Ch8

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CHAPTER 8 Introduction to Economic Growth and Instability Topic Question numbers ___________________________________________________________________________________________________ 1. Economic growth 1-14 2. Business cycle 15-26 3. Unemployment 27-66 4. GDP gap; Okun's law 67-79 5. Inflation: measurement, rule of 70 80-89 6. Demand-pull and cost-push inflation 90-102 7. Nominal versus real income 103-109 8. Inflation effects 110-120 Last Word 121-124 True-False 125-139 ___________________________________________________________________________________________________ Multiple Choice Questions Economic growth 1. Economic growth is best defined as an increase in: A) either real GDP or real GDP per capita. B) nominal GDP. C) total consumption expenditures. D) wealth in the economy. 2. Real GDP per capita is found by: A) adding real GDP and population. B) subtracting population from real GDP. C) dividing real GDP by population. D) dividing population by real GDP. 3. Growth is advantageous to a nation because it: A) promotes faster population growth. B) lessens the burden of scarcity. C) eliminates the economizing problem. D) slows the growth of wants. 4. For comparing changes in potential military strength and political preeminence, the most meaningful Page 1
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measure of economic growth would be: A) changes in total nominal output. B) changes in total real output. C) changes in per capita output. D) changes in per family output. Use the following to answer questions 5-8: A l t a Z o r n A l t a Z o r n Y e a r ( r e a l G D P ) ( r e a l G D P ) ( p o p u l a t i o n ) ( p o p u l a t i o n ) 1 $ 2 , 0 0 0 $ 1 5 0 , 0 0 0 2 0 0 5 0 0 2 2 , 1 0 0 1 5 2 , 0 0 0 2 0 2 5 0 5 3 2 , 2 0 0 1 5 4 , 0 0 0 2 1 0 5 0 8 5. Refer to the above table. Between years 1 and 2, real GdP grew by __________ percent in Alta: A) 3 percent. B) 4 percent. C) 5 percent. D) 10 percent. 6. Refer to the above table. Between years 1 and 2, real GDP per capita grew by __________ percent in Alta: A) 3 B) 4 C) 5 D) 10 7. Refer to the above table. Between years 2 and 3: A) Alta's real GDP grew more rapidly than Zorn's real GDP. B) real GDP fell in Zorn. C) population growth reduced Alta's real GDP growth to zero. D) population fell in Alta's. 8. Refer to the above table. Per capita GDP was about: A) $105 in year 3 in Alta. B) $303 in year 3 in Zorn. C) $200 in year 1 in Zorn. D) $5 in year 2 in Alta. 9. If a nation's real GDP is growing by 5 percent per year, its real GDP will double in approximately: A) 22 years. B) 20 years. C) 14 years. D) 8 years. 10. If the economy's real GDP doubles in 18 years, we can: A) not say anything about the average annual rate of growth. Page 2
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B) conclude that its average annual rate of growth is about 5.5 percent. C) conclude that its average annual rate of growth is about 2 percent. D)
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