Last year, real GDP in an imaginary economy was $125 billion and the population was 5 million. This year, real GDP is $132 billion and the population was 5.2 million. What was the growth rate of real GDP per person during the year?
1.54%Last year, real GDP per capita was $125 billion/5 million = $25,000. This year, it is $132 billion/5.2 million = $25,384. The rate of growth is calculated as 100 ((GDP per person in the current year - GDP per person last year)/ GDP per person last year) = 100(($25,384 - $25,000)/ $25,000) = 1.54%.

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An increase in the savings rate.Encouraging saving and investment is one way that a government can stimulate growth and, in the long run, raise the country"s standard of living.
FalseThe traditional view of the production process is that capital is subject to diminishing returns: As the stock of capital rises, the extra output produced from an additional unit of capital falls.
The United Kingdom is an advanced economy, and over the past century its rate of economic growth has been higher than that of the United States.
Which of the following statements is consistent with the fact that capital in an economy is subject to diminishing returns?
When workers have a relatively small quantity of capital, giving them an additional unit of capital increases their productivity by a relatively large amount.
The fact that in the United States, real GDP per person was $4,044 in 1870 and $47,210 in 2010 implies that every year the United States had the growth rate of 1.77% per year
FalseIf real GDP per person, beginning at $4,044, were to increase by 1.77% for each of 140 years, it would end up at $47,210. However, real GDP per person did not rise exactly 1.77% every year: Some years it rose by more, other years it rose by less, and still other years it fell. The growth rate of 1.77% per year ignores short-run fluctuations around the long-run trend and represents an average rate of growth for real GDP per person over many years.
The short-run effects of an increase in the saving rate include a higher growth rate of productivity and a lower growth rate of income.
FalseThe short-run effects of an increase in the saving rate include a higher level of productivity, a higher growth rate of productivity, and a higher growth rate of income.
Suppose that productivity grew faster in Country A than in Country B, while the population and total hours worked remained the same in both countries.
Real GDP per person grew faster in Country A than in Country BBoth population growth and productivity growth contribute in growth of real GDP. If there is no population growth, whereas productivity grows faster in Country A than in Country B, then real GDP per person must grow faster in Country A than in Country B.
Suppose an economy experiences an increase in its saving rate. The higher saving rate leads to a higher growth rate of productivity in the long-run.
FalseThe accumulation of capital is subject to diminishing returns: The more capital an economy has, the less additional output the economy gets from an extra unit of capital. As a result, although higher saving leads to higher growth for a period of time, growth eventually slows down as capital, productivity, and income rise.
Which of the following countries is a middle-income country, which over the past century had a higher rate of economic growth than the United States
The fact that in Canada, real GDP per person was $2,397 in 1870 and $38,370 in 2010 implies that every year, the growth rate was 2.00% per year.
Consider two economies with diminishing returns to capital. The economies are identical except one has a higher capital per worker than the other. Suppose that the saving rates in both countries increase.
Over the next few years, the growth rate of real GDP per worker will be higher in the country that started with less capital per worker.
Countries that have had higher output growth per person have typically done so without higher productivity growth.

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FalseOne of the Ten Principles of Economics is that a country"s standard of living depends on its ability to produce goods and services. A nation can enjoy a high standard of living only if it can produce a large quantity of goods and services. Americans live better than Nigerians because American workers are more productive than Nigerian workers. The Japanese have enjoyed more rapid growth in living standards than Argentineans because Japanese workers have experienced more rapid growth in productivity.
A public policy that increases saving and investment increases future labor productivity because the policy ____
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