GDP And Economic Growth 5

Question 1

What does it mean when an economy experiences 'jobless growth'?

Accepted Answer

GDP grows but unemployment does not fall significantly

Answer

Jobless growth occurs when GDP expands but employment does not rise proportionally, often due to productivity gains or structural changes.

Question 2

Which of the following is an example of EXTENSIVE economic growth?

Accepted Answer

Adding more workers and physical capital to increase total output

Answer

Extensive growth means increasing output by adding more inputs (labor or capital), rather than using existing inputs more efficiently.

Question 3

When real GDP growth is consistently below the growth rate of the labor force, what typically happens?

Accepted Answer

Unemployment tends to rise

Answer

If GDP growth is too slow to absorb new labor force entrants, unemployment rises as jobs aren't created fast enough.

Question 4

What is Okun's Law?

Accepted Answer

The empirical relationship between the output gap and changes in the unemployment rate

Answer

Okun's Law is the empirical finding that for every 1% the unemployment rate falls below its natural rate, GDP is roughly 2% above potential.

Question 5

Which factor helps explain why some low-income countries have NOT converged toward high-income country living standards?

Accepted Answer

Institutional barriers, poor governance, and lack of property rights

Answer

Poor institutions, weak governance, and insecure property rights discourage investment and innovation, preventing convergence.

GDP - Gross Domestic Product Practice Test