Question 1

Real GDP per person in Canada was $7,377 in 1950.Over the next 48 years it grew at a compound annual rate of 2.0%.If,instead,real GDP per person had grown at an average compound annual rate 2.5%,then real GDP per capita in Canada in 1998 would have been approximately __________ larger.

Accepted Answer

Using the formula for compound interest/ growth, we can calculate the real GDP per capita in Canada in 1998 in two different scenarios:

Case 1: Real GDP per person grew at a compound annual rate of 2.0% 
Real GDP per capita in 1998 = $7,377 x (1 + 0.02)^48 = $16,562.03

Case 2: Real GDP per person grew at a compound annual rate of 2.5%
Real GDP per capita in 1998 = $7,377 x (1 + 0.025)^48 = $21,612.99

The difference in real GDP per capita between the two cases is:
Difference = $21,612.99 - $16,562.03 = $5,050.96

So, real GDP per capita would have been approximately $5,050 larger if it had grown at an average compound annual rate of 2.5% instead of 2.0%. Therefore, the correct answer is B) $5,050.

Question 2

Compound interest differs from simple interest because compound interest is interest paid on

Accepted Answer

Compound interest is calculated on the initial principal and also on the accumulated interest from previous periods, while simple interest is calculated only on the initial principal.

Question 3

Real GDP per person in Richland is $20,000,while real GDP per person in Poorland is $10,000.However,Richland's real GDP per person is growing at 1% per year and Poorland's is growing at 3% per year.After 50 years,real GDP per person in Richland minus real GDP in Poorland is

Accepted Answer

The answer of Real GDP per person in Richland is...

Question 4

If,at the age of 21,you put $1,000 in a bank account promising to pay 7% annual compound interest and you make no withdrawals,how much will be in the account 45 years later when you retire at age 66?

Accepted Answer

The answer of If,at the age of 21,you put $1,000...

Question 5

The population of Alpha totals one million people,of whom 40% are employed.Average output per worker in Alpha is $20,000.Real GDP per person in Alpha totals

Accepted Answer

Real GDP per person is calculated by multiplying the percentage of employed people by the average output per worker. In Alpha, 40% of one million people are employed, which is 400,000 workers. With an average output of $20,000 per worker, the total GDP is $8 billion. Dividing this by the total population (1 million) gives a real GDP per person of $8,000.

Question 6

Real GDP per person in Northland is $30,000,while real GDP in Southland is $10,000.However,Northland's real GDP per person is growing at 1% per year and Southland's is growing at 3% per year.If these growth rates persist indefinitely,then

Accepted Answer

Since Southland's real GDP per person is growing at a faster rate than Northland's, eventually Southland's real GDP per person will exceed Northland's. Therefore, choice D is the correct answer.

Question 7

If on the day you were born,your parents deposited $1,000 into a savings account that would earn an annual compound interest rate of 5%,what would the value of the account be on your 20^th birthday?

Accepted Answer

Using the formula for compound interest:

A = P(1 + r/n)^(nt)

where:

A = final amount
P = principal (initial deposit)
r = annual interest rate (as a decimal)
n = number of times interest is compounded per year
t = time in years

In this case:

P = $1,000
r = 0.05
n = 1 (compounded annually)
t = 20

So:

A = $1,000(1 + 0.05/1)^(1*20)
A = $1,000(1.05)^20
A = $2,653.30

Therefore, the value of the account on the 20th birthday would be $2,653.30, which corresponds to choice B.

Question 8

Real GDP per person in Richland is $20,000,while real GDP per person in Poorland is $10,000.However,Richland's real GDP per person is growing at 1% per year and Poorland's is growing at 2% per year.After 50 years,real GDP per person in Richland minus real GDP in Poorland is

Accepted Answer

After 50 years, Richland's GDP per person will be $32,703.20 and Poorland's will be $26,908.48. The difference is $5,794.72, which is positive but less than $10,000.

Question 9

Average labour productivity multiplied by the proportion of the population employed equals

Accepted Answer

The answer of Average labour productivity multiplied by the proportion...

Question 10

If an economy's real GDP doubles in fourteen years,then the average annual rate of growth in real GDP is about

Accepted Answer

The average annual rate of growth can be calculated using the rule of 70, which states that the number of years it takes for a variable to double can be approximated by dividing 70 by the annual growth rate. In this case, we can estimate the annual growth rate by dividing 70 by 14 (years), which equals 5%. Therefore, the answer is C) 5%.

Question 11

If,at the age of 21,you put $1,000 in a bank account promising to pay 6% annual compound interest and you make no withdrawals,how much will be in the account 45 years later when you retire at age 66?

Accepted Answer

The answer of If,at the age of 21,you put $1,000...

Question 12

In symbolic terms,where Y equals real GDP,POP equals total population,and N equals the number of employed workers,Y/POP must equal

Accepted Answer

The equation Y/POP = (Y/N) x (N/POP) is derived from the identity that real GDP per capita (Y/POP) can be expressed as the product of labor productivity (Y/N) and the employment rate (N/POP).

Question 13

The key variable in determining changes in a country's standard of living is the

Accepted Answer

The long-run rate of economic growth, or the increase in an economy's overall production of goods and services over time, is the key variable in determining changes in a country's standard of living. A higher growth rate allows for an increase in wages, higher overall income, and improved living standards. While interest rates, inflation, unemployment, and population growth can all have an impact on an economy, their effects are typically more short-term and less significant in the long run.

Question 14

If a nation's real GDP is growing by 3% per year,its real domestic output will double in approximately

Accepted Answer

Using the Rule of 70, we can estimate the time it takes for real GDP to double by dividing 70 by the growth rate.

70/3 = approximately 23.3 years

Therefore, the closest answer choice is B) 24 years.

Question 15

Real GDP per person equals average labour productivity

Accepted Answer

Real GDP per person is calculated by multiplying average labor productivity by the share of the population that is employed. This reflects the total output per person in the economy.

Question 16

Real GDP per person in Westland is $30,000,while real GDP in Eastland is $10,000.However,Westland's real GDP per person is growing at 1.5% per year and Eastland's is growing at 3% per year.If these growth rates persist indefinitely,then

Accepted Answer

Eventually, with the higher growth rate of 3%, Eastland's real GDP per person will surpass Westland's, even though it currently lags behind. Therefore, option D is the correct answer.

Question 17

Real GDP per person in the United States was $9864 in 1950.Over the next 48 years,it grew at a compound annual rate of 2.0%.If,instead,real GDP per person had grown at an average compound annual rate 2.5%,then real GDP per capita in the United States in 1998 would have been approximately __________ larger.

Accepted Answer

The answer of Real GDP per person in the United...

Question 18

Suppose Botswana doubles its income in 8 years,while South Africa doubles its income in 12 years.According to the Rule of 72,the growth rate in Botswana

Accepted Answer

According to the Rule of 72, the number of years it takes for an investment to double is approximately 72 divided by the annual growth rate. So, for Botswana:

72/growth rate = 8 years

Solving for growth rate:

growth rate = 72/8 = 9%

Similarly, for South Africa:

72/growth rate = 12 years

Solving for growth rate:

growth rate = 72/12 = 6%

The difference in growth rates between Botswana and South Africa is:

9% - 6% = 3%

Therefore, the answer is A - the growth rate in Botswana is 3 percentage points higher than the growth rate in South Africa.

Question 19

Small differences in growth rates of real GDP per person,over the long run,make ________ differences in the average standard of living.

Accepted Answer

Over a long period of time, even small differences in growth rates of real GDP per person can compound into significant differences in the average standard of living. This is because even small changes can have a significant impact over a long enough period of time due to the power of compounding. As a result, slight differences in growth rates can result in very large differences over time.

Question 20

Growth of real GDP per person is totally determined by the growth of average

Accepted Answer

Growth of real GDP per person is determined by the growth of average labour productivity and the proportion of the population employed, as these factors directly influence the total output produced per person.

Quiz 14: International Trade