Question

Long-run economic growth requires all of the following except

Select one:
a. government provision of secure property rights.
b. increases in capital per hour worked.
c. technological change.
d. political instability.

Potential GDP refers to

Select one:
a. the level of GDP attained by the country with the highest growth in real GDP in a given year.
b. the level of GDP attained when all firms are producing at capacity.
c. the extent to which real GDP is above or below nominal GDP.
d. the difference between the highest level of real GDP per quarter and the lowest level of real GDP per quarter within any given year.

According to the "Rule of 70," it will take 4 years for real GDP per capita to double when the growth rate of real GDP per capita is

Select one:
a. 28 percent.
b. 17.5 percent.
c. 12.25 percent.
d. 4 percent.

The best measure of the standard of living is

Select one:
a. real GDP.
b. nominal GDP.
c. real GDP per capita.
d. nominal GDP per capita.

Suppose that real GDP for 2015 was $10,000 billion and real GDP for 2016 was $9,500 billion. What is the rate of growth of real GDP between 2015 and 2016?

Select one:
a. -1%
b. -2%
c. -10%
d. -5%

Answer 1

Q1. d. political instability.

Political instability will not help economy grow in the long run.

Q2. b. the level of GDP attained when all firms are producing at capacity.

Potential GDP is the GDP produced in the economy when all the resources are fully and efficiently employed.

Q3. b. 17.5 percent.

​​​​​​Rule of 70:

t ~ 70/i

Where t = no of years to double GDP

i is the interest rate.

----> 4 = 70/i

------> i = 17.5

So, interest rate is 17.5 percentage.

Q4. c. real GDP per capita.

​​​​​​Real GDP is the best measure of measuring standard of living out of the given four alternatives.

Q5. d. -5%.

Real GDP in 2015 = $10,000 b

Real GDP in 2016 = $9,500 b

Growth rate =

[(9500b-10,000b)/10,000b]*100 = -5%.

So, the growth rate of real GDP is -5%.