1. What is economic growth?

2. What are the two broad sources of potential GDP growth?

3. What are the effects of an increase in the population on potential GDP, the quantity of labour, the real wage rate and potential GDP per hour of labour?

4. What are the effects of an increase in labour productivity on potential GDP, the quantity of labour, the real wage rate and potential GDP per hour of labour?

5. What is the key difference between the neoclassical growth theory and the classical growth theory?

6. What is the key difference between the neoclassical growth theory and the new growth theory?

7. Consider the following data for a hypothetical economy:

Year Real GDP Population

1 $50,000 200

2 $51,400 202

a. Calculate the growth rate of real GDP.

b. At this rate of growth, approximately how many years will pass before real GDP doubles?

c. Find real GDP per capita in each of the two years. Calculate the growth rate of real GDP per capita.

d. At this rate of growth, approximately how many years will pass before real GDP per capita doubles?

8. Suppose an economy's real GDP is $5,000 billion. There are 125 million workers, each working an average of 2,000 hours per year.

a. What is the labor productivity per hour in this economy?

b. Suppose worker productivity rises by 5% over the following year and the labor force grows (work hours rise) by 1%. What is the projected value of real GDP?

c. Based on your previous answer, what is this economy's rate of growth?

9. For three years, there was no technological change in Longland but capital per hour of labour increased from $10 to $20 to $30 and real GDP per hour of labour increased from $3.80 to $5.70 to $7.13. Then, in the fourth year, capital per hour of labour remained constant but real GDP per hour of labour increased to $10. Does Longland experience diminishing returns?