GDP And Economic Growth 4

Question 1

How does a higher national savings rate typically affect long-run economic growth?

Accepted Answer

It funds more investment, raising the capital stock and productivity

Answer

Higher savings provide the funds for investment in physical and human capital, increasing productive capacity over time.

Question 2

Which measure captures economic well-being more accurately than GDP alone?

Accepted Answer

GDP per capita

Answer

GDP per capita divides total output by population, giving a better picture of average living standards than total GDP alone.

Question 3

What is the 'output gap' and how is it calculated?

Accepted Answer

Actual GDP minus potential GDP

Answer

The output gap equals actual GDP minus potential GDP, indicating whether the economy is overheating or underperforming.

Question 4

Which country characteristic is most strongly associated with sustained high economic growth rates?

Accepted Answer

Strong institutions and rule of law

Answer

Research consistently finds that strong institutions — property rights, rule of law, and low corruption — are key drivers of sustained growth.

Question 5

In endogenous growth theory, what drives long-run growth UNLIKE in the Solow model?

Accepted Answer

Factors within the economy such as knowledge, innovation, and education

Answer

Endogenous growth theory argues that long-run growth is driven by internal factors like knowledge spillovers, innovation, and human capital investment.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP And Economic Growth 4