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University of Lethbridge - Department of Economics
ECON 1012
–
Introduction to Macroeconomics
Instructor: Michael G. Lanyi
Chapter 7
––
Growth, Productivity, and Wealth in the Long Run
Answer Key
1. C
Response:
The Rule of 72 says that a country's income will double in the number of years equal to 72 divided by
the country's growth rate (9 in this case.)
2. C
Response:
The Rule of 72 says that a country's income will double in the number of years equal to 72 divided by
the country's growth rate.
Dividing 72 by 4 gives us a growth rate of 18 percent.
3. B
Response:
The Rule of 72 says that a country's income will double in the number of years equal to 72 divided by
the country's growth rate.
Dividing 72 by 6 and 9 gives growth rates of 12 and 8 percent respectively
for Botswana and South Africa.
4. B
Response:
Per capita output is obtained by dividing GDP by the population.
5. D
Response:
Growth in per capita output equals the difference between the growth rate of output and the growth
rate of population.
6. B
Response:
Growth in per capita output equals the difference between the growth rate of output and the growth
rate of population.
7. C
Response:
Growth in per capita output equals the difference between the growth rate of output and the growth
rate of population.
8. B
Response:
See data in textbook.
9. C
Response:
The five important sources of growth are (1) institutions with incentives compatible with growth; (2)
technological development; (3) available resources; (4) capital accumulation; and (5)
entrepreneurship.
10. D
Response:
The Soviet Union did invest in capital goods (at the expense of consumer goods) but still did not
grow. It lacked institutions with incentives for individuals to work hard.