Real GDP per person in the country of Flax is $10,000. Each year real GDP per person grows 5 percent. At the end of 2 years, real GDP per person is _________________.

$11,025
$10,000
$10,500
$11,000

Real GDP per person in the country of Flip is $10,000, and the growth rate is 10 percent a year. Real GDP per person in the country of Flap is $20,000 and the growth rate is 5 percent a year. When will real GDP per person be greater in Flip than in Flap?

in 2 years
in 14 years
in 15 years
never

Economic growth can begin when people _______, but in order to continue, there must be an incentive system which encourages people to pursue activities _______.

are educated; in which they have a comparative advantage
increase working hours; that use more capital
specialize and trade; such as investment in human capital
have comparative advantage; having absolute advantage

The one third rule predicts that if capital per hour of work increases by 18 percent and real GDP per hour of work increases by 10 percent, then the increase in capital per hour of work increases real GDP per hour of work by _______ and technological change increases real GDP per hour of work by _______.

18 percent; 0 percent
4 percent; 6 percent
6 percent; 4 percent
10 percent; 0 percent

The table shows capital per hour of work and labor productivity for the beach economy of Whitepool. In the year 2001, how many seashells does the increase in capital per hour of work contribute and how many seashells of growth does technological change contribute to the growth in real GDP per hour of work?

12 seashells; 12 seashells
54 seashells; -30 seashells
3 seashells; 3 seashells
24 seashells; 0 seashells

The table shows capital per hour work and labor productivity for the beach economy of Whitepool. In the year 2002, what is the contribution of the increase in capital per hour of work and the contribution of technological change to the growth in real GDP per hour of work?

5 percent; 5 percent
0 percent; 10 percent
3 1/3 percent; 6 2/3 percent
10 percent; 0 percent

In 1997, capital per person was $250 and real GDP per person was $50. In 1998, real GDP per person was $55. If there was no change in technology between 1997 and 1998, then capital per person in 1998 was _______.

$280
$252
$275
$325

An economy is in a long-run equilibrium. The real interest rate is 6 percent a year. New technology increases the productivity of capital and the real interest rate increases to 10 percent a year. The supply of capital increases. Neoclassical growth theory predicts that economic growth will continue __________________.

as long as the real interest rate is 10 percent a year
until the real interest rate falls to 6 percent a year
indefinitely
until the real interest rate and subsistence wage rate are equal

The real interest rate in an economy is 8 percent a year. The supply of capital (which includes the capital of knowledge) shifts progressively rightward. New growth theory predicts that economic growth will continue _______ because the rate of return on capital will _______.

for a short period; fall
indefinitely; stay at 8 percent a year
for a short period; stay at 8 percent a year
to decrease; fall

A country would achieve faster growth by ______________________.

discouraging free trade
increasing the cost of education
increasing union membership
taxing consumption and not income

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