Question

1) Real GDP per capita, growing at a constant rate over a 35-year period, doubles in size at

the end of that period. What must the annual growth rate of real GDP per capita be for

this economy?

a) 2%

b) 1%

C)4%

D) 15%

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2) Assume China in 2008 has a per-capita income of$3000 and the U. S. has a per-capita income

of $40,000.Between 2008 and 2028 China grows at 9 percent while the U. S. grows at 2

percent. The per-capita income of China in 2028 will be and that of the U. S. will be

a) 18148; 59672

  

b) 10148; 69672

   

C) 10148; 59672

   

d) 18148; 69672

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3) If output is growing at 5% annually, how many years will it take for output to reach 4

times its original level?

a) 28 years

b) 14 years

C) 10 years

D) 20 years

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4) The required reserve ratio in an economy is 10%. By how much do bank deposits

increase after an increase of 300 in bank reserves? (Assume that this economy uses no

currency.)

a) 3000

b) 300

c) 2700

d) none of the above

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5) In a closed economy government spending was $30 billion, consumption was $70 billion,

taxes were $20 billion, and GDP was $110 billion this year. There were no transfers.

Investment spending was $10 billion. As a result:

a) private savings were equal to $20 billion

b) private savings were equal to $10 billion

c) the government's budget balance was equal to a surplus of $10 billion

d) net savings were equal to $0

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6) If the marginal propensity to consume is 0.9, then the tax multiplier will be:

a) less than 10.

b) impossible to determine

c) greater than 10.

d) zero, because there is no multiplier effect from taxes.

Please kindly provide a detail solution/ explanation for the question. Thank you

Answer 1

Question 1

Let the constant growth rate of real GDP per capita be x%.

the real GDP per capita doubles in 35 years.

According to the Rule of 70,

Number of years real GDP will take to double = 70/Annual growth rate of real GDP per capita

35 = 70/Annual growth rate of real GDP per capita

Annual growth rate of real GDP per capita = 70/35

Annual growth rate of real GDP per capita = 2%

The annual growth rate of real GDP per capita be 2% for this economy.

Hence, the correct answer is the option (a).