Chapter 13

If the real gross domestic product of the nation of Happyville is $40 billion in 2011 and the population of Happyville is 6 million, the Happyville's real GDP per capita is $_____.

6,667

Growth in Per Capita GDP. The growth rate of real GDP per capita equals the growth rate of real GDP minus the growth rate of the population. If the growth rate of the population is 2 percent per year, how fast must real GDP grow for real GDP per capita to double in 14 years? _____ percent.

7

Growth in Per Capita GDP. The growth rate of real GDP per capita equals the growth rate of real GDP minus the growth rate of the population. If the growth rate of the population is 2 percent per year, how fast must real GDP grow for real GDP per capita to double in 14 years? _____

7 percent

Growth in Per Capita GDP. The growth rate of real GDP per capita equals the growth rate of real GDP minus the growth rate of the population. If the growth rate of the population is 2 percent per year, how fast must real GDP grow for real GDP per capita to double in 10 years? _____ percent.

9

A worldwide patent and copyright system would _____ the incentive to be innovative.

increase

If everything else is held equal, an increase in the size of the population will _____ total output and _____ per capita output.

increase/ decrease

Government Spending, Taxes, and Investment. Suppose a government places a 10 percent tax on incomes and spends 50 percent of the money from taxes on investment and the rest on public consumption goods, such as military parades. Individuals save 30 percent of their income and consume the rest. In this case, total investment (public and private) _____.

increases

The economy grows 3.06 percent per year over a 20 year period. 0.67 percent per year is attributed to labor and 1.38 percent per year is attributed to capital. Therefore, _____ percent per year must be due to technological progress.

1.01

The economy grows 3.12 percent per year over a 20 year period. 0.62 percent per year is attributed to labor and 1.07 percent per year is attributed to capital. Therefore, _____ percent per year must be due to technological progress.

1.43

The economy grows 3.79 percent per year over a 20 year period. 0.78 percent per year is attributed to labor and 1.02 percent per year is attributed to capital. Therefore, _____ percent per year must be due to technological progress.

1.99

At a 7 percent annual growth rate in GDP per capita, it will take _____ years for GDP per capita to double.

10

If the real gross domestic product of the nation of Happyville is $50 billion in 2011 and the population of Happyville is 3 million, the Happyville's real GDP per capita is $_____.

16,666

Growth in Per Capita GDP. The growth rate of real GDP per capita equals the growth rate of real GDP minus the growth rate of the population. If the growth rate of the population is 1 percent per year, how fast must real GDP grow for real GDP per capita to double in 14 years? _____ percent.

6

Future Generations. Some economists say that economic growth involves a trade- off between current generations and future generations. If a current generation raises its saving rate, what does it sacrifice? What will be gained for future generations?

Current consumption. Both a and b.

Clear property rights deduce growth in an economy because producers are not able to freely use innovations.

False

There is clear evidence that poorer countries in the world are converging in per capita incomes to richer countries.

False

Trade Deficits: Capital deepening or consumption? Suppose a country that had balanced trade began to run a trade deficit. At the same time, consumption as a share of GDP increased but the investment share did not. Do you think there was an increase in capital deepening?

No, because , not investment, was fueled the trade deficit.

Will the Poorer Country Catch Up? Suppose one country has a GDP that is one- eighth the GDP of its richer neighbor. But the poorer country grows at 10 percent per year, while the richer country grows at 2 percent per year. In 35 years, the _____ country will have a higher GDP.

Poorer

Once we account for changes in the labor force, _____ is the next biggest source of growth of GDP in the United States.

Technological process

Free trade leads to more research and development because it promotes larger markets.

True

Governments can play a key role in designing institutions that promote economic growth, including providing secure property rights.

True

If a country runs a trade deficit to finance increased current consumption, it will have to reduce consumption in the future to pay back its borrowings.

True

A policy of not enforcing patents or copyrights would _____ the incentive to be innovative.

decrease

If everything else is held equal, a decrease in the size of the population will _____ total output and _____ per capita output.

decrease/ increase

Higher saving leads to _____ gross investment and will tend to _____ the stock of capital available for production and result in _____ depreciation because there is _____ capital to deprecate.

higher/ increase/ more/ more

Will the Poorer Country Catch Up? Suppose one country has a GDP that is one- eighth the GDP of its richer neighbor. But the poorer country grows at 14 percent per year, while the richer country grows at 7 percent per year. In 40 years, the _____ country will have a higher GDP.

poorer