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Chapter 9
Global Economic Growth and Development
9.1 How Do We Define Economic Growth?
1) An increase in growth rates will cause the production possibilities curve to
A) shift inward. B)
b
ecome steeper.
C)
b
ecome flatter. D) shift outward.
2) An outward shift of the production possibilities curve represents
A) economic contraction. B) economic growth.
C) economic recession. D) economic inflation.
3) Which of the following variables is used to measure economic growth?
A) nominal GDP B) nominal GDP per capita
C) real GDP D) real GDP per capita
4) According to your text, which of the following countries currently has the highest annual per
capita Gross Domestic Product (GDP) growth rate?
A) China B)
J
apan C) Germany D) United States
5) The term economic growth refers to increases in
A) resources use. B) nominal income.
C) satisfaction. D) productive capacity.
6) Economic growth is usually defined as
A) the rate of increase in output divided by the increase in labor.
B) the increase in output over time, as measured by real per capita Gross Domestic Product
(GDP).
C) the increase in input availability.
D) the reduction in the real cost of necessities.
7) Using a production possibilities curve, economic growth is represented by
A) an outward shift in the curve. B) a movement along the curve.
C) an inward shift of the curve. D) a pivot of the curve.
8) Economic growth is best measured by increases in
A) nominal personal income.
B) nominal Gross Domestic Product (GDP).
C) per capita real Gross Domestic Product (GDP).
D) per capita nominal Gross Domestic Product (GDP).
9) When Country X has high economic growth, this country has
A) a high level of real Gross Domestic Product (GDP).
B) a high level of per capita real Gross Domestic Product (GDP).
C) a large increase in per capita real Gross Domestic Product (GDP).
D) a large increase in personal income.
Chapter 9 Global Economic Growth and Development 197
2009 2010 2009 2010
Real GDP Real GDP Population Population
Country (Millions) (Millions) (Millions) (Millions)
A $280,000 $300,000 832.5 849.5
B 235,000 260,000 14.8 14.9
C 28,200 33,400 2.7 3.0
D 5,200,000 5,445,000 248.8 250.0
10) Refer to the above table. Which country experienced the greatest economic growth from 2009 to
2010?
A) A B) B C) C D) D
11) Refer to the above table. Which country had the highest growth rate of real Gross Domestic
Product (GDP) from 2009 to 2010?
A) A B) B C) C D) D
12) Economic growth may understate changes in standards of living if
A) the growth is accompanied by increasing congestion.
B) leisure time is also increasing.
C) the types of jobs generated feelings of alienation.
D) deflation is taking place.
13) There are a number of benefits that usually accompany economic growth. The following are
such benefits EXCEPT
A) increase in literacy. B) increased expected life spans.
C) political stability. D) urban congestion.
14) Costs associated with economic growth include all of the following EXCEPT
A) environmental pollution.
B) psychological problems such as depression.
C) urban congestion.
D) improved health care.
15) The growth rate of per capita real Gross Domestic Product (GDP) is a reasonable measure of
A) inflation. B) productive activity.
C) personal well
b
eing. D) quality of life.
16) Which of the following best represents economic growth?
A) a movement down a given production possibilities curve.
B) a movement up a given production possibilities curve.
C) an outward or, equivalently, a rightward shift of the production possibilities curve.
D) an inward or, equivalently, leftward shift of the production possibilities curve.
17) The faster economic growth is, the
A) steeper the slope of the production possibilities curve.
B) farther the production possibilities curve shifts out.
C) closer to the origin the production possibilities curve becomes.
D) more bowed the production possibilities curve becomes.
18) Which of the following is NOT an important factor affecting economic growth?
A) The rate of saving B) The growth of leisure
C) The rate of growth of capital D) The rate of growth in labor productivity
19) Which of the following is true?
A) Real standards of living can increase without any positive economic growth.
B) Real growth rates fail to account for by price level changes.
C) Real and nominal values are not related.
D) Real standards of living decrease with positive economic growth.
20) When a nation s real per capita Gross Domestic Product (GDP) increases, which of the following
is true?
A) Every individual in that nation shares in the economic gain.
B) A nation must channel most of the economic gains to its poorest citizens.
C) Low income people are guaranteed to lose; they never share in their nation s economic
gains.
D) We don t know who has most benefited from economic growth unless we look at the
distribution of income.
21) Is it possible to see gains in a nation s real standard of living without any positive economic
growth?
A) No. Without economic growth a nation s standard of living cannot improve.
B) Yes
,
b
ut only if the government prints more money so people feel wealthier.
C) Yes. If workers can produce the same level of output in fewer work hours, leisure time
gains could push up the real standard of living.
D) None of the above.
22) A nation s technological gains have increased labor productivity and, as a result, the average
number of hours worked each week has been falling. How do Gross Domestic Product (GDP)
calculations account for this shortening of the average workweek?
A) Real Gross Domestic Product (GDP) does not factor in an increase in leisure time but per
capita real Gross Domestic Product (GDP) does.
B) Neither real Gross Domestic Product (GDP) nor per capita real Gross Domestic Product
(GDP) includes the increase in leisure time that results, so the nation s actual economic
growth will be overstated.
C) Gains in leisure time are dollar valued and included in real per capita Gross Domestic
Product (GDP) gains.
D) Gains in leisure time are not included in Gross Domestic Product (GDP), so any increase in
real per capita Gross Domestic Product (GDP) will understate the nation s actual economic
growth.
23) How should per capita real Gross Domestic Product (GDP) be used?
A) It is an accurate measure of economic well
b
eing.
B) It is a reasonably good measure of productive activity.
C) Per capita real Gross Domestic Product (GDP) is a good gauge of a nation s quality of life
because it takes into account a nation s cultural and spiritual values.
D) All of the above.
24) Does economic growth have any negative side effects?
A) No. Every person in a nation experiencing economic growth will benefit.
B) No
,
b
ecause where negative side effects do occur, a nation s government is required to
neutralize them.
C) Quite possibly. Some say economic growth puts people on a never ending quest to satisfy
newly created wants, so we always feel disappointed with our lives.
D) Yes
,
b
ut only for the poorest segment of a nation s population.
25) Countries are concerned about small changes in their average annual growth rates because
A) growth rates tend to decline over time.
B) the power of compounding means small changes have large effects over time.
C) the faster a country grows today, the less it will be able to consume in the future.
D) growth rates are a factor in U.N. participation.
26) Suppose that Country A and Country B each had the same per capita real Gross Domestic
Product (GDP) is $10,000 in 2003. Country A has a growth rate of 3 percent and Country B has a
growth rate of 4 percent. By 2008, the per capita real Gross Domestic Product (GDP)s for the
two countries, respectively, are
A) $11,500 and $12,000. B) $11,593 and $12,167.
C) $11,255 and $11,699. D) $14,000 and $16,000.
27) Economic growth is measured by
A) increases in GDP.
B) increases in per capita real GDP.
C) increases in the population.
D) increases in the value of the total output of society.
28) Economic growth can be depicted as
A) a movement up on the production possibilities curve.
B) a movement down on the production possibilities curve.
C) an outward shift on the production possibilities curve.
D) an inward shift on the production possibilities curve.
29) Economic growth can be defined as a percentage increase in
A) per capita real GDP. B) real GDP.
C) nominal GDP. D) consumption by households.
30) Which of the following statements is NOT true about economic growth?
A) When growth occurs the production possibilities curve shifts outward.
B) Growth represents an increase in a nation s productive capacity.
C) Growth is measured as the overall level of real GDP.
D) Growth generally means that overall the members of the nation are better off materially.
31) Which of the following nations has experienced the highest average annual rate of growth of per
capita real GDP since 1990?
A) India B) United States C) China D) Germany
32) Per capita real GDP is a serviceable measure of
A) economic welfare. B) cost of living standards.
C) cultural superiority. D) productive activity.
33) Which of the following is a benefit of economic growth?
A) reduction in illiteracy B) reduction in poverty
C) improved health D) all of the above
34) The real GDP in a nation has just increased from $2 billion to $2.1 billion.
A) This country has experienced economic growth because there is a $.1 billion increase in
real GDP.
B) We do not know if this country experienced economic growth since the increase in the
population was not given.
C) We do not know if this country experienced economic growth since information on
nominal GDP was not given.
D) This country did not experience economic growth since $.1 billion is not a large number.
35) The historical record for the United States since 1900 shows
A) mostly positive economic growth, with two substantial periods of negative economic
growth.
B) economic growth for about half the years and economic decline for the other half.
C) growth until 1970 and then a period of constant per capita real GDP.
D) continuous economic growth, although at different rates, throughout the entire century.
36) Suppose per capita real GDP grows by 7% per year. Based on the Rule of 70, approximately
how many years will it take for the level of per capita real GDP to double?
A) 4.9 years B) 7 years
C) 10 years D) none of the above
37) Which of the following is a true statement concerning economic growth?
A) Changes in per capita nominal GDP are used to measure economic growth because
population growth can distort the figures and we want to use the nominal amounts since
that is what people identify with.
B) Changes in per capita nominal GDP are used to measure economic growth, but there are
serious problems concerning the desirability of using figures that do not account for
pollution and urban sprawl.
C) Changes in per capita real GDP are used to measure economic growth because this
accurately measures all the differences in living standards across countries.
D) Changes in per capita real GDP are used to measure economic growth because inflation
and population growth can distort nominal GDP figures or total GDP figures.
38) Which of the following statements is NOT true about using per capita real GDP to measure a
nation s economic growth?
A) The definition does not indicate how the increase in growth is being disturbed among the
nation s population.
B) The definition assumes that some of the increase in productivity goes to the poor.
C) The definition has understated actual economic growth because it does not take into
consideration changes in leisure.
D) The definition is not perfect for measuring increases in a nation s productive capacity.
39) When examining the growth record of any nation
A) all that must be examined is increases in per capital real GDP.
B) no consideration should be given to the change in the average amount of leisure time in
the nation.
C) increases in per capita real GDP must be considered along with how far the production
possibilities curve has shifted.
D) we must consider which income groups have benefited most from the growth.
Chapter 9 Global Economic Growth and Development 205
2008 2010 2008 2010
Real GDP Real GDP Population Population
CNTRY (Millions) (Millions) (Millions) (Millions)
A $214,200 $256,300 767.70 798.40
B 164,300 174,700 37.20 37.80
C 166,700 184,300 6.53 7.00
D 200,800 222,500 114.49 114.85
40) Refer to the above table. Which country had the largest increase in per capita real GDP?
A) A B) B C) C D) D
41) Refer to the above table. Which country has the lowest increase in per capita real GDP?
A) A B) B C) C D) D
42) If we are interested in knowing whether a poor country is improving economically, we want to
know not only what the economic growth rate is, but also
A) whether the economic growth rate is faster than other nations growth rates.
B) whether government spending is growing at the same rate.
C) whether the economic growth rate is greater than last year s rate.
D) whether the lowest income groups are benefiting from the growth.
43) Real standards of living can increase
A) if the country is producing the same amount they traditionally have and are enjoying more
leisure time.
B) only if there is positive economic growth.
C) if there is positive growth in the manufacturing sector.
D) only at the cost of increased urban congestion.
44) Economic growth may overstate changes in the standard of living if
A) people are retiring at a younger age.
B) the average workweek is increasing.
C) the number of students attending college is increasing.
D) expected life spans are increasing.
45) A country has had its per capital real GDP remain constant for several years. During this period
this country
A) has not experienced any economic growth.
B) may have experienced economic growth if the average hours worked per week have
fallen.
C) will have experienced an inward shift of the production possibilities curve.
D) will have an increase in the number of poor people.
46) An example of a cost of economic growth is
A) longer life spans. B) political instability.
C) alienation. D) increases in illiteracy.
47) The measurement of economic growth cannot take into account
A) the service sector of an economy.
B) productive activity in an economy.
C) cultural aspects of life in a country.
D) differences in inflation rates across countries.
48) Suppose two countries have identical growth rates of real GDP and the same initial value of per
capita real GDP. We know, then, that
A) life expectancies are the same in both countries.
B) economic well being is the same in both countries.
C) living standards may differ in the two countries because we don t know how income is
distributed in the countries.
D) living standards in the two countries are probably identical, or very close to each other.
49) The reason that differences in economic growth rates are important in the long run is that
A) growth compounds over time.
B) population naturally shrinks in most countries.
C) real GDP usually drops when adjusted for inflation.
D) nominal GDP typically increases faster than real GDP.
50) A one percentage point in the growth rate
A) does not make much difference in the long run per capita real GDP.
B) will not influence the real standard of living in a country.
C) can make a big difference in the per capita real GDP because of urban congestion.
D) can make a big difference in the per capita real GDP because of compounding.
51) A small reduction in a country s growth rate is a concern to policy makers because
A) a small change can have large effects on per capita GDP over time.
B) a reduction usually leads to future reductions until finally the economy stagnates.
C) policy makers focus too much on economic growth and not enough on increasing savings
rates.
D) the larger GDP is the better the economic welfare will be in the future.
52) Suppose two countries have per capita real GDP of $20,000 in 2008. Country A has a growth rate
of 4 percent and Country B has a growth rate of 5 percent. By 2011, the per capita real GDPs for
the two countries, respectively, are (rounded)
A) $21,630 and $22,050. B) $22,400 and $23,000.
C) $22,500 and $23,150. D) $25,000 and $26,500.
#YRS 3% 4% 5% 6% 8% 10% 20%
1 1.03 1.04 1.05 1.06 1.08 1.10 1.20
2 1.06 1.08 1.10 1.12 1.17 1.21 1.44
3 1.09 1.12 1.16 1.19 1.26 1.33 1.73
4 1.13 1.17 1.22 1.26 1.36 1.46 2.07
5 1.16 1.22 1.28 1.34 1.47 1.61 2.49
6 1.19 1.27 1.34 1.41 1.59 1.77 2.99
7 1.23 1.32 1.41 1.50 1.71 1.94 3.58
8 1.27 1.37 1.48 1.59 1.85 2.14 4.30
9 1.30 1.42 1.55 1.68 2.00 2.35 5.16
10 1.34 1.48 1.63 1.79 2.16 2.59 6.19
20 1.81 2.19 2.65 3.20 4.66 6.72 38.30
30 2.43 3.24 4.32 5.74 10.00 17.40 237.00
40 3.26 4.80 7.04 10.30 21.70 45.30 1470.00
50 4.38 7.11 11.50 18.40 46.90 117.00 9100.00
53) According to the above table, if per capita real GDP is currently $1000, then at a constant annual
rate of growth of 8 percent, per capita real GDP ten years from now will be equal to
A) $2000. B) $2140. C) $2160. D) $2590.
54) Refer to the above table. How long would it take for a country to triple its GDP if the GDP grew
at a 20 percent rate?
A) 2 years B) 4 years C) 6 years D) 10 years
55) Refer to the above table. Two countries have per capita real GDPs in 2010 of $5000. If country A
has a 4 percent growth rate and Country B a 5 percent growth rate, what will the per capita real
GDPs of each be in the year 2060?
A) A: $40,000; B: $60,000 B) A: $35,550; B: $57,500
C) A: $24,000; B: $35,200 D) A: $15,000; B: $30,000
56) Refer to the above table. Suppose one country has a per capita real GDP of $1000 and another
has a per capita real GDP of $10,000, or ten times larger. If both countries have a growth rate of 5
percent, how much larger will per capita real GDP be in the second country be than the first
after 50 years?
A) 4 times larger B) 5 times larger C) 8 times larger D) 10 times larger
57) Refer to the above table. Country A has a per capita real GDP of $1000 and B has a per capita
real GDP of $10,000. A is growing at a rate of 5 percent a year and B at a rate of 4 percent a year.
After 50 years, how much larger is per capita real GDP in B than A? How much is this in real
dollars?
A) B is 8 times larger, or $175,000 larger on a real per capita basis.
B) B is 12 times larger, or $230,000 larger on a real per capita basis.
C) B is a little over 6 times larger, or almost $60,000 larger on a real per capita basis.
D) B is a little less than 2 times smaller, or almost $20,000 smaller on a real per capita basis.
58) Refer to the above table. If an economy s current per capita real GDP is $3,000, and if its
economy grows at an constant annual rate of 5 percent for 50 years, what will be its per capita
real GDP at the end of that period?
A) $13,140 B) $21,330 C) $34,500 D) $55,200
59) Refer to the above table. You have a choice among four alternatives. Choice A lets you invest
$250,000 at 4 percent; B lets you invest $125,000 at 6 percent; C lets you invest $62,500 at 8
percent, and D lets you invest $31,250 at 10 percent. Which choice will get you to $1 million
faster?
A) A B) B C) C D) D
60) All of the following will cause the reported growth rate in a country to change EXCEPT
A) population changes.
B) changes in the number of poor people in the country.
C) a shift of the production possibilities curve.
D) changes in productivity.
61) Graphically, economic growth is represented as
A) a movement along the production possibilities curve.
B) a movement from a point inside the production possibilities curve to a point on the curve
itself.
C) an inward shift of the production possibilities curve.
D) an outward shift of the production possibilities curve.
62) One of the problems with the definition of economic growth is that
A) it overstates economic growth because it does not account for leisure time.
B) it does not account for the distribution of income.
C) it overstates economic growth because it does not account for the reduction in work time.
D) it understates economic growth because it does not account for the reduction in work time.
63) Economic growth is
A) an increase in the per person real production in a nation.
B) an increase in stock market values.
C) an increase in real estate values.
D) an increase in the number of people employed in agriculture.
64) The variable used to measure economic growth is
A) the growth of the money supply. B) the trade surplus.
C) the growth in per capita real GDP. D) the number of new jobs created.
65) Why do very small differences in annual growth rates amount to big differences in the degree of
long term economic growth?
A) Because the faster growing countries gain a political advantage over poorer countries, and
use that advantage for their economic gain.
B) Because the annual growth rate is compounded over time.
C) Because the slower growing countries save too much.
D) Because the slower growing countries don t export enough.
66) An outward shift of the production possibilities curve demonstrates
A) a recession. B) an increased rate of inflation.
C) economic growth. D) a cyclical shock.
67) Economic growth is defined as
A) an increase in the satisfaction of all people within a country.
B) an increase in per capita real GDP measured by its rate of change per year.
C) any increase in per capita nominal GDP measured by its rate of change per year.
D) an increase in the supply of money measured by its rate of change per year.
68) According to the World Bank and the International Monetary Fund, which of the following
countries has shown the greatest rate of economic growth in the past two decades?
A) China B) Germany C) United States D) Mexico
69) Which of the following would typically be considered a cost of economic growth?
A) increased illiteracy B) decreased levels of health
C) increased poverty D) urban congestion
70) A small increase in the annual rate of economic growth can lead to a larger increase in growth
over time due to the effects of
A) the money supply. B) compounding.
C) regression towards the mean. D) averaging.
71) The definition of economic growth is the annual percentage
A) increase in the per capita real GDP. B) increase in the per capita nominal GDP.
C) increase in the total nominal GDP. D) increase in total exports.
72) Economic growth will
A) shift the production possibilities curve inward.
B) shift the production possibilities curve outward.
C) shift along the production possibilities curve toward the X axis.
D)
b
e a movement from inside the productions possibilities curve to the curve itself.
73) Suppose per capita real GDP grows by 3.5% per year. Based on the Rule of 70, approximately
how many years will it take for the level of per capita real GDP to double (i.e., increase by
100%)?
A) 3.5 years B) 10 years C) 20 years D) 35 years
74) Assume a country produces two types of goods: manufactured goods and agricultural goods.
When this country experiences economic growth, we know that
A) the production possibilities curve will shift outward.
B) the production possibilities curve will shift inward.
C) there will be a movement along the curve toward more manufactured goods.
D) there will be movement along the curve toward more agricultural goods.
75) When looking at economic growth in a country, the distribution of output and income
A) generally follows predictable patterns.
B) is not taken into consideration.
C) is skewed toward the lowest quintile of the population.
D) is shared equally.
76) Which of the following is NOT a benefit of economic growth?
A) urban congestion B) reduction in illiteracy
C) improved health D) longer lives
77) Which of the following is a negative effect of economic growth?
A) higher inflation B) higher unemployment
C) environmental pollution D) all of the above
78) A change in the growth rate of a country of one percentage point annually has
A) very little impact on the economy of a country.
B) a large impact in the future due to compounding.
C) a small impact in the current year, and smaller impact in the future because of
compounding.
D) a large impact on the economy in the current year, but not in the future.
79) The modification of manufacturing processes so as to reduce the resulting environmental
damage is an endeavor that requires capital investment, labor inputs, and technology. What
then follows from this statement?
A) Economic growth can benefit the environment.
B) Environmental damage is a regrettable but necessary side effect of economic growth.
C) The condition of the environment will be better in slower growing countries.
D) The way to reduce pollution is to educate people about its effects.
