1012 - 2008-03 - CH 07_ANS - University of Lethbridge Department of Economics ECON 1012 Introduction to Macroeconomics Instructor Michael G Lanyi

# 1012 - 2008-03 - CH 07_ANS - University of Lethbridge...

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Page 1 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.