Question

1. What are the three main categories of things which affect economic growth in the long run?

2. Which of the above probably explains most of world economic growth over the last 200 years?

3. Which of the above probably explains most of the difference in output between North Korea and South Korea?

4. If an economy grows at 5% per year, how long will it take for per capita real GDP to double

5. If nominal GDP (the dollar value of goods and services produced in a country) grows by 10%, the population grows by 3% and the price level grows by 5%, what is the rate of economic growth?

6. If real GDP goes from 24,000 to 28,000 what is the percentage change in real GDP?

7. Name one institution which fosters economic growth.

8. According to Adam Smith, the division of labour is limited by the extent of what?

Answer 1

1) Accumulation of capital stock(savings), population and texhnological advancement are the main three factors which affect long run economic growth.

2) Technological advancement explains the economic growth of the world in the last 200 years.

3) The output differrnces between north korea and south korea is because of technology constrainst in the north korea. North korea is almost a closed economy and do not get gain of globalisation like technologhy transfer. The economic policies are dictated by the dictator of north korea who take decision accoding to his own will. In contrast, south korea ia a developed economy.

4) No of years required to double = (70/Annual rate of growth)

Thus, No. Of years required to double Per capita real GDP = 70/5 = 14

5) the growth rate of economy would be 8% .

6) Growth rate of real GDP =[ (28000 - 24000) / 24000] = 0.166 *100 = 16 %.

7) Economic growth of a country depends in its political, legal , exonomic institutions.

8) According to Adam Smith, the division of labour is limited by the extent of Market. Division of labour increases the efficiency because spilting of labour into section they are good at enhances productivity.