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Macroeconomics
HW6
Economic growth
1. Use www.cia.gov World Factbook (Guide to country comparisons Economy) to find the following information
a. list 3 largest economies in the world (in terms of GDP), include your numbers
b. list 3 richest and 3 poorest economies in the world (per capita GDP), include numbers
c. list 3 fastest and 3 slowest growing economies in the world, include numbers
d. what other indicators of well-being could one use to compare standards of living across countries? Compare any two
countries using your suggested indicator(s).
2. All of the following are critical functions of the government in facilitating the operation of a market economy except
a. protecting private property and enforcing property rights.
b. collecting taxes to invest in infrastructure.
c. enforcing contracts.
d. ensuring an equal distribution of income to all citizens.
3. If real GDP grows by 0.5% in 2009, 3% in 2010, and 2.5% in 2011, what is the average annual growth rate of real GDP?
4. If a country’s real per capita GDP grows by 3.5% per year, how many years will it take for average incomes to double
assuming growth rate will remain at its current level (use the rule of 70)
5. Which factors are the keys to determining labor productivity?
a. the business cycle
d. the quantity of capital per hour worked
b. the interest rate
e. the average level of education
c. technology
f. the price level
6. Significant economic growth did not begin in the world until
a. 1000 A.D.
b. 1750 A.D.
c. 1820 A.D.
d. the 20th century A.D.
7. Which of the following would contribute to a sustained high rate of economic growth in the long run in an economy?
A) growth in capital per hour accompanied by technological change
B) increases in labor force participation rates as workers who are out of the labor force pursue rising wages
C) a shift of workers in the economy from the agricultural sector to the nonagricultural sector
D) an influx of immigrant labor into an economy without any accompanying technological change
8. Refer to the per-worker production function in the figure
a. Based on the per-worker production function above, if the
economy raises capital per hour worked from $35,000 to
$40,000, by how much will real GDP per hour worked
increase?
b. Draw a new production function that illustrates a
technological improvement
c. Draw a new production function that illustrates the impact
of a war or a revolution with their subsequent destruction of
capital
d. How would you illustrate diminishing marginal product
of capital using this graph?
e. How would you illustrate a point where a developing country might be on this graph versus a developed country?
9. The Soviet Union's economy grew rapidly in terms of GDP per hour worked in the 1950s, but eventually this growth
slowed. Why might this occur?
A) Increasing implementation of new technologies eventually suffered diminishing marginal returns.
B) Capital per hour worked grew slowly, but technological change grew very rapidly.
C) Capital per hour worked grew rapidly from 1950 to 1980, but technological change occurred very slowly.
D) The centrally planned economy invested too heavily in technological change.
10. Using course resources under this lesson or your textbook chapter, research why some countries are rich and other
countries are poor, why some countries grow and some don’t. List a number of factors that explain differences in
economic development across countries.