Q: Suppose Country X had a real GDP of $$500 billion in 2020 and 530 $$billion in 2021. What was Country X's real GDP growth rate in 2021?

$$\frac{530-500}{500} \times 100 = 6\%$$

Question 1

Suppose Country X had a real GDP of $$500 billion in 2020 and 530 $$billion in 2021. What was Country X's real GDP growth rate in 2021?

Accepted Answer

$$\frac{530-500}{500} 	imes 100 = 6\%$$

Question 2

If a country’s real GDP grows at 2% per year, approximately how many years will it take for its real GDP to double, according to the Rule of 70?

Accepted Answer

$$\frac{70}{2} = 35$$ years

Question 3

Which of the following best describes the difference between a 'rich' country and a country with 'high economic growth'?

Accepted Answer

A 'rich' country has a high level of wealth now, while a country with 'high economic growth' is increasing its wealth quickly.

Question 4

If a country increases its working-age population but labor productivity remains unchanged, what is the most likely effect on potential GDP and potential GDP per hour of labor?

Accepted Answer

Potential GDP increases, but potential GDP per hour of labor decreases.

Question 5

Which of the following is NOT a precondition for labor productivity growth according to the study materials?

Accepted Answer

A large government bureaucracy

Question 6

A country’s real GDP per person grew by 3% last year, while its population grew by 1%. What was the approximate growth rate of real GDP per person?

Accepted Answer

$$3\% - 1\% = 2\%$$

Question 7

Which of the following scenarios best illustrates economic growth as defined in the study materials?

Accepted Answer

A country’s production possibilities frontier (PPF) expands from one year to the next.

Question 8

If labor productivity increases in an economy, what are the likely effects on the real wage rate and the number of labor hours employed?

Accepted Answer

Both the real wage rate and the number of labor hours employed increase.

Question 9

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

Accepted Answer

Population increases, causing real GDP per person to fall back to subsistence level.

Question 10

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

Accepted Answer

Technological advances

Question 11

If the real wage rate in the labor market is above the equilibrium wage rate, what will happen in the labor market?

Accepted Answer

There will be a surplus of labor, and the wage rate will fall toward equilibrium.

Question 12

Which of the following best explains why knowledge capital is not subject to diminishing returns, according to new growth theory?

Accepted Answer

Knowledge is a public good that can be used by many people without being depleted.

Question 13

Which of the following is an example of human capital growth?

Accepted Answer

A mechanic completes advanced training in automotive repair.

Question 14

According to neoclassical growth theory, what is the primary driver of sustained long-run economic growth?

Accepted Answer

Random improvements in technology

Question 15

Which of the following would shift the labor supply curve to the right in the aggregate labor market?

Accepted Answer

An increase in the working-age population

Question 16

A country invests heavily in research and development, leading to new technologies. According to new growth theory, what is the likely long-term effect?

Accepted Answer

Permanent economic growth due to continuous technological innovation

Question 17

Which of the following is an example of physical capital growth?

Accepted Answer

A car manufacturer installs new robotic assembly lines.

Question 18

If a country’s real GDP increases but its population grows even faster, what happens to real GDP per person?

Accepted Answer

Real GDP per person decreases.

Question 19

Which of the following best describes the main difference between classical (Malthusian) and new growth theory?

Accepted Answer

Classical theory sees population growth as limiting, while new growth theory sees it as a source of innovation.

Chapter 6

Study Guide - Practice Questions

Study Guide - Flashcards