Question 1

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 estimates the time it takes for an investment to double by dividing 72 by the annual interest rate. Here, 72 / 4.5 ≈ 16, so the investment will double in 16 years, making it worth $1,100.

Question 2

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 Rule of 70 is used to estimate the number of years it takes for a quantity to double, given a constant annual growth rate. It states that the doubling time is approximately 70 divided by the annual growth rate. Here, 70/48 ≈ 1.46, which is closest to 1.5%.

Question 3

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 _____ years.

Accepted Answer

D

Question 4

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 5

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 70 is a way to estimate the number of years it takes for a quantity to double, given a constant annual growth rate. By dividing 70 by the annual growth rate (2% in this case), we get approximately 35 years. Therefore, it will take about 36 years for the town's income to double.

Question 6

Assume that an economy grows at compounding rates.Then, over a period of 40 years, an economy that grows at 6.5% each year will have an output level approximately ____ times larger than an economy that grows at 2.5%.

Accepted Answer

To calculate the increase in output level after 40 years for an economy that grows at 6.5% each year, we can use the compound interest formula:
Output level after 40 years = Initial output level x (1 + growth rate)^40

Similarly, for an economy that grows at 2.5% each year, we have:
Output level after 40 years = Initial output level x (1 + growth rate)^40

Dividing the output level of the first economy by the output level of the second economy, we get:
Output level after 40 years (6.5% growth rate) 
------------------------------------------------- = (1.065^40) / (1.025^40)
Output level after 40 years (2.5% growth rate)

Calculating this using a calculator yields approximately 5. Therefore, an economy that grows at 6.5% each year will have an output level approximately five times larger than an economy that grows at 2.5%. Hence the correct answer is C) five.

Question 7

What will be a nation's real GDP after seven years if the average annual growth rate is 5 percent and initial real output is $10 billion?

Accepted Answer

The future value of GDP can be calculated using the formula for compound growth: Future Value = Present Value * (1 + growth rate)^number of years. Here, it is $10 billion * (1 + 0.05)^7 = $14.07 billion.

Question 8

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

The growth rate formula is: (new value - old value) / old value * 100%.

Plugging in the given data, we get:

(473.7 - 448.3) / 448.3 * 100% = 5.66%

Therefore, the correct answer is B) 5.66%.

Question 9

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

Accepted Answer

The time required for real GDP to double can be found by dividing the number 72 by the annual growth rate. This is known as the "rule of 72."

Question 10

Economic growth is measured as:

Accepted Answer

Economic growth is best measured as the annual percentage change in real GDP, which takes into account changes in output due to inflation. The other options do not accurately capture overall economic growth.

Question 11

If Australia's real GDP is AUD$434.95 billion in 1999 and the country's average annual growth rate is 2.9 percent, what will its real GDP be in 2004?

Accepted Answer

The correct answer is D: AUD$501.78 billion.To calculate the real GDP in 2004, we can use the formula:Real GDP in 2004 = Real GDP in 1999 * (1 + growth rate)^number of yearsReal GDP in 2004 = AUD$434.95 billion * (1 + 0.029)^5Real GDP in 2004 = AUD$501.78 billion

Question 12

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 13

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

The Rule of 72 states that dividing the number 72 by the annual growth rate of an investment or economy will give us the number of years it will take for the investment or economy to double.

Therefore, in this question, we need to divide 72 by the number of years we want the economy to double, which is 4 years. This gives us 18.

So, the average annual growth rate needed for a country to double its size in just four years is 18 percent. Therefore, the best choice is option C.

Question 14

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 as the total real GDP of a country divided by the population of that country, and therefore provides a measure of the average income or standard of living of the people in that country.

Question 15

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 16

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

Accepted Answer

The rule of 72 is a financial shortcut used to estimate the number of years it will take to double an investment at a constant rate. It is calculated by dividing 72 by the annual rate of return.

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

The answer of In 2000, the real GDP for Malaysia...

Question 18

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 in 16 years, which suggests using the Rule of 72. Dividing 72 by 16 gives an approximate annual interest rate of 4.5%.

Question 19

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 answer of If Korea's average annual growth rate is...

Question 20

What will be Singapore's approximate real GDP after five years if its average annual growth rate is 9.8 percent and the economy initially produces at real GDP of S$80, 500 million?

Accepted Answer

The correct answer is E.The formula for calculating real GDP after n years is:Real GDP after n years = Real GDP * (1 + growth rate)^nPlugging in the values given in the question, we get:Real GDP after 5 years = S$80,500 million * (1 + 0.098)^5= S$80,500 million * 1.5938= S$128,472 million

Quiz 28: Economic Growth