Chapter 22

Question 1

Economic growth

Answer 1

Sustained expansion of production possibilities measured as the increase in real GDP over a given period of time

Question 2

Real GDP per capita

Answer 2

Amount of real GDP per person

Question 3

Real GDP per capita equation

Answer 3

Real GDP divided by population

Question 4

For real GDP per capita to grow over time what must happen

Answer 4

Real GDP must grow faster than the population (use growth rate)

Question 5

Rule of 70

Answer 5

Tells us number of years to double variable which is 70 divided by growth rate

Question 6

What is normal state of production in economy called

Answer 6

Potential GDP

Question 7

To find natural state of production what do we need to know

Answer 7

How many people are employed when economy is at full employment (labour market)

And how much stuff can be produced with that many workers (full employment)

Question 8

What is diminishing marginal product of labour

Answer 8

As I use more labour I get less additional production