Deck 8: Part A: Economic Growth

Question 1

Explain the demand factor in economic growth.

Answer 1

Aggregate demand must be sufficient and growing to purchase the expanding output of the economy.When this occurs, there will be no unplanned increases in inventories and resources will be fully employed.Total spending in the economy needs to match total production.

Question 2

List some of the institutional structures that economic historians believe promote and sustain modern economic growth.

Answer 2

The list includes strong property rights, intellectual property rights (patents and copyright), efficient financial institutions, a commitment to high literacy rates and education, free trade, reliance on a competitive market system, and a stable participatory political system.

Question 3

Explain why even small changes in the rate of economic growth are significant.Use the "rule of 70" to demonstrate the point.

Answer 3

Small changes in the rate of growth can be very meaningful, especially for a country where a fraction of a percent change in the growth rate may mean the difference between starvation and hunger.
Over a period of time, small changes are cumulative in the same way that compound interest payments are cumulative on a bank account.Using the rule of 70 to estimate the time it takes to double GDP, we can see that a country whose growth rate is 5% takes 14 years to double its Real GDP, but a country whose growth rate is 3% may take about 23.3 years or nearly 10 years longer to double its Real GDP.If these countries continued to grow at their respective 5% and 3% rates, in 28 years the first country's Real GDP would be quadrupled, whereas in the second country, it would take nearly 47 years to quadruple its Real GDP from the current year.

Question 4

Suppose an economy's real GDP is $125 billion in year 1 and $130 billion in year 2.What is the growth rate of its GDP?

Question 5

Summarize the four supply factors in economic growth.

Question 6

Suppose an economy's real GDP is $700 billion in year 1 and $718 billion in year 2.What is the growth rate of its GDP?

Question 7

Summarize the historical growth record of Canada between 1961 and 2011 in terms of real GDP growth and in terms of real GDP per capita growth.

Question 8

How might poorer nations catch up to richer countries in terms of GDP per capita?

Question 9

Suppose an economy's real GDP is $100,000 in year 1 and $110,000 in year 2.What is the growth rate of its GDP? Assume that population was 200 in year 1 and 205 in year 2.What is the growth rate in GDP per capita?

Question 10

Use the diagram below to answer the questions.(a) If the economy's production possibilities curve is shown by curve AB, then draw in a new curve, which indicates positive economic growth.(b) If the economy illustrated by production possibilities curve AB is producing at point 4, what economic problem does this represent for this economy?
(c) What are some of the factors, which could cause a shift from AB to EF?

Question 11

Identify the two major ways economic growth is measured.

Question 12

Why is economic growth desirable?

Question 13

Suppose an economy's real GDP is $50,000 in year 1 and $55,000 in year 2.What is the growth rate of its GDP? Assume that population was 100 in year 1 and 105 in year 2.What is the growth rate in real GDP per capita?

Question 14

What are some of the positive changes associated with modern economic growth?

Question 15

Define modern economic growth.When did it seem to start?

Question 16

What is the efficiency factor?

Question 17

How much faster will a nation's Real GDP double if its annual rate of growth is 3 percent rather than 1.5 percent per year?

Question 18

Is growth felt evenly across society and around the world?

Question 19

Canada's economy has realized significant economic growth in the last 50 or so years.Still, there are some items missing in our growth calculations that might impact our standard of living.List three of them and describe how their inclusion might modify our interpretation of economic growth statistics.

Question 20

What is the relevance of productive and allocative efficiency to the growth process?

Question 21

Economy growth matters? Either support or critic the statement and support your answer.Use a numeric example as part of your support or critic.

Question 22

Which is more important-the quantity of inputs or the productivity of inputs-as a source of economic growth in Canada? Explain.

Question 23

Offer a defense of economic growth.

Question 24

Does the recent increase in the average rate of Productivity Growth mean that the downward trends of the rate of economic growth will not occur in the future?

Question 25

If an economy has 9,000 workers with each working 2,000 hours per year and the average real output per worker-hour is $20, what is real GDP?

Question 26

Are economic growth and progress synonymous? How might they differ?

Question 27

What are the reasons for improved resource allocation?

Question 28

Define worker-hours and labour productivity.What factors are behind labour productivity?

Question 29

If an economy has 2,000 workers with each working 3,000 hours per year and the average real output per worker-hour is $10, what is real GDP?

Question 30

Summarize the anti-growth view of economic growth.

Question 31

What is meant by economies of scale and what is the importance of this concept to economic growth?

Question 32

What are the characteristics of current rise in the Average Rate of Productivity Growth that distinguishes it from the economy of previous periods?

Question 33

Aside from increases in labour and capital inputs, what accounts for economic growth in Canada?

Question 34

Offer a skeptical perspective on the economics of the recent increase in the average rate of Productivity Growth.

Question 35

What are the economic implications from the current rise in the Average Rate of Productivity Growth?