Economic Growth: Lecture 8 Overview

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Questions and Answers

What is a characteristic of sustained growth?

It is largely due to technological spillovers from developed countries.

It results primarily from foreign investment.

It relies on technological innovation and human capital development. (correct)

It occurs rapidly through external resources.

Which of the following is NOT a factor contributing to catch-up growth?

Influx of foreign investment

Advancements in local technology (correct)

Utilization of local underutilized human capital

Improvement of labor efficiency

What is a primary source of catch-up growth?

The diversification of local industries.

Technological spillovers from more developed countries. (correct)

Continuous improvement in local education systems.

Stable government policies promoting local businesses.

Which of the following statements about sustained growth is true?

It can support continuous improvement over time. Signup and view all the answers

Which option does NOT directly support the concept of catch-up growth?

Reduction of local labor costs. Signup and view all the answers

What does economic growth specifically refer to?

Increase in a country’s GDP over time Signup and view all the answers

How is the growth rate of GDP calculated?

Percentage change in GDP from one period to another Signup and view all the answers

What trend has been observed regarding GDP around the world over the last 200 years?

Short-run fluctuations with a long-term increase Signup and view all the answers

Which of the following is NOT a method of measuring GDP?

Consumer index approach Signup and view all the answers

Which of the following statements concerning Real vs. Nominal GDP is true?

Real GDP is adjusted for inflation while nominal GDP is not. Signup and view all the answers

What is one of the key flaws of GDP as a measure of economic health?

It does not account for income distribution. Signup and view all the answers

GDP per capita PPP is important for assessing what aspect of national economies?

Global inequality and living standards Signup and view all the answers

Which of the following is true regarding the relationship between GDP growth and productivity?

Increased productivity typically leads to GDP growth. Signup and view all the answers

What is generally regarded as the primary indicator of economic performance?

Gross Domestic Product (GDP) Signup and view all the answers

What characterizes the economic growth before the 1800s?

Output growth was minuscule despite periods of prosperity. Signup and view all the answers

According to Malthus's theory, what happens when GDP per capita exceeds the subsistence level?

Fertility adjusts to reinstate subsistence levels. Signup and view all the answers

What was one of the reasons for the lack of sustained growth before the 1800s?

New wealth was often utilized in unproductive ways. Signup and view all the answers

Which statement reflects the consequences of falling GDP per capita according to Malthus?

It can trigger famine, child mortality, or conflict. Signup and view all the answers

What did ancient economies like Babylon and Persia experience in terms of prosperity?

Periods of prosperity with limited growth in output. Signup and view all the answers

How did population dynamics contribute to economic stagnation before the 1800s?

Child labor was essential for many families. Signup and view all the answers

Which factor was NOT a reason for slow economic growth prior to the 1800s?

Widespread sharing of wealth among the populace. Signup and view all the answers

What limitation did economies face in achieving sustainable growth before the modern era?

The slow pace of technological change. Signup and view all the answers

What is the relationship between constant GDP growth rates and the overall GDP increase?

GDP growth rates compound over time. Signup and view all the answers

How many years would it take for GDP to double at a growth rate of 5%?

25 years Signup and view all the answers

Which country had the highest average annual GDP growth rate between 1960 and 2010 according to the data?

Greece Signup and view all the answers

What happens to GDP if it starts at 100 and grows at a rate of 3% for 40 years?

It becomes 316. Signup and view all the answers

Given a starting GDP of 100, what will the GDP be after 40 years at a growth rate of 2%?

Approximately 216 Signup and view all the answers

Which of the following statements about GDP growth rates is accurate?

Slim differences in rates can lead to large GDP gaps over time. Signup and view all the answers

What is the average GDP per capita of the United States in 2010 as per the provided data?

$41,365 Signup and view all the answers

At what growth rate would GDP triple in 24 years?

5% Signup and view all the answers

Which of the following countries had an average GDP per capita of approximately $55,862 in 2010?

Singapore Signup and view all the answers

Which of the following scenarios demonstrates the impact of compounding in GDP growth?

A small annual growth rate leads to a significantly higher GDP over decades. Signup and view all the answers

What trend is observed when GDP growth rates slightly differ over an extended period?

Even slight differences create considerable gaps in GDP. Signup and view all the answers

How does a 10% annual growth rate affect the time taken for GDP to double?

It doubles in approximately 8 years. Signup and view all the answers

What was the average GDP per capita of the UK in 2010?

$34,268 Signup and view all the answers

What is the primary focus of leaders regarding poverty in the context of population growth?

They sought to decrease the population. Signup and view all the answers

Which major historical event began in Britain and is linked to the advancement of technology in production?

The Industrial Revolution Signup and view all the answers

Before 1800, the majority of labor was primarily involved in which of the following?

Production of necessities Signup and view all the answers

What transformation did the Industrial Revolution cause in terms of family and labor dynamics?

The concept of large families was replaced by the idea of small families. Signup and view all the answers

What is the significance of investing in research and development today for future wealth?

It will determine the wealthy countries of the future. Signup and view all the answers

How did technology's role in production change after 1800?

It freed labor from necessity production to more productive sectors. Signup and view all the answers

The Malthusian model was a good representation of population trends until which period?

The Industrial Revolution Signup and view all the answers

In the context of the Malthusian cycle, what effect would lifting people out of poverty have had?

Decreased population and increased GDP per capita to subsistence. Signup and view all the answers

What main advantage did technology provide to humanity regarding economic cycles?

Breaking away from the Malthusian cycle Signup and view all the answers

Which factor is NOT mentioned as affecting the prosperity of nations?

Political policies Signup and view all the answers

Which of the following factors is considered to be out of a nation's control?

Geography Signup and view all the answers

According to the content, which aspect contributes to a nation's prosperity but is entirely based on chance?

Luck Signup and view all the answers

What should students be cautious about when using lecture slides for studying?

Slides may mislead if used without lecture notes Signup and view all the answers

Which of the following is NOT a characteristic of the factors affecting national prosperity?

They are all controllable Signup and view all the answers

What initiative is mentioned in relation to attempting to alleviate poverty in Africa?

End Poverty in Africa initiatives Signup and view all the answers

Which of the following best describes the role of historical factors in a nation's prosperity?

They shape the context for current economic conditions Signup and view all the answers

Study Notes

Lecture 8: Economic Growth

Macroeconomics definition, measuring GDP (production, expenditure, income)
Distinction between real and nominal GDP, using CPI and PPP
GDP flaws, global inequality, and national productivity
Economic growth defined as increase in a country's GDP over time
Growth rate is the percentage change in GDP from one period to another
Historically, GDP has generally increased over the last 2 centuries, though short-term fluctuations exist
Long-term trend of GDP noted
GDP growth is exponential, not linear
Growth rates, when compounded, lead to exponential increases over time
Small differences in growth rates result in sizable GDP differences after a period
Examples of Sustained vs. Catch-up growth detailed

Sustained vs. Catch-up Growth

Sustained growth arises from a country's internal advancements (technological innovation, human capital development)
Catch-up growth comes from technology spillovers and advantages from other developed countries; benefits from local underutilized human capital, foreign investment, infrastructure improvements, and more efficient labor.

Malthusian Limits to Growth

Thomas Malthus' theory noted that population growth would limit per capita income
Malthus observed that fertility would adjust so that income would revert back to subsistence levels
When GDP per capita exceeds subsistence, population growth increases, bringing it back down to subsistence
When GDP per capita falls below subsistence, factors such as famine, child mortality, or war reduce the population

The Industrial Revolution

The Industrial Revolution's impact on economic growth; the shift in production from necessities to more productive sectors.
Technological development allowed for fewer people to work on producing necessities, accelerating productivity due to opportunities in other areas.
Modern families reduced reliance on children for labor, leading to a profound economic shift.
The Industrial Revolution marked a significant break from earlier, slower growth patterns.

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Description

This quiz covers key concepts from Lecture 8 on economic growth in macroeconomics. Examine definitions of GDP, the distinction between real and nominal GDP, and understand the factors influencing sustained versus catch-up growth. Analyze historical trends and their implications for productivity and global inequality.