Chapter 9

How to measure nation’s standard living
Real gross domestic product per capita (GDP)/population
The rule of 70
tells us that if a variable is growing by X percent per year, it will double in approximately 70/X years.
17) The Rule of 70 is used to
A) estimate how much of an economy’s growth rate is due to increases in capital per hour of labor
B) calculate the standard of living
C) calculate the economy’s growth rate
D) estimate how long it will take the level of any variable to double
D) estimate how long it will take the level of any variable to double
18) Using the Rule of 70, if China’s current growth rate of real GDP per person was 7 percent a year, how long would it take the country’s real GDP per person to double?
A) 35 years
B) 14 years
C) 10 years
D) 49 years
Rule of 70
70/x% years
70/7=10

C) 10 years

The amount of output the average worker produces in an hour is called labor productivity, or just productivity.
Productivity = Output per hour = Total output/Total hours worked
For example, if during a given year, all workers in the United States spent a total of 300 billion hours at their jobs and produced $15 trillion worth of output, then on average, labor productivity would be
Productivity =Total output/total hours worked
Trillion has 12 zeros and billion has 9 zeros
15000000000000000/300000000000000=$50 per hour
The average number of hours a worker spends on the job can be found by dividing the total hours worked by everyone by total employment (the number of people who worked during the period).
Average Hours = Total hours/Total employment
For example, if total employment is 150 million people and they work a total of 300 billion hours during the year, then average annual hours would be
Average Hours= Total hours worked/Total employment
300000000000/150000000
The fraction of the population that is working EPR. The employment population ratio
EPR = Total employment/Population
So if the total population is 300 million, and 150 million of them are working
EPR=Total employment/Population
150000000/300000000000=0.5
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