# Chapter 8 – Economic Growth

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If the number of worker-hours in an economy is 100 and its labor productivity is \$5 of output per worker-hour, the economy's real GDP: cannot be calculated.
\$500
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Countries that have experienced modern economic growth have also tended to:
moved toward more democratic forms of government
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The percentage of the working-age population in the labor force (= employed + officially unemployed) is called the:
labor force participation rate.
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How do you calculate % growth in Real GDP from year to year?
- Subtract year 2 from year 1 - Divide the outcome from the function above by year 1 (ex: yr 1 Real GDP 2000 year 2 Real GDP 2100 2100-2000= 100 / 2000 = 0.05 or 5% rate change)
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The annual growth of U.S. labor productivity:
was greater between 1995 and 2012 than between 1973 and 1995.
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How does Free trade affect the economy?
- encourages growth by promoting the rapid spread of new inventions and innovations - allowing countries to specialize so that different types of output can be produced
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encourages growth by promoting the rapid spread of new inventions and innovations.
calculate the number of years required for real GDP to double.
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Other things equal, which of the following would increase the rate of economic growth, as measured by changes in real GDP?
An increase in the size of the working age population. wrong (A decrease in the labor force participation rate.)
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Suppose that an economy's labor productivity and total worker-hours each grew by 4 percent between year 1 and year 2. We could conclude that this economy's:
production possibilities curve shifted outward.
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Skeptics of the 1995-2012 rise in the average rate of productivity growth say that:
it is too soon to judge whether the high productivity advances between 1995 and 2012 are long lasting or transitory.
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All of the following are economic implications of the 1995-2012 rise in the average rate of productivity growth except:
an end to the business cycle.
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If the economy's real GDP doubles in 18 years, we can:
conclude that its average annual rate of growth is about 3.9 percent. (Approximate # of years req. to double Real GDP = 70 / annual percentage rate of growth) 18 = 70/x (x)18 = 70 x = 70/18 x = 3.9
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If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, it real GDP per capita will:
Remains constant. - Real GDP - Population - Real GDP/capita year 1 - 100 / 200 = 0.5 or \$5 billion Year 2 - 106 / 212 = 0.5 or \$5 billion
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The period in the U.S. economy from 1995 to 2012 is characterized by:
a higher trend rate of productivity growth.
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If the secular trend of labor productivity rises from 2 percent per year to 4 percent, the number of years that it will take for the standard of living to double will decline by about:
17.5
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(Last Word) It is expected that by 2050, most nations will have decreasing populations. With the likely decline in the labor force and number of hours of work in the economy, what must occur for real GDP to continue to rise?
Labor productivity must grow faster than the drop in work hours.
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The achievement of full employment through time will:
increase the realized rate of economic growth.
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In 1998, living standards in the United States were nearly ______ times higher than those in Africa.
20
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Real GDP per capita:
can grow either more slowly or more rapidly than real GDP.
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Real GDP per capita in the United States (as of 2010) exceeds that of France primarily because:
the United States has a higher percentage of the working-age population in the labor force and because U.S. employees average about 14 percent more hours worked per year.
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Sources of increasing returns and economies of scale
- Simultaneous consumption - Network effect - Learning by doing - More specialized inputs - Spreading of development cost
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(Consider This) The Consider This box on patents and innovation demonstrates that:
patent protection for U.S. companies may not be as effective when other countries do not respect or enforce U.S. patent laws.
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Labor productivity is measured by:
real output per worker hour.
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The percentage of U.S. adults with a high school education or has:
risen from 41 percent in 1960 to 88 percent in 2012 (see figure 8.4)
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Other things equal, which of the following would increase labor productivity the most?
The increase in the stock of real capital exceeds the increase in inputs of labor.
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Labor productivity is defined as:
total output/worker-hours.
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Which of the following statements is correct?
The amount of real capital used per worker has increased historically in the United States.
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If the growth trend of labor productivity is 3 percent per year, the number of years that it will take for the standard of living to double will be about:
23 years. (rule of 70)
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Real GDP per capita is found by:
dividing real GDP by population.
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Economies of scale refer to:
the fact that large producers may be able to use more efficient technologies than smaller producers.
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Which of the following is a true statement?
Economists who support economic growth say that it is the most practical route to the higher standards of living that the vast majority of people desire.
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Empirical studies suggest that:
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Which of the following is correct?