Chapter 11 - Economic Growth

Question 1

Economic Growth

Answer 1

The percentage change in real per capita GDP

Question 2

Life Indication

Answer 2

Measure of well-being beyond GDP

Question 3

What is the most important growth rate that we consider?

Answer 3

Real GDP per capita

Question 4

What do we need to take into account in order to have an accurate growth rate?

Answer 4

Inflation and population growth

Question 5

What is the equation to find economic growth?

Answer 5

%Δ in nominal GDP − %Δ price level − %Δ population

Question 6

What is the equation to find real GDP growth?

Answer 6

Nominal GDP growth - inflation

Question 7

What is a common mistake in reporting international economic growth statistics?

Answer 7

The terms can sometimes get mixed up

Question 8

What’s the Rule of 70?

Answer 8

If the annual growth rate of a variable is X%, the size of that variable doubles every 70/x years

Question 9

GDP in Brazil has grown rapidly in recent years. But historically Brazil is a country that has struggled with inflation rates.
Nominal GDP growth rate - 15.73%
GDP deflator growth rate - 8.23%
Population growth rate - 0.9%
Question: What was the rate of economic growth for Brazil in 2010?

Answer 9

6.6%

Question 10

GDP in Brazil has grown rapidly in recent years. But historically Brazil is a country that has struggled with inflation rates.
Nominal GDP growth rate - 15.73%
GDP deflator growth rate - 8.23%
Population growth rate - 0.9%
Question: If Brazil continues to grow at 6.6% per year, how long will it take to double the level of per capita real GDP?

Answer 10

10.6 years

Question 11

What are the three factors of economic growth?

Answer 11

1. Resources
2. Technology
3. Institutions

Question 12

Does having more resources lead to more or less output?

Answer 12

More

Question 13

The period in time in which per capita GDP for the world started to increase faster than it had in the rest of history began during what years?

Answer 13

1800s

Question 14

What year did the U.S break out of poverty?

Answer 14

1900s

Question 15

If the annual growth rate of an economy is 7%, how long will it take for income to double?

Answer 15

10 years

Question 16

What is another name for resources?

Answer 16

Factors of production

Question 17

What are resources?

Answer 17

They are the inputs used to produce goods and services

Question 18

What are the three major categories that resources is divided up into?

Answer 18

1. Natural Resources
2. Human Capital
3. Physical Capital

Question 19

List some examples of natural resources

Answer 19

Coal, physical land, geography

Question 20

List some examples of capital

Answer 20

Computers, bridges and roads, factories

Question 21

What is capital?

Answer 21

The tools and equipment used in the production of goods and services

Question 22

What is human capital?

Answer 22

It is the resource represented by the quantity, knowledge, and skills of the workers in an economy

Question 23

What does economic growth require?

Answer 23

More output per capita

Question 24

What is effective labor?

Answer 24

Labor adjusted for training and education

Question 25

For each policy listed below, which resource is the primary focus? 1. international loans for infrastructure like roads, bridges, and dams 2. mandated primary education 3. restrictions on the development of forested land 4. population controls 5. international aid for construction of a shoe factory

Answer 25

1. Physical Capital 2. Human Capital 3. Natural Resources 4. Physical Capital per capita 5. Physical Capital

Question 26

Early contribution to growth theory focused on the role of what?

Answer 26

The role of physical capital

Question 27

What are the two important dimensions of human capital?

Answer 27

1. The knowledge of the workers | 2. The skills of the workers

Question 28

What is the knowledge available for the use of production?

Answer 28

Technology

Question 29

What does technological advancements introduce?

Answer 29

New techniques or methods firms can use to produce more for less

Question 30

When does economic growth occur?

Answer 30

When resources and technology work together

Question 31

What is an institution?

Answer 31

A significant practice, relationship, or organization in a society

Question 32

List the important institution for economic growth

Answer 32

1. Political stability & rule of law 2. Private property rights 3. Stable money & prices 4. Competitive markets 5. Efficient taxes 6. International trade 7. Flow of funds across borders

Question 33

What does private property rights entail?

Answer 33

The rights of individuals to own property, to use it in production, and to own the resulting output

Question 34

What is the single greatest incentive for voluntary production?

Answer 34

Private property rights

Question 35

What is a disincentive for investment?

Answer 35

Political instability

Question 36

What is crucial for economic growth?

Answer 36

Consistent and trustworthy enforcement of a nation’s laws

Question 37

What does international trade do?

Answer 37

It creates value and allows countries to consume goods they cannot produce on their own

Question 38

What happens if you put restrictions on the flow of capital across borders?

Answer 38

You hurt domestic firms as they are relegated to seeking funds from solely domestic savers