Q: Suppose Country X had a real GDP of $$500 billion last year and 525 $$billion this year. What is the growth rate of real GDP for Country X this year? Use the formula: $$ \text{Growth rate} = \frac{\text{Current year} - \text{Previous year}}{\text{Previous year}} \times 100 $$

$$ \frac{525 - 500}{500} \times 100 = 5\% $$

Question 1

Which of the following best describes the difference between a 'rich' country and a country with 'high economic growth' as discussed in the study materials?

Accepted Answer

A rich country has a lot of wealth currently, while a country with high economic growth is increasing its wealth quickly.

Question 2

Suppose Country X had a real GDP of $$500 billion last year and 525 $$billion this year. What is the growth rate of real GDP for Country X this year? Use the formula: $$ 	ext{Growth rate} = \frac{	ext{Current year} - 	ext{Previous year}}{	ext{Previous year}} 	imes 100 $$

Accepted Answer

$$ \frac{525 - 500}{500} 	imes 100 = 5\% $$

Question 3

If a country's real GDP grows at 7% per year, approximately how many years will it take for its real GDP to double according to the Rule of 70?

Accepted Answer

$$ \frac{70}{7} = 10 $$ years

Question 4

Which of the following scenarios represents true economic growth, rather than simply moving to full employment?

Accepted Answer

A country increases its production possibilities frontier (PPF) and produces on the new PPF.

Question 5

If the growth rate of real GDP is 4% and the growth rate of population is 2%, what is the approximate growth rate of real GDP per person?

Accepted Answer

$$ 4\% - 2\% = 2\% $$

Question 6

Which of the following is NOT a factor that directly increases the supply of labor in an economy?

Accepted Answer

An increase in labor productivity

Question 7

What happens to potential GDP per hour of labor when the supply of labor increases, according to the aggregate production function?

Accepted Answer

It decreases due to diminishing returns to labor.

Question 8

Which of the following best explains why an increase in labor productivity leads to higher potential GDP?

Accepted Answer

Each hour of labor produces more real GDP, and more hours of labor are employed.

Question 9

Which of the following is a precondition for labor productivity growth in an economy?

Accepted Answer

Firms, markets, property rights, and money

Question 10

Which of the following is the most significant contributor to long-run labor productivity growth, according to the study materials?

Accepted Answer

Technological advances

Question 11

According to classical (Malthusian) growth theory, what happens when real GDP per person rises above the subsistence level?

Accepted Answer

Population growth increases, eventually reducing real GDP per person back to subsistence.

Question 12

Which of the following statements best reflects the neoclassical growth theory?

Accepted Answer

Technological improvements are random and necessary for long-run growth.

Question 13

Which of the following is a key difference between new growth theory and classical growth theory?

Accepted Answer

New growth theory sees knowledge as a public good that can lead to permanent growth.

Question 14

Suppose a country invests heavily in education and training for its workforce. According to the study materials, which variable is this most likely to increase?

Accepted Answer

Human capital

Question 15

If a new technology is invented and widely adopted, which of the following is most likely to occur in the aggregate labor market?

Accepted Answer

The demand for labor increases.

Question 16

Which of the following best describes the concept of diminishing returns to labor?

Accepted Answer

Each additional hour of labor produces less additional output than the previous hour.

Question 17

Which of the following is an example of technology embodied in human capital?

Accepted Answer

A worker learning advanced geometry

Question 18

According to new growth theory, why can economic growth be permanent?

Accepted Answer

Knowledge capital is not subject to diminishing returns.

Question 19

Which of the following is NOT a precondition for labor productivity growth?

Accepted Answer

High inflation

Question 20

If a country’s labor supply increases but its labor productivity does not, what is the most likely effect on potential GDP per hour of labor?

Accepted Answer

It will decrease due to diminishing returns.

Economic Growth: Concepts, Measurement, and Theories

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