Small Differences in the Annual Rate of Economic Growth Can

question 1

Multiple Choice

Small differences in the annual rate of economic growth can make substantial differences in living standards a few decades later because

• A) each year the increase in output is added to a larger base, thus compounding its impact.
• B) increases in output create surplus labor, keeping costs low.
• C) the more rapid the rate of growth, the higher the rate of inflation.
• D) increases in output lead to greater increases in population, lowering overall standards of living.
• E) expanding economies use up national resources at a rapid rate and create substantial amounts of pollution.

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Definitions:

Partnerships

A legal form of business operation between two or more individuals who share management and profits.

Depression

A severe and prolonged downturn in economic activity, marked by significant declines in income, employment, and production, often more severe than a recession.

Gross Investment

The total amount spent on purchasing or constructing new capital goods over a specific time period, without accounting for depreciation.

Net Investment

Net investment refers to the total amount spent on purchasing new capital minus the depreciation on existing capital, indicating the growth of a company or economy's productive capacity.