Quiz 17: Production and Growth
Number of years requires doubling the GDP: The real GDP of the United State is growing annually at a rate of around 2 percent, the numbers of year required to double the GDP can be calculated by using the Rules of 70. Rules of 70: …… (1) Substitute the respective values in Equation (1) to obtain the require number of years to double the GDP. It takes years to double the GDP of the United State. Thus, the option 'b' is correct.
The two facts do not contradict with each other. GDP measures the level of income earned and expenditure on the goods and services produced in the economy. Productivity is the ability to produce goods and service. It is a good measure of GDP. The higher the ability to produce a large quantity of goods and services, the higher is the productivity, and the higher is the standard of living. At the same time, free trade can improve the productivity by offering a resource of technological advances. By importing goods and services from advanced countries, less advanced countries can learn more advance technological knowledge contained in the imports. In addition, free trade increases the amount and variety of goods and services of an economy than otherwise it produces everything by itself. Therefore, both the statements are TRUE. When a country is an importer they borrow against the future production of goods and services. When other countries that the importing countries produces the goods and services then there will be no exports in the first place.
GDP measures the total income earned in the economy and the total expenditure on the goods and services produced in the economy. Real GDP is a good gauge of economic prosperity. The growth of real GDP is a good gauge of economic progress. A country with high level of GDP has slower growth rate than the country with a low level of GDP. It is more desirable to live in a country with high level of GDP even though it has slower growth rate. There are more goods and services being produced by a country with high level of GDP; as a result, there is higher level of consumption. Country with low level of GDP can grow faster, but during its process of catching up a rich country it is producing less goods and services.