Q: What is the formula for calculating the growth rate of real GDP between two years?

$$\frac{\text{Real GDP}_{\text{final}} - \text{Real GDP}_{\text{initial}}}{\text{Real GDP}_{\text{initial}}} \times 100$$

Question 1

Suppose the real GDP of a country grows from $$10,000 to$$ $$20,000 in$$ $$14$$ years. Using the rule of 70, what is the approximate annual growth rate?

Accepted Answer

$$7\%$$

Question 2

Which of the following would shift the supply curve for loanable funds to the right?

Accepted Answer

An increase in private saving due to higher income

Question 3

What is the formula for calculating the growth rate of real GDP between two years?

Accepted Answer

$$\frac{	ext{Real GDP}_{	ext{final}} - 	ext{Real GDP}_{	ext{initial}}}{	ext{Real GDP}_{	ext{initial}}} 	imes 100$$

Question 4

According to the convergence theory, what is expected to happen to the growth rates of high-income and low-income countries over time, assuming similar access to technology and capital?

Accepted Answer

Low-income countries will catch up and grow faster than high-income countries.

Question 5

Which of the following best describes the Marginal Propensity to Consume (MPC)?

Accepted Answer

The fraction of additional income that is consumed.

Question 6

If the MPC is $$0.8$$, what is the value of the multiplier in the simple Keynesian model?

Accepted Answer

$$5$$

Question 7

Which of the following would cause a movement along the aggregate demand curve?

Accepted Answer

A change in the price level

Question 8

What is the main reason for the positive slope of the Short-Run Aggregate Supply (SRAS) curve?

Accepted Answer

Wages and input prices are sticky in the short run.

Question 9

Which of the following is NOT a component of aggregate expenditure?

Accepted Answer

Taxes

Question 10

If the per-worker production function shifts upward, which of the following is the most likely cause?

Accepted Answer

Technological progress

Question 11

Which policy is most likely to foster technological change according to new growth theory?

Accepted Answer

Subsidizing research and development

Question 12

In the aggregate expenditure model, what does it mean if actual GDP is greater than planned aggregate expenditure?

Accepted Answer

Firms will cut back on production.

Question 13

Which of the following would shift the long-run aggregate supply (LRAS) curve to the right?

Accepted Answer

An increase in the labor force and capital stock

Question 14

If the marginal propensity to save (MPS) is $$0.25$$, what is the value of the multiplier?

Accepted Answer

$$4$$

Question 15

Which of the following is a common failure in low-income countries that hinders economic growth?

Accepted Answer

Weak legal and financial institutions

Question 16

What does a vertical long-run aggregate supply (LRAS) curve indicate?

Accepted Answer

Output is determined by resources and technology, not the price level.

Question 17

Which of the following would cause a shift in the consumption function?

Accepted Answer

A change in consumer wealth

Question 18

If government spending increases by $$100$$ and the multiplier is $$3$$, what is the total change in equilibrium GDP?

Accepted Answer

$$300$$

Question 19

Which of the following best describes the effect of an increase in net exports on aggregate expenditure?

Accepted Answer

Aggregate expenditure increases.

Question 20

What does the aggregate demand curve show?

Accepted Answer

The relationship between the price level and the quantity of real GDP demanded.

Macroeconomics Exam Study Guide: Financial Markets, Economic Growth, Aggregate Expenditure, and AD-AS Model

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