2) The idea of continuous economic growth as a “perpetual motion machine” best relects
the prediction of which growth theory?
A) the classical growth theory
B) the traditional growth theory
C) the Keynesian growth theory
D) the new growth theory
E) no growth theory
Skill: Level 3: Using models
Section: Integrative
Status: Old
AACSB: Relective thinking
3) Workers in the United States are ________ workers in China because ________.
A) more productive than; workers in the United States have more capital per worker.
B) more productive than; there are more college-educated workers in the United States.
C) less productive than; there are fewer workers in the United States.
D) less productive than; the labor force participation rate is lower in the United States.
E) equally as productive as; China’s real GDP per person equals the U.S. real GDP per
person.
Skill: Level 3: Using models
Section: Integrative
Status: Old
AACSB: Relective thinking
4) The presence of government corruption in some countries
A) slows their economic growth.
B) speeds their economic growth.
C) invalidates the new growth theory’s predictions.
D) supports the classical growth theory‘s predictions.
E) invalidates the neoclassical growth theory’s predictions.
Skill: Level 2: Using deinitions
Section: Integrative
Status: Old
AACSB: Relective thinking
71
5) Which of the following policies encourages economic growth?
A) increased taxes on income and business proits
B) reduction of government support of higher education
C) high tarifs and strict import quotas on foreign-made products
D) creation of tax free savings accounts
E) limiting the years people spend in education so that they can start productive work
Skill: Level 4: Applying models
Section: Integrative
Status: Old
AACSB: Relective thinking
9.6 Essay: The Basics of Economic Growth
1) Why is growth in GDP diferent from growth in a nation’s standard of living? Is it
possible for a nation’s GDP to grow while its standard of living falls?
Skill: Level 1: Deinition
Section: Checkpoint 9.1
Status: Old
AACSB: Written and oral communication
2) How do we calculate growth in a nation’s standard of living?
Skill: Level 1: Deinition
Section: Checkpoint 9.1
Status: Old
AACSB: Relective thinking
3) What is the Rule of 70?
Skill: Level 1: Deinition
Section: Checkpoint 9.1
Status: Old
AACSB: Relective thinking
72
4) A nation’s population was 250 million last year and is 255 million this year. If its real
GDP was $8.5 trillion last year and is $8.8 trillion this year, what is its growth rate of real
GDP per person?
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
5) U.S. real GDP per person grew rapidly in the early 1960s. The table above has U.S. real
GDP and population for 1961 and 1962.
a. What was U.S. real GDP per person in 1961?
b. What was U.S. real GDP per person in 1962?
c. Between 1961 and 1962, how rapidly did U.S. real GDP per person grow?
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
6) If a nation’s population grows at 2 percent and its real GDP grows at 4 percent, what is
the growth rate of real GDP per person?
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
73
7) Suppose that real GDP grows at 3 percent per year. What is the growth rate of real GDP
per person if the population grows at:
a. 2 percent? What happens to the standard of living?
b. 3 percent? What happens to the standard of living?
c. 4 percent? What happens to the standard of living?
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
8) During 2005, real GDP in Ireland grew 9.8 percent. If Ireland maintains this level of
growth in the future, real GDP will double in approximately how many years?
Skill: Level 2: Using deinitions
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
9) Suppose real GDP grows at 7 percent per year and the population grows at 2 percent
per year. How many years will it take for real GDP and real GDP per person to double?
Skill: Level 2: Using deinitions
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
74
9.7 Essay: Labor Productivity Growth
1) Real GDP can increase either because the quantity of labor increases or because labor
productivity increases. What is the efect on the standard of living if real GDP increases
because
a. the quantity of labor increases?
b. labor productivity increases?
Skill: Level 5: Critical thinking
Section: Checkpoint 9.2
Status: Old
AACSB: Written and oral communication
2) What is the efect on real GDP per person if labor productivity increases? What is the
efect on the nation’s standard of living?
Skill: Level 5: Critical thinking
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
3) Real GDP equals $12 trillion and aggregate hours equals 300 billion hours. What does
labor productivity equal?
Skill: Level 1: Deinition
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
4) Labor productivity is $30 per hour and aggregate hours are 165 billion hours. What does
real GDP equal?
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
5) Labor productivity is $20 per hour and aggregate hours are 400 billion hours.
a. What does real GDP equal?
b. Because of technological advances, labor productivity doubles to $40 per hour.
Furthermore, assume that aggregate hours decrease to 300 billion hours. What does real
75
GDP equal?
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
6) Deine labor productivity. Discuss the relationship between labor productivity, human
capital growth, and technology change.
Skill: Level 1: Deinition
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
7) List and explain the three factors that can increase labor productivity.
Skill: Level 1: Deinition
Section: Checkpoint 9.2
Status: Old
AACSB: Written and oral communication
76