Deck 8: A: Economic Growth

Question 1

Use the diagram below to answer the questions.(a) If the economy's production possibilities curve is shown by curve AB, then draw in a new curve, which indicates positive economic growth.(b) If the economy illustrated by production possibilities curve AB is producing at point 4, what economic problem does this represent for this economy?
(c) What are some of the factors, which could cause a shift from AB to EF?

Answer 1

(a) Any production possibilities curve outside AB indicates growth (such as curve CD).
(b) Production at point 4 indicates that the economy is not operating at its full potential.Increases in aggregate demand or reallocation of resources may be necessary to address this unemployment problem.
(c) A shifting from AB to EF indicates economic growth.This can occur as a result of supply factors that include increased quantity and quality of natural and human resources, increase in the stock of capital, and improved technology; growth in aggregate demand which motivates increases in production; and more efficient allocation of resources.

Question 2

Canada's economy has realized significant economic growth in the last 50 or so years.Still, there are some items missing in our growth calculations that might impact our standard of living.List three of them and describe how their inclusion might modify our interpretation of economic growth statistics.

Answer 2

Economic growth is based upon the growth rate in real GDP or real GDP per capita.Our GDP calculations miss some important items that can change when GDP grows.For instance, improved product quality and services, and increases in available leisure time are associated with GDP growth and certainly improve our standard of living.However, these improvements are not included in economic growth statistics meaning that these growth statistics understate the gain in economic well-being.
On the other hand, economic growth may have negative effects upon our environment and can lead to a decline in quality of life.In this case, economic growth statistics overstate the gain in economic well-being.

Question 3

Identify the two major ways economic growth is measured.

Answer 3

Economic growth can first be defined and measured as an increase in real GDP occurring over a period of time.Economic growth can also be defined and measured as an increase in real GDP per capita occurring over a period of time.Economic growth is usually calculated as an annual percentage rate of growth.

Question 4

Summarize the four supply factors in economic growth.

Question 5

Suppose an economy's real GDP is $700 billion in year 1 and $718 billion in year 2.What is the growth rate of its GDP?

Question 6

List some of the institutional structures that economic historians believe promote and sustain modern economic growth.

Question 7

Explain why even small changes in the rate of economic growth are significant.Use the "rule of 70" to demonstrate the point.

Question 8

Explain the demand factor in economic growth.

Question 9

Suppose an economy's real GDP is $125 billion in year 1 and $130 billion in year 2.What is the growth rate of its GDP?

Question 10

Suppose an economy's real GDP is $100,000 in year 1 and $110,000 in year 2.What is the growth rate of its GDP? Assume that population was 200 in year 1 and 205 in year 2.What is the growth rate in GDP per capita?

Question 11

What is the relevance of productive and allocative efficiency to the growth process?

Question 12

Suppose an economy's real GDP is $50,000 in year 1 and $55,000 in year 2.What is the growth rate of its GDP? Assume that population was 100 in year 1 and 105 in year 2.What is the growth rate in real GDP per capita?

Question 13

What are some of the positive changes associated with modern economic growth?

Question 14

What is the efficiency factor?

Question 15

Why is economic growth desirable?

Question 16

How might poorer nations catch up to richer countries in terms of GDP per capita?

Question 17

Is growth felt evenly across society and around the world?

Question 18

Summarize the historical growth record of Canada between 1961 and 2011 in terms of real GDP growth and in terms of real GDP per capita growth.

Question 19

Define modern economic growth.When did it seem to start?

Question 20

How much faster will a nation's Real GDP double if its annual rate of growth is 3 percent rather than 1.5 percent per year?

Question 21

Economy growth matters? Either support or critic the statement and support your answer.Use a numeric example as part of your support or critic.

Question 22

Define worker-hours and labour productivity.What factors are behind labour productivity?

Question 23

Summarize the anti-growth view of economic growth.

Question 24

What are the characteristics of current rise in the Average Rate of Productivity Growth that distinguishes it from the economy of previous periods?

Question 25

Offer a skeptical perspective on the economics of the recent increase in the average rate of Productivity Growth.

Question 26

Aside from increases in labour and capital inputs, what accounts for economic growth in Canada?

Question 27

Which is more important-the quantity of inputs or the productivity of inputs-as a source of economic growth in Canada? Explain.

Question 28

What are the economic implications from the current rise in the Average Rate of Productivity Growth?

Question 29

What is meant by economies of scale and what is the importance of this concept to economic growth?

Question 30

Are economic growth and progress synonymous? How might they differ?

Question 31

Does the recent increase in the average rate of Productivity Growth mean that the downward trends of the rate of economic growth will not occur in the future?

Question 32

Offer a defense of economic growth.

Question 33

If an economy has 9,000 workers with each working 2,000 hours per year and the average real output per worker-hour is $20, what is real GDP?

Question 34

If an economy has 2,000 workers with each working 3,000 hours per year and the average real output per worker-hour is $10, what is real GDP?

Question 35

What are the reasons for improved resource allocation?