Q: Suppose real GDP in 2020 was $$21.4 trillion and in 2021 it was 21.8 $$trillion. What was the growth rate of real GDP from 2020 to 2021? Use the formula $$ \frac{\text{Current} - \text{Previous}}{\text{Previous}} \times 100 .$$

$$ \frac{21.8 - 21.4}{21.4} \times 100 = 1.9\% $$

Question 1

Which of the following best describes long-run economic growth?

Accepted Answer

The increase in the average standard of living due to rising productivity over time.

Question 2

Real GDP per capita is considered a key measure of economic prosperity because:

Accepted Answer

It measures the total value of goods and services produced, adjusted for population and inflation.

Question 3

Suppose real GDP in 2020 was $$21.4 trillion and in 2021 it was 21.8 $$trillion. What was the growth rate of real GDP from 2020 to 2021? Use the formula $$ \frac{	ext{Current} - 	ext{Previous}}{	ext{Previous}} 	imes 100 .$$

Accepted Answer

$$ \frac{21.8 - 21.4}{21.4} 	imes 100 = 1.9\% $$

Question 4

If the average annual growth rate of real GDP over three years is calculated as $$ \frac{-2.2\% + 5.8\% + 1.9\%}{3} $$, what is the result?

Accepted Answer

$$ 1.8\% $$

Question 5

Using the Rule of 70, how many years will it take for an economy growing at 3.5% per year to double its real GDP per capita?

Accepted Answer

$$ \frac{70}{3.5} = 20 $$ years

Question 6

Which of the following is NOT a factor that directly affects labor productivity growth?

Accepted Answer

An increase in government budget deficits.

Question 7

What is the formula for calculating potential GDP growth if the labor force, capital stock, and technology all increase?

Accepted Answer

Potential GDP increases when the labor force expands, the nation acquires more capital stock, or new technologies are created.

Question 8

In a closed economy, which equation correctly represents the relationship between savings and investment?

Accepted Answer

$$ S = I $$

Question 9

If the government runs a budget deficit, what is the likely effect on the market for loanable funds?

Accepted Answer

The supply of loanable funds decreases, raising the real interest rate and reducing investment.

Question 10

Which of the following best describes 'crowding out' in the context of government budget deficits?

Accepted Answer

A reduction in private investment due to increased government borrowing raising interest rates.

Question 11

Suppose a technological innovation makes investment more profitable for firms. What happens in the market for loanable funds?

Accepted Answer

The demand for loanable funds shifts right, increasing the real interest rate and investment.

Question 12

Which of the following is a plausible reason for the supply of loanable funds to decrease?

Accepted Answer

An increase in the desire of households to consume today rather than save.

Question 13

During a recession, which of the following typically occurs?

Accepted Answer

Firms cut back on investment and employment, leading to further declines in spending.

Question 14

Which of the following is NOT a reason cited for the Great Moderation in the U.S. economy since the mid-1980s?

Accepted Answer

A decrease in the importance of services in the economy.

Question 15

If the real interest rate increases, what is the expected effect on the quantity of loanable funds supplied by households?

Accepted Answer

A small increase in the quantity of loanable funds supplied.

Question 16

Which of the following best describes the business cycle?

Accepted Answer

Alternating periods of economic expansion and recession.

Question 17

According to the National Bureau of Economic Research (NBER), a recession is defined as:

Accepted Answer

A significant decline in activity spread across the economy, lasting more than a few months.

Question 18

Which of the following is a real-world example of a policy that could shift the supply of loanable funds to the right?

Accepted Answer

The government increases tax benefits for retirement savings accounts.

Question 19

If the government reduces taxes on corporate profits (with no change in the budget deficit), what is the likely effect in the loanable funds market?

Accepted Answer

The demand for loanable funds shifts right, increasing investment.

Question 20

Which of the following is a benefit provided by the financial system?

Accepted Answer

Risk sharing, liquidity, and information aggregation.

Principles of Macroeconomics: Economic Growth, Prosperity, and Measuring Growth

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