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%

-----

**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

----

**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

--------

**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

---

**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

------

**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).**

1) 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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