And Economic Growth Flashcards
7 cards from real GDP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 And Economic Growth flashcards as text
How does a higher national savings rate typically affect long-run economic growth?
Answer: It funds more investment, raising the capital stock and productivity
Higher savings provide the funds for investment in physical and human capital, increasing productive capacity over time.
Which measure captures economic well-being more accurately than GDP alone?
Answer: GDP per capita
GDP per capita divides total output by population, giving a better picture of average living standards than total GDP alone.
What is the 'output gap' and how is it calculated?
Answer: Actual GDP minus potential GDP
The output gap equals actual GDP minus potential GDP, indicating whether the economy is overheating or underperforming.
Which country characteristic is most strongly associated with sustained high economic growth rates?
Answer: Strong institutions and rule of law
Research consistently finds that strong institutions — property rights, rule of law, and low corruption — are key drivers of sustained growth.
In endogenous growth theory, what drives long-run growth UNLIKE in the Solow model?
Answer: Factors within the economy such as knowledge, innovation, and education
Endogenous growth theory argues that long-run growth is driven by internal factors like knowledge spillovers, innovation, and human capital investment.
A country's real GDP grows from $10 trillion to $10.3 trillion. What is the growth rate?
Answer: 3%
Growth rate = (10.3 - 10) / 10 × 100 = 3%.
How does infrastructure investment (roads, bridges, broadband) affect economic growth?
Answer: It raises private sector productivity and lowers transaction costs, boosting growth
Public infrastructure lowers costs of doing business and raises private sector productivity, complementing private investment and spurring growth.