LearnSmart Module 6

Economic growth is an increase in:

- real gross domestic product per capita - real gross domestic product

Those *opposing* NAFTA argued that opening up Mexico's market to trade

- would hurt growth -would reduce employment because US workers could not compete with lower-wage Mexican workers

Suppose that real GDP per capita in Italy is $32,000. If real GDP per capita is growing at a rate of 2.5% per year, how many years will it take for real GDP per capita to reach $64,000?

72/2.5 = 28.8 years

Starting in the late 1600s, as economies started to grow:

the standards of living of the people within them grew also

Those favoring NAFTA argued that opening up Mexico's market to trade:

-would help the U.S. exporters and would enable U.S. consumers to buy less-expensive Mexican goods - would spur growth

The change (in dollars) in real GDP per capita in Germany from 1700 to 2000 was ____ To the nearest percent, the percent change in real GDP per capita in Germany from 1700 to 2000 was ___%. In the 300 years since 1700, GDP per capita grew slightly more than ___ times higher than where it began

1. 18,982-910 = $18,072 2. (18,982/910)*100 = 3. 18,982/910 = 20.9

Suppose that in year 1, real GDP was $60 billion and in year 2, real GDP rose to $69 billion. The growth rate of real GDP was __%.

15 [Year 2 value - Year 1 value/Year 1 value] * 100

Suppose real GDP per capita equals $25,000 and the growth rate of real GDP per capita is 3 percent per year. It will take ___ years for real GDP per capita to double to $50,000.

24 Rule of 72: Years to double = (72/growth rate)

Suppose that Scotland can only produce kilts and bagpipes with its resources, and that its PPF is shown on the graph as PPF1.Using the graph, for each of the following situations, determine whether the PPF curve shifts. a. Scotland's economy moves out of a recession and its unemployment rate falls to the natural rate of unemployment. Scotland's PPF curve would b. Scotland invents a new sewing machine, which increases the production of kilts. Scotland's PPF curve would c. Scotland experiences an increase in investment, which increases the level of capital for both kilts and bagpipes. Scotland's PPF curve would

A. remain the same at PPF1 B. increase and move to PPF2 C. increase and move to PPF3

The changes and improvements in people's lives that began by 1770 are detailed in a book called An Inquiry into the Nature and Causes of the Wealth of Nations by ___

Adam Smith

Which of the following statements about economic growth is accurate?

The world's sustained economic growth has only been occurring over the last 300 to 400 years.

Growth was higher in the decade following NAFTA than in the decade preceding it.

True

The growth rate of real GDP is calculated as

[(New GDP - Old GDP)/Old GDP] * 100

Suppose that Italy can produce either goods or services with its resources, and that its PPF curve is shown on the graph as PPF1. a. Suppose that Italy increases its spending on education, which increases the amount of human capital in Italy. Italy's PPF curve would _____ b. A recession causes Italy's unemployment rate to increase above the natural rate of unemployment. Italy's PPF curve would _____. c. Italy experiences an influx of immigrants from surrounding countries, which causes the population of Italy to increase. Italy's PPF curve would ____

a. b. c.

The table below shows real GDP, population, and real GDP per capita for the hypothetical economy of Highlands. a. Using the information in the table, calculate the growth rates in real GDP, population, and the standard of living (real GDP per capita) between year 1 and year 2. Real GDP: Population: Standard of living: b. Now, using the information in the table, calculate the growth rates in real GDP, population, and the standard of living between year 2 and year 3. c. The standard of living in the economy of Highlands between year 1 and year 2 grew ____ the same as slower than faster than the standard of living between year 2 and year 3.

a. Real GDP: 13.6% Population: 1.8% Standard of living: 11.5% b. Real GDP: 13.8% Population: 3.1% Standard of living: 10.3% c. faster

Historically, the average income in the United States is

about 4 times greater than the world average

The opportunity cost of having more capital and being more productive in the future is reduced ___ today

consumption

The time it takes for something to __ is approximately equal to 72 divided by the growth rate

double

Given a constant rate of growth, the rule of 72 is a quick and easy way to estimate how long it will take for a number to:

double in size

An increase in real GDP or real GDP per capita is called

economic growth

When we measure the _____ _____ of a country, we are interested in knowing how fast the country is growing.

economic growth

Some economies started to grow faster than ever before starting in the:

late 1600s

Real GDP per capita in China is:

lower than in the United States, but China's growth rate is making it possible for the Chinese to catch up to the United States.

The more capital a country has, the (more/less) productive it will be

more

Once workers in the economy have plenty of capital, adding more capital will:

not be helpful and will not contribute to economic growth

The points on the ___ possibilities frontier show how we are allocating our resources to the production of two different goods or services.

production

Knowing how ___ an economy is growing can give us an idea of how big it will be in the future.

quickly

The points on the production possibilities frontier show how we are allocating our ___ to the production of two different goods or services

resources

One reason economic growth occurs is that an economy obtains more resources. Capital goods being produced in Year 1 turn into capital that can be used to produce output in Year 2. This change will result in a

shift of PPF1 to PPF2