) Country D

Question 62

The following table shows levels of consumption and investment in four countries.

Refer to the table above.Which country has the lowest savings rate?

A) Country A
B) Country B
C) Country C
D) Country D

Question 63

The saving rate indicates ________.

A) the fraction of income that households save
B) the difference between household consumption and savings
C) the rate of return households earn on their savings
D) the difference between government revenue and government expenditure

Question 64

Consider two economies: Barylia and Lithasia.The GDP per capita in Lithasia is $6,000,while the GDP per capita in Barylia is $12,000.Both countries grow exponentially at an annual rate of 10 percent.How will their GDPs vary over the next year? Is there any limitation to comparing the absolute levels of GDP per capita of both countries over the next years? If yes,what is a plausible solution?

Question 65

Scenario: In a closed economy without a government, the consumption expenditure equals $5,000 and the investment expenditure equals $2,000.
Refer to the scenario above.What is the national income of the economy?

A) $2,000
B) $5,000
C) $7,000
D) $10,000

Question 66

The following table shows levels of consumption and investment in four countries.

Refer to the table above.Which country has the highest consumption rate?

A) Country A
B) Country B
C) Country C
D) Country D

Question 67

The rates of return that households expect on their savings are determined by ________.

A) tax rates
B) interest rates
C) exchange rates
D) the level of government expenditure

Question 68

The process by which the stock of equipment and structures available to an economy is increased by investment is referred to as ________.

A) investment growth
B) output expansion
C) physical capital accumulation
D) autonomous growth

Question 69

The value of all equipment and structures in an economy is referred to as its ________.

A) national income
B) physical capital stock
C) wealth
D) asset value

Question 70

Assuming all else equal,if the production technology available to a nation improves,its ________.

A) GDP decreases
B) stock of physical capital decreases
C) GDP increases
D) population increases

Question 71

In a closed economy without a government,________.

A) consumption equals savings
B) consumption equals investment
C) saving equals investment
D) saving equals net exports

Question 72

A new coal-fired power plant will increase aggregate production.Which element of the aggregate production function Y = A × F(K,H)will this power plant increase?

A) A
B) F
C) K
D) H

Question 73

Which of the following statements is true?

A) A nation with a high saving rate will accumulate capital slowly.
B) A nation with a high saving rate will accumulate capital rapidly.
C) In a closed economy, government spending equals zero.
D) In a closed economy, aggregate consumption equals zero.

Question 74

Explain how saving equals investment in a closed capitalist economy.

Question 75

Scenario: In a closed economy without a government, the consumption expenditure equals $5,000 and the investment expenditure equals $2,000.
Refer to the scenario above.If the population of the economy is 200,the per capita national income is ________.

A) $10
B) $17
C) $35
D) $50

Question 76

The following table shows levels of consumption and investment in four countries.

Refer to the table above.Which country has the highest savings rate?

A) Country A
B) Country B
C) Country C
D) Country D

Question 77

In a closed economy,________ equal to zero.

A) investment is
B) consumption is
C) net exports are
D) government spending is

Question 78

In a closed economy without a government,income equals aggregate ________.

A) consumption
B) saving
C) saving plus aggregate investment
D) saving plus aggregate consumption

Question 79

From the perspective of individual households,income can only be consumed or saved,the latter of which become ________ utilized by firms.

A) investment
B) capital depreciation
C) intellectual property
D) interest rates

Question 80

Consider two countries,Country A and Country B,that are alike in most respects.However,the saving rates in the two countries differ.Country A's saving rate is greater than Country B's saving rate.Which of the following statements is true?

A) The rate of physical capital accumulation will be the same in both economies.
B) Physical capital accumulation will occur faster in Country A than in Country B.
C) Physical capital accumulation will occur faster in Country B than in Country A.
D) The growth rate in Country B is likely to be higher than the growth rate in Country A in the long run.