ECON CH.7
If per capita GDP is $1,000 and grows at 5% annual interest, approximately how long will it take before it is $4,000? 70 years 28 years 42 years 14 years
28 years **70 ÷ 5 = 14 years to double one time, so doubling twice will take 14 × 2 = 28 years
If China has a 10% annual growth rate in real GDP and Germany has a 2% annual growth rate, China's GDP will double how many years sooner than Germany's? 28 years sooner 4 years sooner 35 years sooner 7 years sooner
28 years sooner **Given the rule of 70, China's GDP will double in seven years, compared to Germany's, which will double in 35 years.
If per capita GDP is $1,000 and government officials want to increase it to $8,000 within 21 years, at what approximate rate does it have to grow? 26.7% 10% 13.3% 3%
10% **Getting from $1,000 to $8,000 requires doubling three times. To do this in 21 years, it must double every 7 years. 70 ÷ x = 7 gives x = 10%.
According to the rule of 70, if GDP per capita grows at an annual rate of _____, then it will double in approximately 7 years. 9% 10% 11% 14%
10% 70 ÷ 10 = 7.
According to the rule of 70, if GDP per capita grows at an annual rate of 5%, then it will double in approximately _____ years. 13 65 6 14
14 70/5=14
According to the rule of 70, if GDP per capita grows at an annual rate of 4%, then it will double in approximately _____ years. 66 7.5 14 17.5
17.5 70 ÷ 4 = 17.5.
According to the rule of 70, if GDP per capita grows at an annual rate of _____, then it will double in approximately 17.5 years. 1.7% 4% 2.5% 3%
4% 70 ÷ 4 = 17.5.
As of the year 2014, about _____ of the world's population lived in a country with a real GDP per capita that was less than $1,500. 75% 48% 5% 2%
5% **This is about 365 million people.
According to the rule of 70, if GDP per capita grows at an annual rate of _____, then it will double in approximately 14 years. 2.5% 5% 6% 20%
5% 70 ÷ 5 = 14.
According to the rule of 70, if GDP per capita grows at an annual rate of 10%, then it will double in approximately _____ years. 10 6 3 7
7 70 ÷ 10 = 7.
If per capita GDP is $1,000 and government officials want to increase it to $4,000 within 20 years, at what approximate rate does it have to grow? 15% 14% 7% 5%
7% **Getting from $1,000 to $4,000 requires doubling twice. To do this in 20 years, it must double every 10 years. 70 ÷ x = 10 makes x = 7%.
If per capita GDP is $1,000 and grows at 2% annual interest, approximately how long will it take before it is $4,000? 30 years 35 years 60 years 70 years
70 years **70 ÷ 2 = 35 years to double one time, so doubling twice will take 35 × 2 = 70 years.
Which of the following statements demonstrates the importance of honest government as an institution to promote economic growth? In many nations, civil war, military dictatorship, and anarchy have destroyed the institutions necessary for economic growth. If India used the human and physical capital that it has as efficiently as the United States uses its capital, it would be four times richer than it is today. Corruption is like a heavy tax that bleeds resources away from productive entrepreneurs. In India, developers cannot get good titles to land so that they can build things like supermarkets, because it is not clear who owns what.
Corruption is like a heavy tax that bleeds resources away from productive entrepreneurs. **Corrupt countries have low per capita GDP.
Imagine that a country begins an aggressive program to build many free state colleges. How would this affect economic growth in the long run? Growth would decrease, as the stock of tools, including machines, structures, and equipment, would decrease in quality. There would be no impact on economic growth. Growth would increase, as the property, plant, and equipment used in the productive process would improve. Growth would increase, as the productive knowledge and skills that workers acquire through education, training, and experience would lead to greater productivity.
Growth would increase, as the productive knowledge and skills that workers acquire through education, training, and experience would lead to greater productivity. **Human capital is the productive knowledge and skills that workers acquire through education, training, and experience; as its quantity increases, productivity and economic growth increase as well.
Imagine that a country loses its best-educated and most-skilled workers, who depart the country to pursue better opportunities elsewhere. How would this affect economic growth? Technological knowledge has increased, which will cause economic growth to increase. Human capital has declined, which will cause economic growth to increase. Human capital has declined, which will cause economic growth to decrease. Physical capital has declined, which will cause economic growth to decrease.
Human capital has declined, which will cause economic growth to decrease. **Human capital is the productive knowledge and skills that workers acquire through education, training, and experience. If this resource is depleted in a country, growth rates would surely decrease.
Which of the following statements is (are) TRUE? I. In year 1, everyone was poor. II. When economists refer to personal growth, they mean the growth rate of real per capita GDP. III. Economic growth refers to the growth rate of nominal per capita GDP. I only I and III only II only II and III only
I only **Refer to Figure 7.3 (27.3) for more information.
Which of the following statements is (are) TRUE? I. In the year 1950, everyone was poor. II. When economists refer to economic growth, they mean the growth rate of real per capita GDP. III. Economic growth refers to the growth rate of nominal per capita GDP I only II only II and III only I and III only
II only **Economic growth refers to the growth rate of real per capita GDP
Which of the following statements is (are) TRUE? I. Under communal property, effort is divorced from payment, so there is a lot of incentive to work. This demonstrates the insignificance of property rights as an institution. II. Corruption is like a heavy tax that takes away resources from productive entrepreneurs. This demonstrates the importance of honest government as an institution. III. In many nations, civil war, military dictatorship, and anarchy have enhanced the institutions necessary for economic growth. This demonstrates the insignificance of political stability as an institution. I only II and III only II only I and II only
II only **Honest government is important.
Which of the following statements demonstrates the importance of competitive and open markets as an institution to promote economic growth? In many nations, civil war, military dictatorship, and anarchy have destroyed the institutions necessary for economic growth. Corruption is like a heavy tax that bleeds resources away from productive entrepreneurs. Under communal property, effort is divorced from payment, so there is little incentive to work. If India used the human and physical capital that it has as efficiently as the United States uses its capital, it would be four times richer than it is today.
If India used the human and physical capital that it has as efficiently as the United States uses its capital, it would be four times richer than it is today. **The factors of production must be not only produced, but also organized.
Which of the following statements demonstrates the importance of a dependable legal system as an institution to promote economic growth? Corruption is like a heavy tax that bleeds resources away from productive entrepreneurs. Under communal property, effort is divorced from payment, so there is little incentive to work. If India used the human and physical capital that it has as efficiently as the United States uses its capital, it would be four times richer than it is today. In India, developers cannot get good titles to land so that they can build things like supermarkets, because it is not clear who owns what.
In India, developers cannot get good titles to land so that they can build things like supermarkets, because it is not clear who owns what. **The legal system in many countries is of such low quality that no one knows for certain who owns what.
Which of the following statements demonstrates the importance of political stability as an institution to promote economic growth? Under communal property, effort is divorced from payment, so there is little incentive to work. In many nations, civil war, military dictatorship, and anarchy have destroyed the institutions necessary for economic growth. In India, developers cannot get good titles to land so that they can build things like supermarkets, because it is not clear who owns what. If India used the human and physical capital that it has as efficiently as the United States uses its capital, it would be four times richer than it is today.
In many nations, civil war, military dictatorship, and anarchy have destroyed the institutions necessary for economic growth. **Who wants to invest in the future when civil war threatens to wash away all the plans?
Imagine that a nation has imported a large quantity of combines and tractors to use in its farming industry. What impact would this have on economic growth? There would be an increase in economic growth as the physical capital has increased, which would lead to greater productivity. There would be an increase in economic growth as the human capital has increased, which would lead to greater productivity. There would be a decrease in economic growth as the human capital has decreased, which would lead to greater productivity. There would be a decrease in economic growth as the physical capital has increased, which would lead to greater productivity.
There would be an increase in economic growth as the physical capital has increased, which would lead to greater productivity. **An increase in physical capital would lead to an increase in economic growth, through productivity gains.
Which of the following statements demonstrates the importance of property rights as an institution to promote economic growth? In India, developers cannot get good titles to land so that they can build simple things like supermarkets, because it is not clear who owns what. Corruption is like a heavy tax that bleeds resources away from productive entrepreneurs. Under communal property, effort is divorced from payment, so there is little incentive to work. In many nations, civil war, military dictatorship, and anarchy have destroyed the institutions necessary for economic growth.
Under communal property, effort is divorced from payment, so there is little incentive to work. **Investors and workers throughout the economy need to know that they will reap what they sow.
If the growth rate of real GDP in the United States is 3%, how many years will it take to double? approximately 23 years approximately 12 years approximately 33 years approximately 210 years
approximately 23 years **The rule of 70 states that if the annual growth rate of a variable is x%, then the doubling time is (70 ÷ x) years, so (70 ÷ 3) equals 23.33 years.
Many goods in India have been produced inefficiently because prohibitions against large-scale manufacturing prevented Indian manufacturers from taking advantage of: low wages. economies of scale. human capital. technological knowledge.
economies of scale. **Economies of scale are the advantages of large-scale production that reduce average cost as quantity increases.
The advantages of large-scale production that reduce average cost as quantity increases are defined as: economies of scale. economic growth. institutional growth. productivity.
economies of scale. **Shirts in India are produced inefficiently because until recently large-scale production was illegal.
Technological knowledge is defined as: knowledge about how the world works that is used to produce goods and services. the productive knowledge and skills that workers acquire through education, training, and experience. the stock of tools, including machines, structures, and equipment. the intellectual capital gained through years of education and on-the-job training.
knowledge about how the world works that is used to produce goods and services. **This factor includes, for instance, the genetics, chemistry, and physics that form the basis of the techniques used in U.S. agriculture
In many nations, civil war, military dictatorship, and anarchy have destroyed the institutions necessary for economic growth. This demonstrates the importance of _____ as an institution. property rights competitive and open markets a dependable legal system political stability
political stability **Who wants to invest in the future when civil war threatens to wash away all the plans?