Question 1

Economic growth is measured as:

Accepted Answer

Economic growth is most commonly measured as the annual percentage change in real GDP, which measures the increase in the output of goods and services in an economy over a given period of time, adjusting for inflation. Other measures, such as nominal GDP or population growth, might give an indication of the size of the economy or the size of the workforce, but they do not capture the changes in economic activity that generate welfare and prosperity.

Question 2

To calculate the time required for real GDP to double, we _____.

Accepted Answer

The time required for real GDP to double can be calculated by dividing 72 by the annual growth rate. This is known as the rule of 72. For example, if the annual growth rate is 3%, it would take approximately 24 years for real GDP to double (72 divided by 3 equals 24).

Question 3

If real GDP in Korea amounted to 448.3 trillion wons in 1999 and 473.7 trillion wons in 2000, compute the growth experienced by this country in 2000?

Accepted Answer

To calculate the growth rate, we use the formula:
Growth rate = ((New value - Old value) / Old value) x 100
Substituting the given values, we get:
Growth rate = ((473.7 - 448.3) / 448.3) x 100
Growth rate = 5.66%
Therefore, the correct answer is B) 5.66%.

Question 4

Per capita real GDP is:

Accepted Answer

Per capita real GDP is a measure of the value of output produced and available to an average person. It is calculated by dividing the total real GDP of a country by its population. It is used to compare the economic well-being of different countries and to track changes in the standard of living over time.

Question 5

Assume that you invest $550 in a certificate of deposit that has an annual interest rate of 4.5 percent. According to the rule of 72, what will your investment be worth after 16 years?

Accepted Answer

The rule of 72 is a simple way to estimate the number of years required to double an investment at a given annual rate of return by dividing 72 by the interest rate. Here, dividing 72 by 4.5 gives 16 years. Therefore, in 16 years, the investment of $550 would double to $1,100.

Question 6

The income of the town of Kennebunkport has been growing by 2 percent per year. If this growth continues into the future, how long will it take until the town's income has doubled?

Accepted Answer

The rule of 72 is a simple way to estimate the number of years required to double the investment at a given annual rate of return. By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself. In this case, with a 2 percent growth rate, 72 divided by 2 equals 36 years.

Question 7

Which of the following is accounted for when we measure economic growth in terms of per capita real GDP?

Accepted Answer

Per capita real GDP measures economic growth adjusted for inflation, so changes in price level are accounted for. However, changes in the quality of life, income distribution, standards of living, and people's nonmonetary needs are not directly accounted for.

Question 8

If the average annual growth rate of a developing country is 7.2 percent, real GDP will double in _____.

Accepted Answer

The answer of If the average annual growth rate of...

Question 9

Using the rule of 72, calculate the average annual growth rate of GDP needed for a country to double its size in just four years?

Accepted Answer

Using the rule of 72, we divide 72 by the number of years it takes for GDP to double. In this case, we want to double GDP in 4 years, so we divide 72 by 4 and get 18. Therefore, an average annual growth rate of 18 percent is needed for a country to double its size in just four years.

Question 10

Suppose the real GDP in an economy in the year 1999 was $2,000 and the total population was 500. The economy experienced a 5% growth in real GDP and a 2% growth in its population in 2000. Calculate the change in per capita income of the economy during this period.

Accepted Answer

Per capita income in 1999 was $2,000/500 = $4.
Real GDP in 2000 = $2,000 × 1.05 = $2,100
Population in 2000 = 500 × 1.02 = 510
Per capita income in 2000 = $2,100/510 = $4.12
Therefore, change in per capita income = ($4.12 − $4)/$4 × 100% = 3%. Hence, the correct answer is D) +3%.

Question 11

If an investment of $400 increases to $800 in 16 years, the annual interest rate of the investment must be _____.

Accepted Answer

The investment doubles over 16 years. Using the rule of 72, which estimates the number of years required to double an investment at a given annual rate of return, we divide 72 by the number of years to estimate the interest rate: 72 / 16 = 4.5%. Therefore, the annual interest rate is approximately 4.5%.

Question 12

If Korea's average annual growth rate is 9 percent and that of the United States is 4 percent, the time required for Korea's real GDP to double will be ____ less than the time required for the GDP of the United States to double.

Accepted Answer

The time required for an investment to double can be estimated using the Rule of 72, which states that dividing 72 by the annual growth rate gives the approximate number of years to double. For Korea, 72/9 = 8 years; for the US, 72/4 = 18 years. The difference is 18 - 8 = 10 years.

Question 13

What is the annual rate of economic growth in Japan if real GDP at the beginning of the year is 11.9 trillion yen and real GDP at the end of the year is 11.1 trillion yen?

Accepted Answer

The answer of What is the annual rate of economic...

Question 14

If real GDP for Mexico was 19.8 trillion pesos at the end of 1999 and 21.3 trillion pesos at the end of 2000, then Mexico's economy grew at an annual rate of _____.

Accepted Answer

The answer of If real GDP for Mexico was 19.8...

Question 15

If you invest $1,000 in a savings account and the annual interest rate is 3.6 percent, your account balance will double in value in approximately _____.

Accepted Answer

To calculate how long it takes for the account balance to double, we use the rule of 72. Divide 72 by the annual interest rate (in this case, 3.6), and the result is the number of years it takes for the account to double in value. So, 72 ÷ 3.6 = 20. Therefore, the answer is D) 20 years.

Question 16

Which of the following is true of the rule of 72?

Accepted Answer

The rule of 72 is a quick way to estimate the time it takes for a value to double based on a given annual growth rate. It is calculated by dividing 72 by the annual growth rate. For example, if an investment is growing at a rate of 6% per year, it will take approximately 12 years for the value to double (72/6 = 12). Therefore, option B is correct. Options A, C, D, and E are all incorrect.

Question 17

In 2000, the real GDP for Malaysia was 93.15 trillion ringgit (MYR) and the population size was 20.5 million, then per capita real GDP for the year was approximately equal to _____.

Accepted Answer

To calculate per capita real GDP, divide the total real GDP by the population size: 93.15 trillion MYR / 20.5 million = 4.54 million MYR per capita.

Question 18

What is the approximate per capita income of the US if the population is 3,405,813 and its GDP is $24 million?

Accepted Answer

Per capita income is calculated by dividing the GDP by the population. 
Per capita income = GDP / Population
Using the figures provided:
Per capita income = $24,000,000 / 3,405,813
Per capita income = $7.05
Therefore, the approximate per capita income of the US is $7.05.

Question 19

If the real GDP of a developed country doubles in 48 years, the average annual growth rate in real GDP must be _____.

Accepted Answer

The average annual growth rate can be calculated using the rule of 70, which states that the number of years it takes for a variable to double is approximately 70 divided by the annual growth rate. In this case, 70 divided by the number of years (48) gives an annual growth rate of approximately 1.5%.

Question 20

The per capita real GDP in Sri Lanka is likely to be lower than the United States because Sri Lanka's economy is characterized by:

Accepted Answer

A high population growth can contribute to a lower per capita real GDP because the total GDP is divided among a larger number of people. This means each individual has access to fewer resources and lower income. Therefore, even if Sri Lanka had a more equitable income distribution system or higher consumption spending, the high population growth would still likely result in a lower per capita real GDP compared to the United States. The other options, such as low regard for political freedom or high budget deficit, may also have an impact on the economy, but they are not necessarily directly related to per capita real GDP.

Quiz 16: Economic Growth