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.

Question

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.

Quizplus · Accepted Answer

Statement I is true because small differences in growth rates can compound over time, resulting in large differences in potential output. Statement II is false because the rule of 72 states that with a constant rate of growth, a variable will double in approximately 72 divided by the growth rate years. Thus, small differences in growth rates will have a significant impact on the standard of living over time. Statement III is false because demographic changes, such as changes in population growth rates, can impact economic growth, but they are not the only factor involved. Other factors such as technological progress, capital accumulation, and efficient use of resources also contribute to economic growth.

Which of the Following Statements Is True