Living Standards

The key indicator of a country's living standard and economic well-being is

• The interest rate

• Nominal GDP

• Real GDP

• Real GDP per person

The payment of interest not only on the original deposit, but on all previously accumulated interest is called

• Real interest rate

• Nominal interest rate

• Compound interest rate

• simple interest rate

Small differences in annual growth rates of real GDP generate large differences in real GDP over time because of the

• importance of average labor productivity.

• power of compound interest.

• diminishing returns to capital.

• limits of economic growth.

Real GDP per person in the United States was $9,864 in 1950. Over the next 48 years, it grew at a compound annual rate of 2.0 percent. If, instead, real GDP per person had grown at an average compound annual rate 2.5 percent, then real GDP per capita in the United States in 1998 would have been approximately ______Blank larger.

• $2,370

• $6,751

• $12,530

• $25,520

Real GDP per person in Richland is $20,000, while real GDP per person in Poor land is $10,000. However, Richland's real GDP per person is growing at 1 percent per year, and Poor land's real GDP per person is growing at 3 percent per year. After 50 years, real GDP per person in Richland minus real GDP in Poor land is

• positive and greater than $10,000.

• positive but less than $10,000.

• zero.

• negative.