IB Economics HL (CHAPTER 18)

What is the definition of economic growth?

• An increase in nominal GDP over time
• An increase in real GDP over time
• A decrease in unemployment over time
• A rise in inflation over time

What does real GDP adjust for?

• Population changes
• Inflation
• Unemployment
• Government spending

Negative economic growth is associated with:

• An economic boom
• An economic recession
• Stable prices
• High employment

Short-term economic growth occurs when:

• An economy moves toward its potential GDP by using resources more efficiently
• The LRAS curve shifts outward
• Nominal GDP decreases
• Inflation rises sharply

Long-term economic growth is represented by:

• A movement along the PPC
• An outward shift of the PPC
• A decrease in aggregate demand
• A leftward shift of the LRAS curve

Potential output refers to:

• The minimum level of GDP an economy can produce
• The maximum level of GDP if all resources are used efficiently
• The actual level of GDP in a recession
• The level of GDP adjusted for taxes

How is nominal GDP different from real GDP?

• Nominal GDP includes inflation, while real GDP does not
• Nominal GDP excludes government spending, while real GDP includes it
• Nominal GDP is always higher than real GDP
• Real GDP includes imports, while nominal GDP does not

If nominal GDP grows by 6% and inflation is 2%, real GDP growth is approximately:

• 0.04
• 0.08
• 0.02
• 0.06

What is the formula for calculating real GDP?

• (Nominal GDP × GDP deflator) / 100
• (Nominal GDP / GDP deflator) × 100
• (Nominal GDP + GDP deflator) × 100
• (Nominal GDP - GDP deflator) / 100

Which of the following is a positive consequence of economic growth?

• Higher unemployment
• Increased tax revenues for the government
• Greater income inequality
• Higher pollution levels