Question 1

Suppose the world's population in 2012 is 7.1 billion and is projected to grow at a rate of 1.2% per year. In approximately what year will the world's population be 14.2 billion?

Accepted Answer

The answer of Suppose the world's population in 2012 is...

Question 2

Holding everything else unchanged, if a nation's output grows at approximately 2.4% per year and its population doubles in 45 years, calculate the approximate rate of change in per capita real GDP.

Accepted Answer

If a nation's output grows at approximately 2.4% per year, then its output will double in approximately 29.5 years (Rule of 70: 70/2.4 = 29.1).

If the population doubles in 45 years, then the annual growth rate of the population is approximately 1.53% (Rule of 70: 70/45 = 1.56).

Therefore, the approximate rate of change in per capita real GDP is 2.4% - 1.53% = 0.87%, which is closest to 0.8% per year (Choice A).

Question 3

Figure 8-4 
-Refer to Figure 8-4. Which of the following could cause the production function to shift upward?

Accepted Answer

An increase in the availability of natural resources would allow for greater productivity and could cause the production function to shift upward. Options A, B, and D would not necessarily cause a shift in the production function.

Question 4

Suppose labor is the only variable that changes. If production displays diminishing marginal returns, each additional unit of labor

Accepted Answer

Diminishing marginal returns means that as more of a variable input (in this case, labor) is added, the increase in output will eventually start to decrease. Therefore, each additional unit of labor will add less and less to total output.

Question 5

Figure 8-4 
-Refer to Figure 8-4. In drawing the aggregate production function, which of the following variables is not held constant?

Accepted Answer

The answer of Figure 8-4 
-Refer to Figure 8-4. In...

Question 6

Figure 8-5  Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve.
-Refer to Figure 8-5. The real wage is the ratio of

Accepted Answer

The answer of Figure 8-5  Panel (a) shows an...

Question 7

If output per capita doubles in 30 years and the population doubles in 60 years, what is the growth rate of output?

Accepted Answer

The answer of If output per capita doubles in 30...

Question 8

The aggregate production function shows the ________ for given levels of labor and other factors of production.

Accepted Answer

The answer of The aggregate production function shows the ________...

Question 9

A curve that relates an economy's total output to the total amount of labor employed, holding all other determinants of output constant, is called

Accepted Answer

An aggregate production function is a curve that shows how an economy's total output depends on the total amount of labor employed, holding all other determinants of output constant. Choice A is incorrect because an input-output matrix is a table that shows how each industry's output is used as an input by other industries. Choice B is incorrect because an average output function does not hold all other factors of production constant. Choice C is incorrect because a marginal product function only shows the additional output that is produced by adding one more unit of labor.

Question 10

Suppose a nation's real GDP grows at approximately 3.6% per year and its per capita real GDP grows by 2.2%. Calculate the approximate rate of population growth.

Accepted Answer

The approximate rate of population growth can be calculated by subtracting the per capita real GDP growth from the real GDP growth. So, 3.6% - 2.2% = 1.4%. Therefore, the approximate rate of population growth is 1.4% per year, which is option B.

Question 11

If a nation's real GDP grows at approximately 3.4% per year and its population doubles in 120 years, calculate the approximate rate of change in per capita real GDP.

Accepted Answer

To find the rate of change in per capita real GDP, we need to use the formula:

Per Capita Real GDP = Real GDP / Population

Let's assume that the current population is P, and it will be 2P after 120 years. Then we can calculate the annual growth rate of the population as follows:

2P = P * (1 + r/100)^120

Where r is the annual growth rate of the population. Solving for r, we get:

r = 0.58% per year

Now, we can use the formula for real GDP growth rate to calculate the annual increase in real GDP:

Real GDP Growth Rate = (Real GDP in Year 2 - Real GDP in Year 1) / Real GDP in Year 1

Assuming that real GDP in Year 1 is Y, then real GDP in Year 2 will be:

Y * (1 + 3.4/100)

Therefore, the real GDP growth rate is:

Real GDP Growth Rate = Y * (1 + 3.4/100 - 1) / Y = 3.4% per year

Finally, we can calculate the rate of change in per capita real GDP as follows:

Per Capita Real GDP Growth Rate = Real GDP Growth Rate - Population Growth Rate

Substituting the values we have calculated, we get:

Per Capita Real GDP Growth Rate = 3.4% - 0.58% = 2.82% per year

Therefore, the closest answer is B) 2.8% per year.

Question 12

Economic growth can be represented by

Accepted Answer

Economic growth is a sustained increase in an economy's production capacity. This can be represented by a rightward shift of the economy's long-run aggregate supply curve, indicating an increase in potential output. Options A and B are a representation of short-term changes in output and do not capture the sustained nature of economic growth. Option C refers to a rightward shift of an economy's long-run aggregate demand curve, which would indicate an increase in potential output if accompanied by a rightward shift of the long-run aggregate supply curve. However, this option is not a direct representation of economic growth.

Question 13

Diminishing marginal returns occurs when

Accepted Answer

Diminishing marginal returns occur when each additional unit of a variable factor adds less to total output than the previous unit, given constant quantities of other factors. This means that as more units of the variable factor are added, the marginal product of that factor decreases. Eventually, adding more units of the variable factor leads to a decrease in total output.

Question 14

Figure 8-5  Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve.
-Refer to Figure 8-5. The labor market represented in Panel (b) is in long-run equilibrium

Accepted Answer

In long-run equilibrium, the labor market is operating at the natural level of employment where there is neither cyclical unemployment nor labor shortages. In Panel (b), the natural level of employment is represented by the point where the aggregate labor demand curve intersects the aggregate labor supply curve at potential output level Yp. Therefore, choice A is correct. Choices B, C, and D are incorrect because they do not capture the essence of long-run equilibrium in the labor market. Zero unemployment is unlikely to be reached in reality due to frictional and structural unemployment. Macroeconomic equilibrium may be achieved in the short-run but does not necessarily imply long-run equilibrium. Diminishing marginal returns may decrease the marginal productivity of labor but do not directly affect the long-run equilibrium of the labor market.

Question 15

Which of the following statements is true?
I. Small differences in rates of economic growth can lead to large differences in levels of potential output over time.
II. From the perspective of the rule of 72, small differences in rates of economic growth between two countries will not significantly affect their respective standards of living.
III. Countries that have higher population growth rates are likely to see higher economic growth rates because increases in population lead to increases in the size of the labor force.

Accepted Answer

Statement I is true because small differences in economic growth rates can compound over time, resulting in a large gap in potential output between two countries. For example, a difference of 1% in annual economic growth rates can lead to a difference of 17% in real GDP per capita after 10 years.

Statement II is false because the rule of 72 indicates that a country's standard of living will double in approximately 72 divided by the annual growth rate. Therefore, even small differences in growth rates can have a significant impact on a country's standard of living over time.

Statement III is false because higher population growth rates do not necessarily lead to higher economic growth rates. In fact, rapid population growth can strain a country's resources and infrastructure, leading to reduced economic growth. The size of the labor force is only one factor that contributes to economic growth.

Question 16

Figure 8-5  Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve.
-Refer to Figure 8-5. In the labor market represented in Panel (b),
I. the equilibrium real wage equals $40,000.
II. at the equilibrium real wage, 100 million workers are employed.
III. the equilibrium real wage is that which prevails when the economy achieves its natural level of employment.

Accepted Answer

The answer of Figure 8-5  Panel (a) shows an...

Question 17

Figure 8-5  Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve.
-Refer to Figure 8-5. The economy could achieve its potential output at a price level- nominal wage combination of

Accepted Answer

The answer of Figure 8-5  Panel (a) shows an...

Question 18

Consider a firm that produces output using labor and capital. The firm's stock of capital is fixed and in order to increase output, it must employ more workers. Which of the following occurs as the number of workers increases?

Accepted Answer

The answer of Consider a firm that produces output using...

Question 19

Figure 8-4 
-Refer to Figure 8-4. The production function displays

Accepted Answer

The answer of Figure 8-4 
-Refer to Figure 8-4. The...

Question 20

Figure 8-3 
-Refer to Figure 8-3. Exponential economic growth can be depicted by

Accepted Answer

The answer of Figure 8-3 
-Refer to Figure 8-3. Exponential...

Quiz 8: Economic Growth

Suppose the world's population in 2012 is 7.1 billion and is projected to grow at a rate of 1.2% per year. In approximately what year will the world's population be 14.2 billion?

Holding everything else unchanged, if a nation's output grows at approximately 2.4% per year and its population doubles in 45 years, calculate the approximate rate of change in per capita real GDP.

Figure 8-4 -Refer to Figure 8-4. Which of the following could cause the production function to shift upward?

Suppose labor is the only variable that changes. If production displays diminishing marginal returns, each additional unit of labor

Figure 8-4 -Refer to Figure 8-4. In drawing the aggregate production function, which of the following variables is not held constant?

Figure 8-5 Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve. -Refer to Figure 8-5. The real wage is the ratio of

If output per capita doubles in 30 years and the population doubles in 60 years, what is the growth rate of output?

The aggregate production function shows the ________ for given levels of labor and other factors of production.

A curve that relates an economy's total output to the total amount of labor employed, holding all other determinants of output constant, is called

Suppose a nation's real GDP grows at approximately 3.6% per year and its per capita real GDP grows by 2.2%. Calculate the approximate rate of population growth.

If a nation's real GDP grows at approximately 3.4% per year and its population doubles in 120 years, calculate the approximate rate of change in per capita real GDP.

Economic growth can be represented by

Diminishing marginal returns occurs when

Figure 8-5 Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve. -Refer to Figure 8-5. The labor market represented in Panel (b) is in long-run equilibrium

Figure 8-5 Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve. -Refer to Figure 8-5. The economy could achieve its potential output at a price level- nominal wage combination of

Consider a firm that produces output using labor and capital. The firm's stock of capital is fixed and in order to increase output, it must employ more workers. Which of the following occurs as the number of workers increases?

Figure 8-4 -Refer to Figure 8-4. The production function displays

Figure 8-3 -Refer to Figure 8-3. Exponential economic growth can be depicted by