Questions and Answers
How do economists typically measure economic growth?
real GDP per capita
Economic growth refers to an ______ in the output of goods and services in an economy. The greater the economic growth, the ______ more goods citizens and their descendants will have to consume.
increase; more
What is economic growth usually measured by?
the annual percent change in real GDP per capita
How much the economy can produce at its natural rate of output depends on?
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What will cause the natural level of real output in a country to fall?
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When will the standard of living decline?
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What will cause an economy's production possibilities curve to shift outward over time?
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What would not result in increasing the natural rate of output in a country?
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What of the following will cause the production possibilities curve to shift outward?
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According to the Rule of 70, if a nation grows at a rate of 5 percent per year, it will take roughly how many years for national income to double?
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According to the Rule of 70, if a country's growth rate doubled, what would happen to the amount of time before its output doubled?
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In the long run, what is the most important determinant of a nation's standard of living?
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Study Notes
Economic Growth Measurement
- Real GDP per capita is the primary metric for measuring economic growth.
Definition of Economic Growth
- Economic growth entails an increase in the output of goods and services.
- Increased economic growth translates to more goods available for consumption by citizens and future generations.
Economic Growth Calculation
- Annual percent change in real GDP per capita typically measures economic growth.
Factors Influencing Natural Rate of Output
- The economy's production capacity at its natural rate is influenced by:
- Technology
- Quantity of available resources
- Labor productivity
- Capital stock
Natural Level of Real Output
- The natural output level declines if:
- A greater fraction of the population retires
- Natural resources are depleted
Standard of Living Considerations
- Decline in standard of living occurs when population growth outpaces real GDP growth.
Production Possibilities Curve
- The production possibilities curve shifts outward due to:
- Technological advancements
- Increases in labor productivity
Factors Not Increasing Natural Rate of Output
- Increasing current consumption by reducing savings does not enhance the natural output rate.
Outward Shift in Production Possibilities Curve
- An outward shift can result from:
- Improved public education
- Enhanced healthcare systems
- Larger budgets for R&D and exploration
Rule of 70 Application
- A nation growing at 5% annually will see national income double in approximately 14 years.
- If a country’s growth rate doubles, the time for output to double is halved.
Long-Term Determinant of Standard of Living
- The rate of productivity growth is the most significant long-term determinant affecting a nation's standard of living.
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Description
Test your knowledge on economic growth concepts with these flashcards. This quiz covers definitions and key measurements such as real GDP per capita and the importance of economic output. Perfect for reinforcing your understanding of economic principles.
