Download Chapter 8: Even More Study Questions

ECON 10233
Introduction to Macroeconomics
John Lovett
Chapter 8: Even More Study Questions
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any assistance on this homework that constitutes academic dishonesty as such.
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1. - 3. Julian is living in an age in which both population and Real GDP/capita are increasing, on average,
by at least 1% per year. This 1% or higher increase in real GDP/capita is typical for the whole of
Julian’s life. What time period might Julian be living in? Check any and all that apply.
_____ 1st century (0 –99)
_____ 16th century (1500 – 1599)
_____ 4th century (300 – 399)
_____ mid 19th century (1825 – 1875)
_____ late 19th - 20th century (1875 – 1925)
_____ 10th century (900 – 999)
_____ half of 20th century (1950 – 1999)
th
_____ 12 century (1100 – 1199)
4. - 6. Marius is living in an age in which Real GDP/capita is increasing, on average, by at least 1% per
year. This 1% or higher increase in real GDP/capita is typical for the whole of Marius’ life. What
time period might Marius be living in? Check any and all that apply.
_____ 1st century (0 –99)
_____ 16th century (1500 – 1599)
_____ 4th century (300 – 399)
_____ mid 19th century (1825 – 1875)
_____ late 19th - 20th century (1875 – 1925)
_____ 10th century (900 – 999)
_____ 2nd half of 20th century (1950 – 1999)
_____ 12th century (1100 – 1199)
7. _____ Brutus and Julius are both TCU students returning from a study abroad experience. They have
been to some of today’s richest and poorest areas of the world. Julius is deeply upset by the gap
between rich nations and poor nations today. Brutus thinks it’s no big deal. Brutus states, “There’s
always been rich and poor nations. The typical rich nation today has 20 times the GDP/capita of the
typical poor nation, and it’s been that way for at least 1,000 years.” Is Brutus correct?
a. No. The gap between rich and poor nations decreased starting about 200 years ago.
b. No. The gap between rich and poor nations decreased starting about 500 years ago.
c. No. The gap between rich and poor nations increased starting about 200 years ago.
d. No. The gap between rich and poor nations increased starting about 500 years ago.
e. Yes, the gap between rich and poor nations has stayed relatively constant for the past 1,000 years.
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ECON 10233
Introduction to Macroeconomics
John Lovett
8. _____ What’s so special about a long-run growth rate of GDP/capita at, or above, 1% per year?
a. Based on empirical data, birthrates fall and population stabilizes when a 1% growth rate is
reached.
b. 1%/year is roughly the rate at which changes begin to be obvious within one lifetime.
c. A 1%/year growth of GDP/capita compensates for the wearing out of the capital stock. Therefore,
a 1% growth rate is needed to maintain living standards.
d. Based on empirical data, 1% growth rate of GDP/capita is needed for population to increase.
Population cannot increase until GDP/capita grows at least 1%/year.
e. It’s a great kisser.
9. _____ What else is special about a long-run growth rate of GDP/capita at, or above, 1% per year?
a. 1% is the growth rate the UN Development Committee estimated will eliminate poverty.
b. A sustained growth rate of 1% was not seen until the start of the “modern era,” about 200 years
ago. A 1% growth rate roughly defines modernity.
c. 1% is the growth rate the Augustine Commission recommended as a target for the United States.
d. A 1% growth rate is approximately the growth rate at which the natural environment is
sustainable.
e. It’s really cute and cuddly.
10. -11 ______________________ Roughly when did the UK, the United States, and much of
Western Europe, first see sustained growth rates of per capita GDP at/above 1% per year?
(counts as two)
#’s 12 – 17: Two countries currently have the same Real GDP/capita, $10,000. In the first country Real
GDP/capita is growing at 2%/year, whereas in the second it is growing at 3%/ year.
12. - 14. At the top of the next page show the GDP/capita for the two countries over the next 10 years.
Assume the growth rate for each country does not change during this period (i.e., they stay at the
numbers above (2% and 3%).
15. -17. At the bottom of the next page show the GDP/capita for the two countries over the next 100
years. Assume the growth rate for each country does not change during this period (i.e., they
stay at the numbers above (2% and 3%).
Notes for #’s 12 – 17:
• You need to put in axis numbers for the vertical axis (ex. $50, $100, etc.).
• Make sure the scale on your vertical axis does not change. If, for example first gridline jumps from
$0 to $50, then next gridline needs be $100. After than comes $150, $200, etc. Note that I am
talking about the gridlines here, not the axis labels. I don’t have spaces to put an axis label for
every gridline.
• Use as much of the graph as possible without changing your scale. i.e. Figure out the highest level
of income you need to plot for each chart, then pick a scale that best fits that number. i.e. Don’t
make your graphs really, really, short.
• Label each curve (ex. “2% growth rate”, 3% growth rate”).
• You do not have to plot every single year. However, the more precise points you have the better.
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ECON 10233
Introduction to Macroeconomics
3
John Lovett
ECON 10233
Introduction to Macroeconomics
John Lovett
Questions 18–20: Assume Narnia’s Real GDP/capita is currently $5,000. Further, assume
Narnia’s Real GDP/capita grows at 3.5%/year?
18. Give me a formula, with specific numbers, telling me what will Narnia’s GDP per capita be in 25
years? Narnia’s Real GDP/capita, in 25 years = _______________________.
19. Get out your calculator and solve the above equation. What will Narnia’s GDP per capita be in 20 25
years? Narnia’s Real GDP/capita, in 25 years = _______________________
20. Now put away your calculator! Approximately, what will Narnia’s GDP per capita be in 40 years?
Use the rule of 70 and estimate the answer without using a calculator. _______________________
Questions 21–23: Assume Fairytopia’s Real GDP/capita is currently $4,000. Further, assume
Fairytopia’s Real GDP/capita grows at 2.0%/year?
18. Give me a formula, with specific numbers, telling me what will Fairytopia’s GDP per capita be in 25
years? Fairytopia’s Real GDP/capita, in 25 years _______________________
19. Get out your calculator and solve the above equation. What will Fairytopia’s GDP per capita be in 20
25 years? Fairytopia’s Real GDP/capita, in 25 years _______________________
20. Now put away your calculator! Approximately, what will Fairytopia’s GDP per capita be in 70 years?
Use the rule of 70 and estimate the answer without using a calculator. _______________________
Questions 24–26: Assume Econostan’s Real GDP/capita is currently $3,000. Further, assume
Econostan’s Real GDP/capita grows at 1.0%/year?
21. Give me a formula, with specific numbers, telling me what will Econostan’s GDP per capita be in 25
years? Econostan’s Real GDP/capita, in 25 years _______________________
21. Get out your calculator and solve the above equation. What will Econostan’s GDP per capita be in 20
25 years? Econostan’s Real GDP/capita, in 25 years = _______________________
22. Now put away your calculator! Approximately, what will Econostan’s GDP per capita be in 70 years?
Use the rule of 70 and estimate the answer without using a calculator. _______________________.
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