Exam 9: Long-Run Economic Growth

Two politicians are debating the best ways to spur long-term growth in the nation's real GDP per capita. Candidate X says we should lower income taxes so that households have more money to spend on goods and services. Candidate Y says we should lower taxes on interest income so that households have more incentive to save. Which candidate has the right idea?

Use the following to answer questions : Figure: Technological Progress and Productivity Growth -(Figure: Technological Progress and Productivity Growth) Look at the figure Technological Progress and Productivity Growth. If there is a significant increase in human capital per worker (all other factors remaining unchanged), it is best indicated by a move from:

Suppose a panel of economists predicts that a nation's real GDP per capita will double in approximately 20 years. According to the rule of 70, what must be the predicted annual growth rate of real GDP per capita?

If technology advances:

Growth accounting enables us to:

If real GDP doubles in 35 years, its average annual growth rate is approximately:

Use the following to answer questions : -(Table: Kenya's Economy in 2010) Look at the table Kenya's Economy in 2010. Aggregate output at the end of 2010, assuming no changes in the price level, was about:

Among the factors that are important for economic growth are:

Output per capita in the United States in 2010 was about _____ as high as in 1900.

The convergence hypothesis:

If output is growing at 5% annually, how many years will it take for output to quadruple?

Diminishing returns to physical capital implies that when the human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to _____ productivity.

Use the following to answer question 279: Figure: The Aggregate Production Function -(Figure: The Aggregate Production Function) Look at the figure The Aggregate Production Function. Does it exhibit diminishing returns to physical capital? Explain.

The convergence hypothesis says that:

Use the following to answer questions : Scenario: Growth Rates in Two Countries India is growing at a rate of 9% per year, and its real GDP per capita is about $3,500, while the United States is growing at a rate of 3% per year, and its real GDP per capita is about $47,000. -(Scenario: Growth Rates in Two Countries) Look at the scenario Growth Rates in Two Countries. How long will it take the United States to double its real GDP per capita?

Use the following to answer questions : Scenario: Productivity The economy has grown by 4% per year over the past 30 years. During the same period the labor force has grown by 1% per year and the quantity of physical capital has grown by 5% per year. Each 1% increase in physical capital per worker is estimated to increase productivity by 0.4%. Assume that human capital has not changed during the past 30 years. -(Scenario: Productivity) Look at the scenario Productivity. How much has growing physical capital per worker contributed to productivity growth?

For developed countries, which of the following is considered the most important driver in productivity growth?

Government spending is like investment in each of the following cases EXCEPT when:

Research and development is defined as spending to develop and implement new technologies.

During the latter half of the twentieth century, the Soviet Union made more physical capital available to its workers, but this increase resulted in successively smaller increases in productivity. This is an example of: