Deck 7: Economic Growth

Question 1

What is the single most important factor influencing economic growth for an economy?

A) population growth
B) government regulation of big businesses
C) reducing the capital-to-labor ratio
D) increased productivity

Answer 1

D

Question 2

How much faster does it take for a $10,000 investment to increase to $20,000 if the average annual growth rate is 14% compared to 7%?

A) At 14%, the investment will double two years faster.
B) At 14%, the investment will double three years faster.
C) At 14%, the investment will double four years faster.
D) At 14%, the investment will double five years faster.

Answer 2

D

Question 3

Which of the following factors would be captured in total factor productivity?

A) the impact of a hurricane
B) an increase in infrastructure spending
C) increased extraction of natural resources
D) greater educational attainment

Answer 3

A

Question 4

What is the best measure of economic growth and standards of living in a country?

A) nominal GDP
B) nominal GDP per capita
C) real GDP
D) real GDP per capita

Question 5

In the following PPF, between which two points would short-run growth be represented?

A) A to B
B) A to C
C) B to C
D) C to D

Question 6

The provision of Pell Grants and the G.I. Bill are examples of government investment in:

A) human capital.
B) technology.
C) physical capital.
D) infrastructure.

Question 7

Which of the following is NOT an effective tool used by government to promote economic growth?

A) a strong legal system to enforce contracts
B) trade barriers to protect domestic industries
C) a stable currency and financial system
D) investing in infrastructure and human capital

Question 8

In the following PPF, between which two points would long-run growth be represented?

A) A to B
B) A to C
C) B to C
D) C to D

Question 9

If an economy is growing at 10%, how long will it take for $1,000 to turn into $4,000?

A) 7 years
B) 14 years
C) 21 years
D) 28 years

Question 10

If real GDP increased from $10 billion to $11 billion from the first quarter of 2016 to the first quarter of 2017, but had increased by 4% from the fourth quarter of 2016 to the first quarter of 2017, the BEA would report first quarter of 2017 GDP growth as _____ using the year-over-year method and _____ using the annualized method.

A) 10%; 4%
B) 10%; 16%
C) 40%; 4%
D) 40%; 16%

Question 11

An example of a less tangible component of a country's infrastructure is:

A) a new highway.
B) refurbished airports.
C) property rights.
D) high-speed rail tracks.

Question 12

Which of the following would be an example of factors that lead to long-run growth?

A) electrical workers temporarily laid off being called back to work
B) an increase in the percentage of the population earning graduate degrees
C) a new store opening up in a shopping mall after a former store had closed last year
D) All of the above are examples of factors leading to long-run growth.

Question 13

Which of the following is NOT an example of an intellectual property right?

A) patent
B) copyright
C) trademark
D) land deed

Question 14

Which of the following combinations would result in the most economic freedom?

A) strong trade protection, competitive markets, and many regulations
B) strong trade protection, competitive markets, and limited regulation
C) free trade, market power, and moderate regulations
D) free trade, competitive markets, and limited regulations

Question 15

If you have $100,000 in a 401(k) growing 10% per year on average, how much will this be worth in 35 years when you retire?

A) $500,000
B) $800,000
C) $1,600,000
D) $3,200,000

Question 16

The concept of diminishing returns to capital would suggest that an additional unit of capital would be most productive in which of the following countries?

A) Canada, which has 100 units of capital per worker
B) Brazil, which has 50 units of capital per worker
C) Honduras, which has 20 units of capital per worker
D) The additional unit of capital would be equally productive in all three countries.

Question 17

Which factor of production enhances the productive capacity of all other resources in the production function?

A) physical capital
B) technology
C) labor
D) natural resources

Question 18

Which effect best explains why Ethiopia (a poor country) is able to achieve a high growth rate while Japan (a rich country) struggles with low growth?

A) technology effect
B) capital effect
C) labor effect
D) catch-up effect

Question 19

Use the production function: output = A × (L + K + H + N). If there are two units of land, two units of human capital, three units of natural resources, five units of physical capital, and technology value of three, what is the output that can be produced?

A) 12
B) 15
C) 36
D) 50

Question 20

Which of the following is NOT considered an example of one of the four main factors of production?

A) mineral deposits
B) internship programs
C) construction cranes
D) cash bonds

Question 21

Which statement about the Rule of 70 is true?

A) It is fairly accurate for small growth rates.
B) It becomes more accurate over time.
C) It provides an exact estimate of compounded values over time.
D) It states that the number of years required for a value to double in size is 70 times the growth rate.

Question 22

The World Bank defines extreme poverty as a person living on less than:

A) $1.25 per day.
B) $2 per day.
C) $16 per day.
D) $5,763 per year.

Question 23

Which of the following statements is NOT true?

A) Economic growth leads to lower poverty rates.
B) Economic growth always leads to a more equitable distribution of income.
C) Economic growth leads to longer life expectancies.
D) Economic growth leads to increased consumption of goods and services.

Question 24

If a country's population increases at a higher rate than the growth in its real GDP:

A) GDP per capita has increased.
B) the standard of living in the country has declined.
C) average output per person remains constant.
D) the country's rate of inflation has increased.

Question 25

If an economy's GDP will double in 25 years, then its growth rate must be about:

A) 2.5%.
B) 2.8%.
C) 25%.
D) 28%.

Question 26

If the actual growth rate of U.S. GDP was 1.25% from the first quarter to the second quarter, the Bureau of Economic Analysis would report the annualized rate as:

A) 0.3125%.
B) 1.25%.
C) 5%.
D) 15%.

Question 27

Between 1990 and 2010, the number of people in the world living in poverty has:

A) stayed roughly the same.
B) been cut in half.
C) doubled.
D) increased by 50%.

Question 28

If the growth rate in an economy is 3.5%, then its GDP will double in about:

A) 3.5 years.
B) 20 years.
C) 70 years.
D) 245 years.

Question 29

Economic growth is most commonly measured by:

A) GDP.
B) GDP per capita.
C) Genuine Progress Indicator per capita.
D) real GDP per capita.

Question 30

If a country's population increases at a slower rate than the growth in its real GDP:

A) GDP per capita has increased.
B) the standard of living in the country has declined.
C) average output per person has decreased.
D) the country's rate of inflation has decreased.

Question 31

Which of the following is NOT one of the BRIC countries (four countries that overcame significant obstacles to have the highest growth rates among industrialized countries in 2012)?

A) Bolivia
B) Russia
C) India
D) China

Question 32

Which statement about the Rule of 70 is NOT true?

A) It is a valuable tool for understanding the power of compounding growth rates over time.
B) It is fairly accurate for small growth rates.
C) It becomes more accurate over time.
D) It is an easy way to approximate the number of years it takes for an amount to double in value.

Question 33

If the growth rate in an economy is 2%, its GDP will double in about:

A) 70 years.
B) 140 years.
C) 35 years.
D) 28 years.

Question 34

Which of the following occurrences is the key explanation for the high economic growth in the United States in the past century?

A) investment in human capital
B) increasing the capital-to-labor ratio
C) technology improvements
D) an increase in population

Question 35

In the United States, real GDP is measured by:

A) the Federal Reserve.
B) the Congressional Budget Office.
C) the National Bureau of Economic Research.
D) the Bureau of Economic Analysis.

Question 36

For which growth rate would the Rule of 70 be least accurate?

A) 1%
B) 15%
C) 20%
D) 30%

Question 37

For which growth rate would the Rule of 70 be most accurate?

A) 1%
B) 15%
C) 20%
D) 30%

Question 38

If the Bureau of Economic Analysis reports that the annualized U.S. growth rate was 2.5% for the second quarter, then the actual growth rate from the first quarter to the second quarter was:

A) 0.625%.
B) 2.5%.
C) 7.5%.
D) 10%.

Question 39

If an economy's GDP will double in 15 years, then its growth rate must be about:

A) 7%.
B) 4.7%.
C) 10%.
D) 15%.

Question 40

Policymakers look at _____ to compare growth rates over an entire year without seasonal ups and downs.

A) year-over-year GDP growth rates
B) annualized GDP growth rates
C) quarter-to-quarter annualized growth rates
D) quarterly growth rates

Question 41

Land and natural resources include:

A) the mental and physical talents of people.
B) human capital.
C) manufactured products that are used to produce other goods and services.
D) water and minerals that come from the earth.

Question 42

Every year in India:

A) about 1 million people get out of poverty.
B) tens of millions of people get out of poverty.
C) tens of millions people fall into poverty.
D) about 1 million people fall into poverty.

Question 43

If your goal was to have the largest amount of money in your bank account in two years, which of the following would you choose? (Assume that the beginning deposit and all interest earnings remain in the account for the full two years.)

A) A beginning deposit of $1,000, earning 4% per year
B) A beginning deposit of $950, earning 5% per year
C) A beginning deposit of $930, earning 8% per year
D) A beginning deposit of $1,010 earning, 3% per year

Question 44

Which statement about short-run economic growth is NOT true?

A) It occurs when an economy makes use of underutilized resources.
B) It is easier to achieve than long-run economic growth.
C) It is likely to occur when countries are recovering from an economic downturn.
D) It is likely to occur when obstacles preventing resources from being used are put in place.

Question 45

(Table) According to the table, which country will have the highest real GDP per capita in 23.67 years? $$\begin{array} { | l | l | l | l | l | } \hline & \text { Ecoland } & \text { Macia } & \text { Nomia } & \text { Coland } \\\hline \text { Real GDP per capita, current year } & \$ 10,000 & \$ 22,000 & \$ 28,000 & \$ 30,000 \\\hline \text { Growth rate real GDP per capita } & 12 \% & 6 \% & 3 \% & 3 \% \\\hline\end{array}$$

A) Ecoland
B) Macia
C) Nomia
D) Coland

Question 46

When Main Street Bank buys new automatic teller machines, the quantity of _____ in the economy increases.

A) land and natural resources
B) labor
C) physical capital
D) entrepreneurial ability, technology, and ideas

Question 47

Labor includes all of the following factors EXCEPT:

A) the physical talents of people.
B) the ability to use physical resources in creative ways to produce goods and services.
C) the mental talents of people.
D) the time and effort provided by migrant workers on farms.

Question 48

Which statement about long-run economic growth is true?

A) It occurs when an economy makes use of underutilized resources.
B) It is easier to achieve than short-run economic growth.
C) It is likely to occur when the capacity to produce goods and services increases.
D) It is likely to occur when obstacles preventing resources from being used are reduced.

Question 49

Human capital includes:

A) physical capital.
B) labor.
C) the improvements to labor capabilities from training, education, and apprenticeship programs.
D) pension plans that enable early retirement.

Question 50

(Table) According to the table, who will have higher real per capita GDP in 11.67 years? $$\begin{array} { | l | l | l | l | l | } \hline & \text { Ecoland } & \text { Macia } & \text { Nomia } & \text { Coland } \\\hline \text { Real GDP per capita, current year } & \$ 10,000 & \$ 22,000 & \$ 28,000 & \$ 30,000 \\\hline \text { Growth rate real GDP per capita } & 12 \% & 6 \% & 3 \% & 3 \% \\\hline\end{array}$$

A) Ecoland because it has a higher growth rate and starting level
B) Macia because it has a higher growth rate and starting level
C) Ecoland because its output will double and then double again
D) Macia because its starting level is high enough that Ecoland will not have enough time to catch up

Question 51

The percentage of the world's population that is poor, defined by the $2 per day threshold, is about:

A) 10%.
B) 15%.
C) 20%.
D) 30%.

Question 52

Improvements in production capacity will:

A) rotate the PPF clockwise.
B) move the economy up to the PPF.
C) move the economy along the PPF.
D) shift the PPF outward.

Question 53

The ability to use physical resources in creative ways to produce goods and services is known as:

A) labor.
B) natural resources.
C) physical capital.
D) entrepreneurial ability, technology, and ideas.

Question 54

Physical capital includes:

A) the physical talents of people.
B) the ability to take physical resources and use them in creative ways to produce goods and services.
C) manufactured products that are used to produce other goods and services.
D) land and raw resources that come from land.

Question 55

Technology:

A) is a physical resource.
B) improves the productivity of all factors.
C) is a manufactured product used to produce other goods and services.
D) is another term for entrepreneurial ability.

Question 56

The natural gas deposits found in the United States over the past decade are an example of an increase in:

A) land and natural resources.
B) labor.
C) physical capital.
D) entrepreneurial ability, technology, and ideas.

Question 57

The Rule of 70 would be most accurate for estimating the doubling time in which of the following situations?

A) the growth rate is steady at 15%
B) the growth rate is variable but averages 15%
C) the growth rate is steady at 4%
D) the growth rate is variable but averages 4%

Question 58

(Table) According to the table, which country will double its real GDP per capita most quickly? $$\begin{array} { | l | l | l | l | l | } \hline & \text { Econia } & \text { Macroland } & \text { Nomicia } & \text { Zaria } \\\hline \text { Real GDP per capita, current year } & \$ 5,000 & \$ 8,000 & \$ 12,000 & \$ 15,000 \\\hline \text { Growth rate of real GDP per capita } & 10 \% & 7 \% & 4 \% & 1 \% \\\hline\end{array}$$

A) Econia
B) Macroland
C) Nomicia
D) Zaria

Question 59

Refer to the production possibilities frontiers below. Panel A illustrates _____ economic growth and Panel B illustrates _____ economic growth.

A) short-run; short-run
B) short-run; long-run
C) long-run; long-run
D) long-run; short-run

Question 60

(Table) According to the table, which country will have the lowest real GDP per capita in 23.67 years? $$\begin{array} { | l | l | l | l | l | } \hline & \text { Ecoland } & \text { Macia } & \text { Nomia } & \text { Coland } \\\hline \text { Real GDP per capita, current year } & \$ 10,000 & \$ 22,000 & \$ 28,000 & \$ 30,000 \\\hline \text { Growth rate real GDP per capita } & 12 \% & 6 \% & 3 \% & 3 \% \\\hline\end{array}$$

A) Ecoland
B) Macia
C) Nomia
D) Coland

Question 61

The capital-to-labor ratio measures:

A) the average number of hours worked.
B) the financial resources of a company divided by the number of employees.
C) the rate of technological improvement.
D) the amount of economic capital per worker.

Question 62

Which is NOT a source of productivity growth?

A) raising the capital-to-labor ratio
B) increasing the quality of labor
C) moving resources from production to pension benefits
D) making investments in technological improvements

Question 63

The classical form of the production function states that output is determined by:

A) population growth.
B) some function of available labor or capital.
C) some function of the money supply.
D) the government.

Question 64

The classical form of the production function states that:

A) Output = f(L/K)
B) Output = f(N, K)
C) Output = f(L, K)
D) Output = f(N/K)

Question 65

Improvements in technology:

A) explain most of the economic growth in recent decades.
B) caused the last recession.
C) are relatively unimportant for today's standard of living.
D) have slowed in the past 100 years.

Question 66

According to the classical model, which of the following developments does NOT contribute to economic growth?

A) labor productivity
B) more capital
C) technological change
D) higher interest rates

Question 67

If output equals A × (5K + 2L), what is output if A equals 2,000, capital equals 10, and labor equals 100?

A) 500,000
B) 120,000
C) 50,000
D) 12,000

Question 68

Which of the following does NOT increase productivity?

A) research and development
B) improvements in labor quality
C) capital investment
D) an increased money supply

Question 69

Which of the following is NOT a factor in the production function?

A) labor
B) technology
C) money
D) capital

Question 70

An increase in physical capital per worker will:

A) lead to more output per worker.
B) lead to lower standards of living.
C) increase standards of living only if coupled with an increase in other inputs.
D) reduce the productivity of labor.

Question 71

Given the form of a typical production function, which of the following would have the greatest impact on the output of a country?

A) A increases by 50%.
B) L increases by 50%.
C) K increases by 50%.
D) N increases by 50%.

Question 72

Rocky Gap Furniture hires ten employees working eight hours each to produce 100 rocking chairs. What is the productivity of these workers?

A) 2.5 chairs per hour
B) 1.25 chairs per hour
C) 100 chairs
D) 50 chairs

Question 73

A production function:

A) shows the output that is produced using different combinations of inputs combined with existing technology.
B) shows the output that is produced using different combinations of technology combined with existing inputs.
C) shows the output that is most highly valued by consumers.
D) shows the most desired production method for a given level of output.

Question 74

A production function says output per worker equals A × f(L/L, K/L, H/L, N/L) and tells us all of the following EXCEPT _____ will lead to a better standard of living.

A) increases in capital
B) more people
C) more human capital
D) more natural resources

Question 75

Investment in human capital is important because:

A) humans need capital.
B) it lowers the total wage bill.
C) it increases labor productivity.
D) it improves morale.

Question 76

Whispering Valley Furniture hires five employees working eight hours each to produce 80 rocking chairs. Rocky Gap Furniture hires ten employees working eight hours each to produce 160 rocking chairs. Which company's workers are more productive?

A) Whispering Valley Furniture's workers are more productive.
B) Rocky Gap Furniture's workers are more productive.
C) The two companies' workers are equally productive.
D) It is not possible to determine which workers are more productive.

Question 77

Whispering Valley Furniture hires five employees working eight hours each to produce 80 rocking chairs. Rocky Gap Furniture hires ten employees working eight hours each to produce 100 rocking chairs. Which company's workers are more productive?

A) Whispering Valley Furniture's workers are more productive.
B) Rocky Gap Furniture's workers are more productive.
C) The two companies' workers are equally productive.
D) It is not possible to determine which workers are more productive.

Question 78

Which of the following is a source of increases in productivity?

A) research and development
B) improvements in labor quality
C) capital investment
D) All of the answers are correct.

Question 79

If technology is held constant, an increase in capital concurrent with a decrease in labor input causes output to:

A) rise, fall, or stay the same.
B) rise.
C) fall.
D) stay the same.

Question 80

Which of the following increases productivity?

A) increased skills in the labor force
B) young labor force
C) poorly educated labor force
D) large labor force