Question 1

Real GDP tends to fluctuate around potential output.

Accepted Answer

Real GDP fluctuates around potential output due to various factors such as business cycles, changes in productivity, fluctuations in aggregate demand, and supply shocks. However, it may occasionally deviate from potential output for extended periods, leading to economic booms or recessions.

Question 2

For economic growth to occur, the citizens of an economy must

Accepted Answer

For economic growth to occur, citizens must be willing to save and invest their resources (such as money, time, and labor) into projects that will generate future returns. This requires sacrificing some current consumption in order to allocate resources towards future production. Therefore, choice B - sacrificing current consumption for future consumption, is the best answer. The other choices do not accurately reflect the tradeoffs necessary for economic growth.

Question 3

All other things unchanged, which of the following events leads to a shift further outward in the country's production possibility curve?

Accepted Answer

Increased government expenditures on basic research can lead to technological advancements and increased productivity, resulting in a shift outward in the production possibility curve. The other events either decrease the country's resources (such as a decrease in labor force participation rate or college-educated individuals) or decrease its ability to invest in future production (such as a decrease in the saving rate).

Question 4

In the long run, economic growth can be expected to lead to
I. increases in consumption.
II. increases in the capital stock.
III. increases in the savings rate.
IV. outward shifts in the production possibilities curve.

Accepted Answer

Economic growth leads to increases in consumption and the capital stock, as well as outward shifts in the production possibilities curve due to increased efficiency and technological advancements. Economic growth may also lead to increases in the savings rate as individuals and businesses have more income to save and invest. Therefore, choices I, II, and IV are all correct, but choice III is not necessarily true in every case.

Question 5

Towards the end of the twentieth century, some of the world's more affluent countries experienced robust growth. Which of the following is not linked to high growth performance?

Accepted Answer

Strict regulations in labor markets are not linked to high growth performance, as they can hinder companies' abilities to hire and fire workers, and can increase costs and decrease productivity. The other choices are all factors that are commonly linked to high growth performance. Encouragement of competitive behavior fosters innovation and efficiency, private sector research and development leads to new products and technologies, and liberal trade policies can increase access to markets and stimulate competition.

Question 6

Economic growth can generally be achieved through a(n)

Accepted Answer

The increase in the proportion of GDP used for saving leads to an increase in the investment in capital goods, which can lead to increased productivity and economic growth. The other options - decrease in economic freedom, decline in the rate of growth in the working-age population, and increase in the depreciation of capital goods - are likely to hinder economic growth.

Question 7

The skills, training, and education possessed by workers contribute to economic growth

Accepted Answer

Workers who possess higher level skills, training, and education are able to perform their jobs at a higher level of quality, increasing productivity and efficiency. This, in turn, contributes to economic growth.

Question 8

Economic growth is defined in terms of changes in the economy's level of goods and services produced from one period to the next.

Accepted Answer

The answer of Economic growth is defined in terms of...

Question 9

According to the rule of 72, a 12% annual increase in real GDP would lead to a doubling of real GDP in 8 years.

Accepted Answer

According to the rule of 72, to find the number of years it takes to double an investment or economic variable, divide 72 by the annual growth rate. Therefore, for a 12% annual increase in real GDP, it would take approximately 6 years to double, not 8.

Question 10

In the long run, economic growth will lead to
I. the opportunity to produce more consumer goods.
II. the opportunity to produce more capital goods.
III. a higher material standard of living.
IV. a more equitable distribution of income.

Accepted Answer

Economic growth increases the capacity to produce both consumer and capital goods, leading to a higher material standard of living. However, it does not necessarily result in a more equitable distribution of income.

Question 11

Exponential growth means the growth rate increases over time.

Accepted Answer

The answer of Exponential growth means the growth rate increases...

Question 12

The 2015 Going for Growth study suggested that:

Accepted Answer

The study suggests that reform efforts have been stronger in some priority areas than in others, indicating that there may be uneven progress in achieving economic growth. Option A is incorrect because the study suggests that priority areas still exist. Option B is incorrect because it suggests uniformity in reform efforts. Option D is incorrect because the study highlights areas where continued reform efforts are necessary to achieve sustained economic growth.

Question 13

An increase in saving, all other things unchanged,

Accepted Answer

An increase in saving means that households and businesses are consuming less and therefore have more funds available to invest in capital goods. This increases the amount of resources that can be devoted to the purchase of capital goods, which can lead to higher levels of productivity and economic growth in the future.

Question 14

Which of the following is an example of an investment in human capital?

Accepted Answer

Enrolling in a course to improve your computer skills is an example of investing in human capital as it involves acquiring new knowledge and skills that will increase the productivity and earning potential of an individual.

Question 15

Economic growth is the process through which the economy's potential output is increased.

Accepted Answer

Economic growth refers to an increase in the economy's potential output, which includes the production of goods and services, and the generation of income and employment opportunities. It is achieved through various factors like technological advancements, increased capital investments, and enhanced human capital.

Question 16

If real GDP grows at 3% and population grows at 1.2%, then real GDP per capita grows by 4.2%.

Accepted Answer

Real GDP per capita growth is calculated by subtracting population growth from real GDP growth, so it would be 3% - 1.2% = 1.8%.

Question 17

Towards the end of the twentieth century, some of the world's more affluent countries experienced robust growth while others experienced growth slowdown or even stagnation. Which of the following is not a reason for the divergent growth trend?

Accepted Answer

Unwillingness to enforce property rights is not a reason for the divergent growth trend. While property rights protection is important for economic growth, it is not the sole determinant of growth and cannot explain all variations in growth performance among countries. Disparities in human capital accumulation, employment rates, and macroeconomic policy are all factors that can contribute to differences in economic growth outcomes.

Question 18

Economic growth can be illustrated by an outward shift of the production possibilities curve.

Accepted Answer

Economic growth means that a country can produce more goods and services than before. This increased production capacity is represented by an outward shift of the production possibilities curve.

Question 19

Economic growth is best viewed as short-run changes in nominal GDP.

Accepted Answer

Economic growth should be viewed as long-term, sustained increases in real GDP, not short-term changes in nominal GDP which can be influenced by inflation. Real GDP accounts for the effects of inflation and provides a more accurate picture of economic growth over time.

Question 20

If an economy grows at a constant rate of 1.5% per year, it will not experience exponential growth.

Accepted Answer

Exponential growth occurs when a quantity increases by a constant percentage over equal time intervals, such as a constant 1.5% growth rate per year.

Quiz 8: Economic Growth