Econ Ch7 Review Quiz Answers

1. Last year, real GDP in an imaginary economy was $125 billion and the population was 5 million. This year, real GDP is $132 billion and the population was 5.2 million. What was the growth rate of real GDP per person during the year?

A. 2.0%

B. 0.15%

C. 1.54%

D. 1.0%

2. In 2013, real GDP in an imaginary economy was $1 billion and the population was 1 million. In 2014, real GDP was $1.2 billion and the population increased to 1.1 million. What was the growth rate of real GDP per person during the year?

A. -9%

B .10%

C. -10%

D. 9%

3. Given that it takes only 35 years for an initial value to double if there is a 2 percent growth rate, we can conclude that _____

A. growth rates are not compounding.

B. growth rates are compounding.

C. Real GDP per person does not change over time.

D. a country with a lower initial real GDP per person can never pass a country with a higher initial real GDP per person.

4. In the United States, real GDP per person was $4,044 in 1870 and $47,210 in 2010. The growth rate was 1.77% per year. Which of the following is true?

[pic 1]A. 1.77% per year is an average rate of growth for real GDP per person, actual growth each year was much lower.

[pic 2]B. 77% per year is an average rate of growth for real GDP per person, actual growth each year was much higher.

[pic 3]C. Each year, for 140 years, real GDP per person increased by 1.77%.

[pic 4]D. 1.77% per year is an average rate of growth for real GDP per person over many years.

5. In Japan, real GDP per person was $1,517 in 1890 and $34,810 in 2010. The growth rate was 2.65% per year. Which of the following is true?

A. 2.65% per year is an average rate of growth for real GDP per person, actual growth each year was much higher.

B. Each year, for 120 years, real GDP per person increased by 2.65%.

C. The growth rate of 2.65% per year ignores short-run fluctuations around the long-run trend.

D. 2.65% per year is an average rate of growth for real GDP per person, actual growth each year was much lower.

6. In Germany, real GDP per person was $2,204 in 1870 and $38,410 in 2010. The growth rate was 2.06% per year. Which of the following is true?

A. 2.06% per year is an average rate of growth for real GDP per person, actual growth in each year was much lower.

B. The growth rate of 2.06% per year accounts for short-run fluctuations around the long-run trend.

C. The growth rate of 2.06% per year ignores short-run fluctuations around the long-run trend and represents an average rate of growth for real GDP per person over the period.

D.  Each year, for 140 years, real GDP per person increased by 2.06%.

7. In Mexico, real GDP per person was $1,169 in 1900 and $14,350 in 2010. The growth rate was 2.31% per year. Which of the following is true?

A. Each year, for 110 years, real GDP per person increased by 2.31%.

B. 2.31% per year is an average rate of growth for real GDP per person, actual growth in each year was much lower.

C. 2.31% per year is an average rate of growth for real GDP per person, actual growth in each year was much higher.

D. In some years the growth rate was higher than 2.31% per year, in other years, it was lower.

8. The fact that in Canada, real GDP per person was $2,397 in 1870 and $38,370 in 2010 implies that every year, the growth rate was 2.00% per year.

A. True 

B. False 

9. The fact that in Japan, real GDP per person was $1,517 in 1890 and $34,810 in 2010 does not necessarily imply that the growth rate was 2.65% per year.

A. True 

B. False 

10. Consider the case of Crusoe's economy. Suppose Robinson Crusoe spends two hours to find ten turtle eggs, whereas his friend Friday finds 10 turtle eggs in one hour. Which of the following is true about productivity in this economy?

A.Robinson and Friday are equally unproductive.

B. Robinson is more productive than Friday.

C. Friday is more productive than Robinson.

D. Robinson and Friday are equally productive.

11. Countries that have had higher output growth per person have typically done so without higher productivity growth.

A. True 

B. False 

12. Suppose that the U.S. undertakes a policy to increase its saving rate. This policy will cause a decrease in the growth of real GDP per person for several decades.

A. True 

B. False 

13. In 1890, Brazil’s real GDP per person was only $62 more than China’s. From 1890 to 2010, Brazil experienced 2.65 percent economic growth while China had 2.15 percent. At the end of 2010, Brazil’s real GDP per person was $3,460 more than China’s. This shows _____