Chapter 16 REVIEW

1. Use the diagram listed below toanswer the questions.

You are watching: Given the annual rate of economic growth, the "rule of 70" allows one to

*

a. Define ECONOMIC GROWTH:

b. What causes economic growth?

c.Is this type of economic growth boost in POTENTIAL GDP or achieve thepotential?

2. Usage the diagram below toanswer the questions.

a. If theeconomy�s manufacturing possibilities curve is displayed by curve AE, then drawin a brand-new curve which indicates positive financial growth.

b.Is this kind of economic growth rise in POTENTIAL GDP or achieve thepotential?

3. Use the diagram listed below to answer the questions.

*

a.What would reason the as curve to shift to the right?

b.Is this form of economic growth rise in POTENTIAL GDP or afford thepotential?

4. What are the 2 (three) interpretations ofeconomic expansion used in class?� Statewhich an interpretation is rise in POTENTIAL GDP and which is achieve thepotential?

5. Use the diagram below toanswer the questions.

a.If the economy portrayed by production possibilities curve AE isproducing at point 4, what economic difficulty does this represent for thiseconomy?

b.Assume the the economy moves from point 4 to a allude on the curve.� draw an arrowhead to present the change.

c.Is this form of financial growth an increase in POTENTIAL GDP or achieve thepotential?

6. Usage the diagram below toanswer the questions.

*

a.What would cause the advertisement curve to shift to the right?

b.Is this kind of economic growth rise in POTENTIAL GDP or achieve the potential?

7. Expect aneconomy�s real GDP is $125 exchange rate in year one and also $130 billion in year two.� What is the growth rate of its GDP?

Chapter 16 (questions with answers)

1. State two (three) interpretations of financial growth.

2. Suppose an economy"s actual GDP is $50,000 in year 1 and$55,000 in year 2.

a. What is the development rate the itsGDP?

b. Assumethat population was 100 in year 1 and 105 in year 2. What is the growth rate inGDP per capita?

3. Describe why even tiny changes in the price of economicgrowth space significant. Use the "rule the 70" to demonstrate thepoint.

4. Which is an ext important �increasing input of sources or enhancing the performance of those inputs �as the main source of economic growth in the united States? Explain.

5. Summarize the historical growth record that the United says over the previous 50 years in terms ofreal GDP growth and also in state of real GDP per capita growth.

ANSWERS:

State 2 (three) definitions of financial growth.

Economic expansion can first bedefined and measured as rise in genuine GDP emerging over a duration oftime. This might be caused by one (1) rise in the potential GDP or (2) simply achieving the potential GDP .

(3) financial growth can also bedefined and measured as an increase in actual GDP per capita occurring over a period of time. Economic growth isusually calculated as an yearly percentage rate of growth.

2. Intend an economy"s actual GDP is $50,000 in year 1 and $55,000in year 2.

a.$5,000/$50,000 or 10% in year 1.

b.The every capita expansion can be calculated together follows:

$500 per capita in year 1($50,000/100);

$523.81 percapita in year 2 ($55,000/105).

3. Explain why even tiny changesin the price of financial growth room significant. Usage the "rule of 70"to show the point.

Small alters in the price of growthcan be very meaningful, especially for a nation where a portion of a percentchange in the growth rate may mean the difference between starvation and hunger.Over a duration of time tiny changes space cumulative in the same way thatcompound interest payments are cumulative top top a financial institution account. Making use of the dominance of70 to estimate the moment it take away to double GDP, we can see the a country whosegrowth rate is 5% take away 14 year to double its GDP, but a nation whose growthrate is 3% may take nearly 10 years much longer to twin its GDP or about 23.3years. If this countries continued to prosper at their particular 5% and also 3%rates, in 28 years the an initial country"s GDP would be quadrupled, conversely, in thesecond country, it would certainly take almost 47 year to quadruple the GDP from gift year.

4. I m sorry is much more important �increasing input of resources or boosting the efficiency of those entry �as the main resource of financial growth in the united States? Explain.

See more: R/Watchitfortheplot ( Reddit Watch It For The Plot (Reddit Gallery)

Both resource quantity and also resourceproductivity contribute substantially to increased financial growth in the unified States. Around a 3rd of the increase ineconomic growth originates from increases in source input and around two-thirdsfrom increases in source productivity. Clearly, that is no the amount ofresources that is many important however the high quality of resources and also how castle areused because that production.

5. Summarize the historical growth record the the United claims over the past 50 year in terms ofreal GDP growth and also in terms of genuine GDP every capita growth.

The real GDP has actually increased about3.5% every year between 1950 and 2000. Actual GDP per capita rose much more slowlybecause population has grown along with GDP. Still the GDP per capita growthhas expanded at about 2.3% every year since 1950.