Question: 1What is economic growth and how do we calculate its rate? 2In 2020, the population increases and labour hours supplied increase by 10 at each

1What is economic growth and how do we calculate its rate?

2In 2020, the population increases and labour hours supplied increase by 10 at each real wage rate. Does the standard of living in this economy increase in 2020? Explain why or why not.

3 What is the relationship between the growth rate of real GDP and the growth rate of real GDP per person?

4 What is the aggregate production function?

5 What determines potential GDP?

6 What are the two broad sources of potential GDP growth?

7 If a large increase in investment increases labour productivity, explain what happens to potential GDP and employment

8 If a severe drought decreases labour productivity, explain what happens to potential GDP and employment.

9 In 2020, the population increases and labour hours supplied increase by 10 at each real wage rate. What are the equilibrium real wage rate, labour productivity and potential GDP in 2020?

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