Chapter 1 -- Quiz -- General

Thomas Piketty, Capital in the 21st Century (Harvard University Press 2014)

Patrick Toche

Question 1

World Population is about

  1. 7 Trillion
  2. 6 Trillion
  3. 7 Billion
  4. 6 Billion
  5. 7 Million
  6. 6 Million

Read the units carefully!

See Table 1.1

Question 2

The Population of Africa is about

  1. 3 Billion
  2. 2 Billion
  3. 1 Billion
  4. 500 Million
  5. 200 Million
  6. 100 Million

Read the units carefully!

See Table 1.1

Question 3

The Population of Asia is about

  1. 6 Billion
  2. 5 Billion
  3. 4 Billion
  4. 3 Billion
  5. 2 Billion
  6. 1 Billion

Read the units carefully!

See Table 1.1

Question 4

The most populated countries of Europe are

  1. Germany, France, Italy, Spain, Portugal
  2. Germany, France, United Kingdom, Spain, Portugal
  3. Germany, France, Austria, United Kingdom, Sweden
  4. Austria, France, United Kingdom, Portugal, Netherlands
  5. Germany, Belgium, Austria, Sweden, Norway
  6. Germany, France, United Kingdom, Italy, Spain

The countries are also ranked by their population.

See Chapter 1. Portugal and Sweden are not among the most populated countries in Europe, so that leaves the last suggestion as the correct answer.

Question 5

The most populated countries of Asia are

  1. China, India, Indonesia, Pakistan, Bangladesh, Russia
  2. China, India, Indonesia, Pakistan, Japan, Philippines
  3. China, India, Indonesia, Pakistan, Japan, Russia
  4. China, India, Japan, Russia, Philippines, Indonesia
  5. China, India, Japan, Russia, Indonesia, Philippines
  6. China, India, Japan, Russia, Pakistan, Philippines

The countries are also ranked by their population.

See Chapter 1. Pakistan and Indonesia are more populated than Japan, so that rules out the last three suggestions. Russia is more populated than Japan, so that leaves the first suggestion as the correct answer.

Question 6

The total GDP of Europe (including Russia) and America (from North to South) together is about

  1. 85% of world GDP
  2. 70% of world GDP
  3. 55% of world GDP
  4. 40% of world GDP
  5. 25% of world GDP
  6. 10% of world GDP

Europe includes Western and Eastern Europe, with Russia included. America includes Canada, the United States, Mexico, Brazil, Argentina, etc..

See Table 1.1

Question 7

The total GDP of Asia accounts for about

  1. 70% of world GDP
  2. 60% of world GDP
  3. 50% of world GDP
  4. 40% of world GDP
  5. 30% of world GDP
  6. 20% of world GDP

Asian output makes up a smaller world share than Asian population.

See Table 1.1

Question 8

The total GDP of Africa accounts for about

  1. 30% of world GDP
  2. 25% of world GDP
  3. 20% of world GDP
  4. 15% of world GDP
  5. 10% of world GDP
  6. 5% of world GDP

African output makes up a much smaller world share than African population.

African output makes up a much smaller world share than African population. 1 billion people but only 5% of world output!. See Table 1.1.

Question 9

World annual GDP per capita is about

  1. 25,000 euros
  2. 20,000 euros
  3. 15,000 euros
  4. 10,000 euros
  5. 5,000 euros
  6. 2,000 euros

The rich countries have GDP per capita about 3-5 times the world average.

See Table 1.1

Question 10

Countries ranked by GDP per capita

  1. United States, China, Germany, India, Mexico, Brazil
  2. United States, China, Germany, Canada, Brazil, India
  3. Germany, China, Portugal, Argentina, Egypt, Cuba
  4. Sweden, Argentina, India, China, Vietnam, Burma
  5. Germany, Spain, Mexico, China, India, Kenya

Eliminate by spotting the clear outliers.

The GDP per capita of China is below the world average, so that immediately rules out the first 3 suggestions. China is richer than India, so that leaves the last suggestion as the correct answer.

Question 11

Explain the difference between Gross Domestic Product and Net National Product. How large can the difference be? Illustrate with examples.

Explain the difference between Gross and Net, and between Domestic and National.

There are 2 main adjustments. To go from Gross to Net, deduct the depreciation of the capital stock (analogous to a 'disinvestment'). To go from Domestic to National, deduct incomes paid to foreign residents (e.g. payments to foreign consultants) and add incomes from paid to national residents from abroad (e.g. local resident earning rental payments on a house owned in a foreign country). The first adjustment results in the Net product being about 10% smaller than the Gross product. The second adjustment typically results in a 1-2% adjustment, except in countries with very large balance of payments imbalances, e.g. Ireland, Philippines. In Ireland, foreign investments are high, owing to favourable taxation, and receive a very high share of corporate profit. In the Philippines, many nationals work abroad (3.5 milion work in the United States, 1.3 million work in Saudi Arabia, 1 million in the United Arab Emirates) and repatriate their saving.

Question 12

When comparing incomes across countries, economists sometimes use market exchange rates and sometimes 'purchasing power parity' rates. Discuss the pros and cons of these approaches. How important is the difference in practice? Illustrate with examples.

Question 13

One measure of a country's wealth is the aggregate wealth/income ratio (which Piketty calls the 'capital/income ratio'). What can this ratio teach us about wealth? What can this ratio not teach us?

Question 14

Define, describe, and discuss Piketty's 'First Fundamental Law of Capitalism.'