Ch (12)

The fact that in Canada, real GDP per person was $2,633 in 1870 and $46,705 in 2017 implies that every year, the growth rate was 1.98% per year. True or False

False - If real GDP per person, beginning at $2,633, were to increase by 1.98% for each of 147 years, it would end up at $46,705. Of course, real GDP per person did not rise exactly 1.98% every year: Some years it rose by more, other years it rose by less, and in other years it fell. The growth rate of 1.98% per year ignores short-run fluctuations around the long-run trend and represents an average rate of growth for real GDP per person over many years.

In the late 1800's, Japan was the richest country in the world. True or False

False - In 1870, the United Kingdom was the richest country in the world with real GDP per person of $5,332, whereas real GDP per person in Japan was only $1,667.

In Canada, real GDP per person was $2,633 in 1870 and $46,705 in 2017. The growth rate was 1.98% per year. Which of the following is true?

The growth rate of 1.98% 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. - If real GDP per person, beginning at $2,633, were to increase by 1.98% for each of 147 years, it would end up at $46,705. Of course, real GDP per person did not rise exactly 1.98% every year: Some years it rose by more, other years it rose by less, and in other years it fell. The growth rate of 1.98% per year ignores short-run fluctuations around the long-run trend and represents an average rate of growth for real GDP per person over many years.

In Germany, real GDP per person was $2,422 in 1870 and $50,369 in 2017. The growth rate was 2.09% per year. Which of the following is true?

The growth rate of 2.09% 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. - If real GDP per person, beginning at $2,422, were to increase by 2.09% for each of 147 years, it would end up at $50,369. Of course, real GDP per person did not rise exactly 2.09% every year: Some years it rose by more, other years it rose by less, and in other years it fell. The growth rate of 2.09% per year ignores short-run fluctuations around the long-run trend and represents an average rate of growth for real GDP per person over many years.

In Japan, real GDP per person was $1,667 in 1890 and $43,279 in 2017. The growth rate was 2.60% per year. Which of the following is true?

The growth rate of 2.60% per year ignores short-run fluctuations around the long-run trend. - If real GDP per person, beginning at $1,667, were to increase by 2.60% per year for 127 years, it would end up at $43,279. However, real GDP per person did not rise exactly 2.60% every year: Some years it rose by more, other years it rose by less, and in other years it fell. The growth rate of 2.60% per year ignores short-run fluctuations around the long-run trend and represents an average rate of growth for real GDP per person over many years.

Which of the following is an accurate explanation of why the average American today is "richer" than the richest American 100 years ago?

Tremendous technological advances. - Because of tremendous technological advances, many of the goods and services that we now take for granted were not available. As a result, the average American today is arguably "richer" than the richest American a century ago, even if that fact is lost in standard economic statistics.

The fact that in Japan, real GDP per person was $1,667 in 1890 and $43,279 in 2017 does not necessarily imply that the growth rate was 2.60% per year. True or False

True - If real GDP per person, beginning at $1,667, were to increase by 2.60% for each of 127 years, it would end up at $43,279. Of course, real GDP per person did not rise exactly 2.60% every year: Some years it rose by more, other years it rose by less, and in other years it fell. The growth rate of 2.60% per year ignores short-run fluctuations around the long-run trend and represents an average rate of growth for real GDP per person over many years.

Japan is an advanced economy, and over the past century its rate of economic growth has been higher than that of the United States. True or False

True - In the United States, real GDP per person was $4,443 in 1870 and $59,532 in 2017. This equates to a growth rate of 1.78% per year. In Japan, over the same period, the growth rate of real GDP was 2.60% per year.

In 1900, Brazil's real GDP per person was only $69 more than China's. From 1900 to 2017, Brazil experienced 2.50 percent economic growth while China had 2.64 percent. As a result, by the end of 2017, Brazil's real GDP per person was $1,323 less than China's. This shows

small differences in growth rates can result in large dollar differences over time. - A slightly higher growth rate over 117 year period reversed the differences in GDP per person between the two nations, despite Brazil's substantial economic growth. The act of compounding growth can lead to large differences over time, and countries that start lower can catch and even pass other nations over time.

Real GDP per person more accurately measures a nation's standard of living than nominal GDP per person. True or False

true - Real GDP is adjusted for inflation, whereas nominal GDP is not. Thus, nominal GDP will often appear higher than real GDP.

Last year real GDP in an imaginary economy was $10 billion and the population was 2 million. This year, real GDP is $9 billion and the population is the same 2 million. What was the growth rate of real GDP per person during the year?

-10.0%. - Last year, real GDP per capita was $10 billion/2 million = $5,000. This year, it is $9 billion/2 million = $4,500. The rate of growth is calculated as 100 * ((GDP per person in the current year - GDP per person last year)/ GDP per person last year) = 100*(($4,500 - $5,000)/ $5,000) = -10.0%

In 2018, real GDP in an imaginary economy was $1.2 billion and the population was 1 million. In 2019, real GDP fell to $1 billion, whereas the population increased to 1.1 million. What was the growth rate of real GDP per person during the year?

-24.24% - In 2018, real GDP per capita was $1.2 billion/1 million = $1,200. In 2019, it is $1 billion/1.1 million = $909.09. The rate of growth is calculated as 100 * ((GDP per person in 2019 - GDP per person in 2018)/ GDP per person in 2018) = 100*(($909.09- $1,200)/ $1,200) = -24.24%.

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?

1.54% - Last year, real GDP per capita was $125 billion/5 million = $25,000. This year, it is $132 billion/5.2 million = $25,384. The rate of growth is calculated as 100 * ((GDP per person in the current year - GDP per person last year)/ GDP per person last year) = 100*(($25,384 - $25,000)/ $25,000) = 1.54%.

In the United States, real GDP per person was $4,443 in 1870 and $59,532 in 2017. The growth rate was 1.78% per year. Which of the following is true?

1.78% per year is an average rate of growth for real GDP per person over many years. - If real GDP per person, beginning at $4,443, were to increase by 1.78% per year for 147 years, it would end up at $59,532. However, real GDP per person did not rise exactly 1.78% every year. Some years it rose by more, other years it rose by less, and in other years it fell. The growth rate of 1.78% per year ignores short-run fluctuations around the long-run trend and represents an average rate of growth for real GDP per person over many years.

In 2018, real GDP in an imaginary economy was $1 billion and the population was 2 million. In 2019, real GDP is $1.2 billion and the population is the same 2 million. What was the growth rate of real GDP per person during the year?

20%.- In 2018, real GDP per capita was $1 billion/2 million = $500. In 2019, it is $1.2 billion/2 million = $600. The rate of growth is calculated as 100 * ((GDP per person in 2019 - GDP per person in 2018)/ GDP per person in 2018) = 100*(($600 - $500)/ $500) = 20%.

Last year real GDP per person in an imaginary economy was $4,500. This year, it is $4,900. What was the rate of economic growth over the year?

8.9% - The rate of growth is calculated as 100 * ((GDP per person in the current year - GDP per person last year)/ GDP per person last year) = 100*(($4,900 - $4,500)/ $4,500) = 8.9%.

In 2018, real GDP in an imaginary economy was $1 billion and the population was 1 million. In 2019, 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?

9% - In 2018, real GDP per capita was $1 billion/2 million = $1,000. In 2019, it is $1.2 billion/1.1 million = $1,090.9. The rate of growth is calculated as 100 * ((GDP per person in 2019 - GDP per person in 2018)/ GDP per person in 2018) = 100*(($1,090.9 - $1000)/ $1000) = 9%.

Last year real GDP in an imaginary economy was $10 billion and the population was 2 million. This year, real GDP is $12 billion and the population was 2.2 million. What was the growth rate of real GDP per person during the year?

9.09% - Last year, real GDP per capita was $10 billion/2 million = $5,000. This year, it is $12 billion/2.2 million = $5,454.5. The rate of growth is calculated as 100 * ((GDP per person in the current year - GDP per person last year)/ GDP per person last year) = 100*(($5,454.5 - $5,000)/ $5,000) = 9.09%.

Which of the following is measured by the growth rate of real GDP per person?

Changes in the level of well-being in a country. - The data on real GDP per person show that living standards vary widely from country to country.

The fact that in the United States, real GDP per person was $4,443 in 1870 and $59,532 in 2017 implies that every year the United States had the growth rate of 1.78% per year. True or False

False - If real GDP per person, beginning at $4,443, were to increase by 1.78% for each of 147 years, it would end up at $59,532. However, real GDP per person did not rise exactly 1.78% every year: Some years it rose by more, other years it rose by less, and still other years it fell. The growth rate of 1.78% per year ignores short-run fluctuations around the long-run trend and represents an average rate of growth for real GDP per person over many years.

In 1870, the United States was the richest country in the world. True or False

False - In 1870, the United Kingdom was the richest country in the world with real GDP per person of $5,332, whereas real GDP per person in the United States was $4,443.

From 1890 to 2017, countries with lower levels of real GDP per person than the United States all had growth rates that are lower than that of the United States.

False - In some cases, countries that had lower levels of real GDP per person than the United States had growth rates that were higher than that of the United States. In other cases, countries with lower levels of real GDP per person had lower growth rates than that of the United States.

The United Kingdom is an advanced economy, and over the past century its rate of economic growth has been higher than that of the United States. True or False

False - In the United States, real GDP per person was $4,443 in 1870 and $59,532 in 2017. This equates to a growth rate of 1.78% per year. One country that has fallen behind is the United Kingdom. In 1870, it was the richest country in the world, with an average income of about 20% higher than that of the United States. Today, the average income in the United Kingdom is about 25% below that of the United States.

The historic data show that the world's poorest countries are doomed to remain in poverty. True or False

False - The world's richest countries have no guarantee they will stay the richest. Similarly, the world's poorest countries are not doomed forever to remain in poverty. For example, over the past century, Japan has risen relative to others, whereas the United Kingdom, once the richest country in the world, has fallen behind.

In Mexico, real GDP per person was $1,285 in 1900 and $18,258 in 2017. The growth rate was 2.29% per year. Which of the following is true?

In some years the growth rate was higher than 2.29% per year, in other years, it was lower. - If real GDP per person, beginning at $1,285, were to increase by 2.29% per year for 117 years, it would end up at $18,258. However, real GDP per person did not rise exactly 2.29% every year: Some years it rose by more, other years it rose by less, and in other years it fell. The growth rate of 2.29% per year ignores short-run fluctuations around the long-run trend and represents an average rate of growth for real GDP per person over many years.

Over the last century, which of the following countries had the highest growth rate of real GDP per person?

Japan - In 1890-2017, Japan had the growth rate of real GDP of 2.65% per year. However, Japan was not a rich country in the beginning of the period; its standard of living in Japan in 1890 was less than half of that in India today. But because of its spectacular growth, Japan is now an economic superpower, with average income more than twice that of Mexico and Argentina and similar to that of Germany, Canada, and the United Kingdom.

Which of the following countries is a middle-income country, which over the past century had a higher rate of economic growth than the United States?

Mexico - Mexico is a middle-income country. In 1900, its real GDP per person was $1,285. Over the century, it rose to $18,258, with the rate of economic growth of 2.29% per year. In the U.S. during the same period, the rate of growth was 1.78%.

The historic data show that the world's richest countries have no guarantee they will stay the richest. True or False

True - The world's richest countries have no guarantee they will stay the richest. Similarly, the world's poorest countries are not doomed forever to remain in poverty. For example, over the past century, Japan has risen relative to others, whereas the United Kingdom, once the richest country in the world, has fallen behind.

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 _____

growth rates are compounding. - If growth rates were not compounding and we were only applying the percentage change to the initial value each time, it would take 50 years to double. Real GDP per person changes over time, and countries with lower initial values can overtake countries with higher initial values by achieving higher growth rates over time.