Deck 11: Economic Growth and the Wealth of Nations

Question 1

Average income in Western Europe in 1600 was, in inflation-adjusted terms, roughly

A) $1,400.
B) $1,555.
C) $1,200.
D) $4,100.
E) $1,368.

Answer 1

A

Question 2

In 1820, average world income was, in inflation-adjusted terms, roughly

A) $628.
B) $816.
C) $554.
D) $1,100.
E) $778.

Answer 2

D

Question 3

Average world income began to increase rapidly during the

A) Enlightenment.
B) Dark Ages.
C) Second World War.
D) War of the Ring.
E) Industrial Revolution.

Answer 3

E

Question 4

An increase in the amount of household wealth in an economy would _____the average standard of living and would_____ the spending power experienced by the typical person.

A) raise; have little effect on
B) raise; improve
C) raise; reduce
D) have no effect on; improve
E) lower; reduce

Question 5

Using 2010 U.S. dollars, in 2000 annual real per capita gross domestic product GDP) in the United States was around________ , whereas in China, it was around______ .

A) $5,200; $44,000
B) $36,000; $18,000
C) $44,000; $5,200
D) $72,000; $12,000
E) $44,000; $9,000

Question 6

Using 2010 U.S. dollars, in 2000 annual real per capita gross domestic product (GDP) in Western Europe was around________ , whereas in India, it was around _______.

A) $2,900; $31,000
B) $46,000; $4,200
C) $28,000; $20,000
D) $75,000; $5,600
E) $31,000; $2,900

Question 7

Economic growth is defined as the percent change of

A) gross domestic product (GDP).
B) real gross domestic product (GDP).
C) real per capita gross domestic product (GDP).
D) per capita gross domestic product( GDP).
E) population.

Question 8

According to the World Bank, the 31 wealthiest countries in the world tended to have much lower rates of _____and much higher rates of _____when compared to the 40 poorest countries.

A) adult literacy; cell phone subscriptions
B) access to water; access to sanitation
C) infant mortality; adult literacy
D) Internet users; life expectancy
E) educational achievement; life expectancy

Question 9

Residents of poor countries tend to have fewer automobiles per capita because

A) lower per capita real gross domestic product GDP) growth rates allow for less spending on automobiles.
B) residents of poor countries tend to live on farms, where cars are unnecessary.
C) residents of wealthy countries have automobiles provided to them by the government.
D) tax rates are higher in poor countries, which leaves less money to spend on cars.
E) residents of poor countries generally prefer to walk.

Question 10

According to the textbook, which of the following countries is NOT considered a "wealthy nation"?

A) Denmark
B) Israel
C) Germany
D) Liberia
E) the United States

Question 11

Residents of wealthy countries tend to have longer life expectancies because

A) the residents of wealthier countries tend to work harder than those in poor countries.
B) the government meets all health care needs in wealthy countries.
C) higher per capita real gross domestic product GDP) growth rates allow for more spending on health care.
D) consumers in wealthy countries face lower health care costs.
E) the residents of poor countries have no desire to consume health care.

Question 12

If you earn a subsistence-level income, much of your time is spent acquiring

A) luxury items, such as expensive cars and a nice house.
B) tax cuts, which will raise your take-home pay.
C) education and training, to better improve your earnings.
D) entertainment and consumer electronics.
E) basic necessities such as food, clothing, and shelter.

Question 13

Residents of poor countries tend to have higher rates of infant mortality because

A) residents of wealthy countries have all their health care provided by the government.
B) residents of poor countries tend to have fewer children than residents in wealthy countries have.
C) consumers in poor countries face higher tax rates and have less to spend on health care.
D) lower per capita real gross domestic product GDP) growth rates allow for less spending on health care.
E) mothers in poor countries tend to wait until they are much older before having children.

Question 14

In 1800, the average income of U.S. citizens was, in inflation-adjusted terms, roughly

A) $100.
B) $400.
C) $19,600.
D) $2,000.
E) $750.

Question 15

Higher rates of real per capita gross domestic product GDP) are negatively correlated with

A) better education.
B) better health care.
C) shorter life expectancy.
D) the number of physicians per capita.
E) adult literacy.

Question 16

Per capita real gross domestic product GDP) is higher in the United States than in Mexico. Based on that, we could predict the United States to have a higher rate of_____ and a lower rate of ______.

A) infant mortality; life expectancy
B) Internet users; automobile ownership
C) educational achievement; physicians per capita
D) Internet users; infant mortality
E) cellular phone use; personal computer use

Question 17

Real per capita gross domestic product (GDP) is defined as the

A) market value of all final goods and services consumed in a country.
B) average number of goods produced in a country.
C) average level of income in a country.
D) median level of income in a country.
E) total level of income in a country.

Question 18

Long-run per capita world income growth was basically flat until around what year?

A) 1500
B) 1600
C) 1700
D) 1800
E) 1900

Question 19

Which of the following statements best describes the average standard of living for much of human history, prior to the Industrial Revolution?

A) There were no rich people; everyone earned the same income.
B) Average income around the world was basically unchanged for centuries.
C) Total income around the world was basically unchanged for centuries.
D) There were no class differences across nations.
E) The vast majority of people were wealthy, with only a few earning subsistence wages.

Question 20

Average world income began to rapidly rise during the Industrial Revolution because

A) population growth outpaced the pace of technological innovation.
B) governments in Western Europe sharply cut taxes.
C) the United States gained its independence from Great Britain.
D) the pace of technological innovation outpaced population growth.
E) there were few wars during that time period.

Question 21

Access to lifesaving medicine is very limited in parts of Africa; as a result, over 10 percent of children do not reach the age of five. What effect would an increase in medical aid to African children have on overall economic growth for the continent?

A) Economic growth would not be affected; medical aid does not contribute to gross domestic product (GDP).
B) Economic growth would decrease because there would be more people to feed but no additional resources.
C) Economic growth would not be affected because children do not contribute to economic growth.
D) Economic growth would increase because the health and productivity of the labor supply would increase.
E) Economic growth would increase because more children would survive, which represents a technological advance.

Question 22

From 2009 to 2010, nominal gross domestic product (GDP) in the United States grew by 3.8 percent. Given that prices increased by 1 percent and the population grew by 1 percent, we know that per capita real GDP grew by

A) 3.8 percent.
B) 1.8 percent.
C) 2.8 percent.
D) 5.8 percent.
E) 4.8 percent.

Question 23

Annual real per capita gross domestic product (GDP) in the United States was roughly $44,000 in 2010. If it grew by 3 percent the following year, by 2011 the annual real per capita GDP would be

A) $57,200.
B) $42,718.
C) $33,846.
D) $45,320.
E) $1,320.

Question 24

The percent change in nominal gross domestic product (GDP) minus the percent change in prices and the rate of population growth equals

A) real per capita GDP.
B) the percent change in real GDP.
C) the percent change in per capita GDP.
D) the percent change in per capita real GDP.
E) real GDP.

Question 25

Change in per capita real gross domestic product (GDP) is the best measure of economic growth because it

A) adjusts changes in nominal GDP for changes in the price level and population growth.
B) ignores changes in the price level used to compute nominal GDP.
C) includes government spending, whereas nominal GDP does not.
D) includes all economic activity, including sales of illegal goods and services, which nominal GDP ignores.
E) does not consider changes in the population, which are not relevant to GDP anyway.

Question 26

Economic growth equals the percent change in nominal gross domestic product (GDP) minus the

A) percent change in prices and the rate of population growth.
B) percent change in prices.
C) rate of population growth.
D) percent change in prices and the federal budget deficit.
E) rate of population growth and the percent change in investment.

Question 27

Average income in Western Europe in 1600 was roughly $1,400 per year, while in Latin America, it was less than half of that. Which of the following best explains this difference in average income?

A) Western Europe had fewer resources than Latin America.
B) Western Europe had never been invaded or colonized, whereas Latin America had.
C) Western Europe had more advanced technology than Latin America.
D) Western Europe had lower taxes than Latin America.
E) Western Europe had a better climate than Latin America.

Question 28

From 2013 to 2014, U.S. real gross domestic product (GDP) increased by 2.4 percent and the U.S. population grew by 0.7 percent. Therefore, per capita real GDP in the United States increased by

A) 2.8 percent.
B) 1.7 percent.
C) 3.8 percent.
D) 5.4 percent.
E) 1.8 percent.

Question 29

In 2015, Canada's gross domestic product (GDP) was roughly $1.6 trillion. Given that Canada's population was roughly 36 million people, per capita GDP in Canada in 2011 was roughly

A) $4,180.
B) $417,960.
C) $0.23.
D) $44,444.
E) $23,000.

Question 30

In 2014, U.S. gross domestic product( GDP) was roughly $17.4 trillion. Given that the U.S. population was roughly 319 million people, per capita GDP in the United States in 2014 was roughly

A) $4,760.
B) $0.22.
C) $54,545.
D) $22,000.
E) $475,990.

Question 31

Nominal gross domestic product (GDP) is a poor measure of economic growth because it

A) does not count investment by private businesses.
B) overstates the importance of consumer spending.
C) does not include government spending.
D) ignores imports and exports.
E) does not consider changes in prices or population growth.

Question 32

The two factors that must be added to the percent change in per capita real gross domestic product (GDP) to yield the percent change in nominal GDP are the

A) percent change in prices and the rate of investment.
B) rate of investment and the rate of savings.
C) percent change in prices and the rate of population growth.
D) rate of population growth and the rate of savings.
E) rate of investment and the rate of population growth.

Question 33

The two factors that must be subtracted from the percent change in nominal gross domestic product (GDP) to yield the percent change in per capita real GDP are the

A) percent change in prices and the rate of investment.
B) percent change in prices and the rate of population growth.
C) rate of investment and the rate of savings.
D) rate of population growth and the rate of savings.
E) rate of investment and the rate of population growth.

Question 34

From 2009 to 2010, nominal gross domestic product (GDP) in the United States grew by 3.8 percent. Given that prices increased by 1 percent and per capita real GDP grew by 1.8 percent, we know that the population grew by

A) 2.0 percent.
B) 1.8 percent.
C) 1.0 percent.
D) 4.8 percent.
E) 5.8 percent.

Question 35

Access to lifesaving medicine is very limited in parts of Africa; as a result, over 10 percent of children do not reach the age of five. What effect would this have on economic growth in Africa?

A) It would have no effect on economic growth because children do not contribute to economic growth.
B) It would slow economic growth because worker health and labor productivity would grow more slowly.
C) It would have no effect on economic growth because adults are less susceptible to illness.
D) It would increase economic growth because more money would be spent on medical research.
E) It would slow economic growth because fewer adults would be employed as teachers.

Question 36

In 2013, U.S. gross domestic product (GDP) was roughly

A) $16.8 trillion.
B) $1.68 trillion.
C) $168 trillion.
D) $168 billion.
E) $168 million.

Question 37

From 2013 to 2014, real gross domestic product (GDP) in the United States increased by

A) 2.8 percent.
B) 1.0 percent.
C) 3.8 percent.
D) 1.7 percent.
E) 5.4 percent.

Question 38

From 2013 to 2014, nominal gross domestic product( GDP) in the United States increased by

A) 8.3 percent.
B) 1.0 percent.
C) 3.9 percent.
D) 2.8 percent.
E) 5.4 percent.

Question 39

If an economy experiences economic growth, does that mean that everyone in that economy will be better off?

A) No, it means that the average person is better off.
B) Yes, that is the definition of economic growth.
C) Yes, but only if there is little immigration during that time period.
D) No, economic growth is not correlated with standards of living.
E) Yes, but only if nominal gross domestic product GDP) increases.

Question 40

The percent change in real per capita gross domestic product (GDP) equals the

A) percent change in nominal GDP.
B) percent change in nominal GDP minus the rate of population growth.
C) percent change in nominal GDP minus the rate of population growth minus the percent change in prices.
D) rate of population growth minus the percent change in prices.
E) rate of population growth.

Question 41

In 2011, per capita real gross domestic product (GDP) in Mexico was roughly $10,100. If Mexico experienced economic growth of 4.8 percent in 2012, per capita real GDP would increase to

A) $10,585.
B) $10,148.
C) $21,042.
D) $485.
E) $15,353.

Question 42

Annual real per capita gross domestic product (GDP) in India was roughly $2,900 in 2000. If it grew by 8 percent the following year, by 2001 the annual real per capita GDP would be

A) $3,132.
B) $2,908.
C) $5,220.
D) $6,080.
E) $4,760.

Question 43

In 2009, per capita real gross domestic product (GDP) in Croatia was $10,059.68. By 2010, it had increased to $10,257.71. At what rate did Croatia's economy grow in that time?

A) 2.0 percent
B) 1.9 percent
C) 2.1 percent
D) 4.5 percent
E) 3.3 percent

Question 44

In 2005, per capita real gross domestic product (GDP) in Angola was $3,328.10. By 2006, it had increased to $4,034.31. At what rate did Angola's economy grow in that time?

A) 8.2 percent
B) 21.2 percent
C) 17.5 percent
D) 7.1 percent
E) 10.1 percent

Question 45

When computing economic growth, changes in nominal gross domestic product (GDP) must be adjusted to reflect changes in the price level because

A) prices are nearly impossible to measure by government economists.
B) an increase in prices will decrease nominal GDP without any actual economic growth.
C) an increase in prices will increase nominal GDP without any actual economic growth.
D) changes in prices are primarily determined by the government.
E) changes in prices are largely irrelevant for consumers.

Question 46

From 2009 to 2010, nominal gross domestic product (GDP) in the United States grew by 3.8 percent. Given that the population grew by 1 percent and per capita real GDP grew by 1.8 percent, we know that prices increased by

A) 2.0 percent.
B) 1.8 percent.
C) 4.8 percent.
D) 1.0 percent.
E) 5.8 percent.

Question 47

In 2010, real gross domestic product (GDP) in the United States was roughly $14.6 trillion. In 2011, real GDP in the United States was roughly $15.1 trillion. Therefore, between 2010 and 2011, real GDP grew by

A) 4.3 percent.
B) 3.4 percent.
C) 3.3 percent.
D) 4.5 percent.
E) 0.5 percent.

Question 48

In the Republic of Yemen, per capita real gross domestic product (GDP) in 2004 was $2,109.27. By 2005, it had increased to $2,203.05. At what rate did Yemen's economy grow in that time?

A) 4.3 percent
B) 4.4 percent
C) 9.4 percent
D) 1.2 percent
E) 8.4 percent

Question 49

In 2007, per capita real gross domestic product (GDP) in Brazil was $9,893.92. By 2008, it had increased to $10,525.58. At what rate did Brazil's economy grow in that time?

A) 6.0 percent
B) 5.4 percent
C) 6.4 percent
D) 7.3 percent
E) 2.3 percent

Question 50

James has worked for the same company his entire life. His current income is $100,000 per year. When he was originally hired, he made $50,000 per year. The company has given James a consistent raise of 2 percent every year. How long has James been with the company?

A) 10 years
B) 25 years
C) 35 years
D) 50 years
E) 75 years

Question 51

In 2010, per capita real gross domestic product (GDP) in the United States was roughly $46,000. In 2011, per capita real GDP in the United States was roughly $48,400. Therefore, between 2010 and 2011, the rate of economic growth in the United States was

A) 2.5 percent.
B) 2.4 percent.
C) 4.9 percent.
D) 5.2 percent.
E) 0.5 percent.

Question 52

From 2009 to 2010, nominal gross domestic product (GDP) in the United States increased by 3.8 percent. Does this mean that the U.S. economy actually grew by 3.8 percent during that time period?

A) Yes, because that is what nominal GDP measures.
B) Yes, because nominal GDP takes into account changes in prices and the population.
C) No, because nominal GDP only considers changes in prices, not population growth.
D) No, because nominal GDP only considers population growth, not changes in prices.
E) No, because that number ignores changes in prices and population growth.

Question 53

Annual real per capita gross domestic product (GDP) in China was roughly $5,200 in 2000. If it grew by 10 percent the following year, by 2001 the annual real per capita GDP would be

A) $520.
B) $5,720.
C) $5,252.
D) $10,520.
E) $6,125.

Question 54

Annual real per capita gross domestic product (GDP) in Western Europe was roughly $31,000 in 2000. If it grew by 4 percent the following year, by 2001 the annual real per capita GDP would be

A) $57,800.
B) $35,910.
C) $43,400.
D) $31,400.
E) $32,240.

Question 55

If you attempted to determine if the standard of living of a country has increased by looking only at changes in its nominal gross domestic product (GDP), what would you be missing?

A) the fact that nominal GDP includes all economic activity, including sales of used goods and illegal goods
B) the fact that nominal GDP only considers changes in the price level but ignores changes in population
C) the fact that an increase in nominal GDP normally means that standards of living are falling, not rising
D) the fact that, in the long run, nominal GDP is the best measure of overall economic growth
E) the fact that an increase in nominal GDP does not necessarily mean that standards of living are rising, due to changes in prices and the population

Question 56

In 1998, per capita real gross domestic product (GDP) in Thailand was $4,444.19. By 1999, it had increased to $4,695.22. At what rate did Thailand's economy grow in that time?

A) 12.2 percent
B) 5.6 percent
C) 5.4 percent
D) 7.9 percent
E) 4.9 percent

Question 57

From 2009 to 2010, per capita real gross domestic product (GDP) in the United States grew by 1.8 percent. Given that prices increased by 1 percent and the population grew by 1 percent, we know that nominal GDP grew by

A) 4.8 percent.
B) 1.8 percent.
C) 2.8 percent.
D) 3.8 percent.
E) 5.8 percent.

Question 58

When computing economic growth, changes in nominal gross domestic product (GDP) must be adjusted to reflect population growth because

A) if real GDP remains the same, an increase in the population actually means a lower average standards of living.
B) an increase in population will tend to reduce nominal GDP.
C) changes in population tend to have no effect on standards of living.
D) if real GDP remains the same, an increase in the population actually means a raised average standards of living.
E) an increase in the population will tend to decrease average prices.

Question 59

If your income increases at a rate of 2 percent per year, how long will it take to double your income?

A) 10 years
B) 25 years
C) 35 years
D) 50 years
E) 75 years

Question 60

In 2010, per capita real gross domestic product (GDP) in Germany was $40,197.67. By 2011, it had increased to $43,741.55. At what rate did Germany's economy grow in that time?

A) 5.5 percent
B) 6.7 percent
C) 3.5 percent
D) 8.1 percent
E) 8.8 percent

Question 61

An example of physical capital is

A) exhaust from a smokestack.
B) a factory.
C) dog food.
D) a pillow.
E) pants.

Question 62

We know that resources are important for economic growth. Which of the following statements about resources is true?

A) All resources are ultimately man-made, because without their use by people, resources would have no value.
B) Very few resources are truly scarce; in fact, most exist in abundance.
C) Resources can be natural, like mineral deposits or forests, or man-made, like machinery and factories.
D) All countries have the same endowments of resources.
E) Most countries do a very poor job of exploiting the resources they have.

Question 63

From 2006 to 2010, per capita real gross domestic product (GDP) in Croatia grew an average of 1.08 percent per year. At that rate, according to the Rule of 70, in roughly how many years will the Croatian economy double in size?

A) 65 years
B) 29 years
C) 69 years
D) 51 years
E) 34 years

Question 64

A(n)____ in the amount of resources will tend to _______economic growth.

A) increase; increase
B) increase; have no effect on
C) decrease; have no effect on
D) increase; decrease
E) decrease; increase

Question 65

Which of the following are the three major categories of resources?

A) physical capital, technology, institutions
B) land, labor, technology
C) institutions, human capital, land
D) natural resources, physical capital, human capital
E) labor, physical capital, technology

Question 66

Resources are

A) the output that firms produce.
B) inputs used to produce goods and services.
C) the technology that firms use to make things.
D) the institutions that encourage efficiency.
E) the cost of producing goods and services.

Question 67

In 1950, Nicaragua and Brazil had roughly the same size economies. Now, Brazil's economy is almost five times as large as Nicaragua's. This is most likely because

A) Brazil had almost no trade with other countries.
B) Nicaragua had higher taxes and government spending.
C) Brazil had better resources and technology.
D) Nicaragua had many more government regulations.
E) Brazil had no public school system and used private schools instead.

Question 68

From 2006 to 2010, per capita real gross domestic product (GDP) in Egypt grew an average of 4.8 percent per year. At that rate, according to the Rule of 70, in roughly how many years will the Egyptian economy double in size?

A) 3 years
B) 15 years
C) 65 years
D) 22 years
E) 35 years

Question 69

Japan is a nation of over 6,800 islands, none of which is very large. The largest island, Honshu, is roughly the same size as the state of Montana in the western United States. Does this mean that Japan is destined to have low economic growth and standards of living?

A) Yes, if Japan cannot grow enough food, it will never prosper.
B) No, as long as Japan keeps its taxes low, it will prosper.
C) No, Japan is rich in other resources and has advanced levels of technology.
D) Yes, because it lacks the space of richer countries.
E) Yes, having so little land means there is no room to produce goods and services.

Question 70

The inputs used to produce goods and services are also known as

A) costs.
B) resources.
C) output.
D) prices.
E) institutions.

Question 71

Saudi Arabia is an oil-rich country in the Middle East. Much of the country is covered by desert, meaning that the nation's food production is very low. Much of its food must be imported from other countries. Does this mean that Saudi Arabia has a very small endowment of natural resources?

A) No, because Saudi Arabia has lots of petroleum, a fossil fuel, which is also considered a natural resource.
B) No, because very few people live in Saudi Arabia, so they have no use for large amounts of food production.
C) Yes, because it has very little land for growing food.
D) Yes, because it also lacks forests and rivers.
E) No, because Saudi Arabia irrigates much of its desert land for food production.

Question 72

Which of the following would be classified as a natural resource?

A) obtaining a college degree
B) a factory
C) coal
D) a loaf of bread
E) wireless networking equipment

Question 73

From 2006 to 2010, per capita real gross domestic product (GDP) in Japan grew an average of 0.46 percent per year. At that rate, according to the Rule of 70, in roughly how many years will the Japanese economy double in size?

A) 71 years
B) 128 years
C) 35 years
D) 225 years
E) 152 years

Question 74

An increase in_____ would lead to an increase in long-run economic growth.

A) consumer spending and borrowing
B) government taxes and fees
C) resources and technology
D) imports and exports
E) prices and interest rates

Question 75

From 2006 to 2010, per capita real gross domestic product (GDP) in India grew an average of 7.11 percent per year. At that rate, according to the Rule of 70, in roughly how many years will the Indian economy double in size?

A) 4.9 years
B) 9.8 years
C) 6.9 years
D) 7.1 years
E) 5.5 years

Question 76

From 2006 to 2010, per capita real gross domestic product (GDP) in China grew an average of 10.62 percent per year. At that rate, according to the Rule of 70, in roughly how many years will Chinese per capita real GDP double in size, beginning in 2006?

A) 7.4 years
B) 5.9 years
C) 8.1 years
D) 6.6 years
E) 9.9 years

Question 77

From 2006 to 2010, per capita real gross domestic product (GDP) in the Philippines grew an average of 3.16 percent per year. At that rate, according to the Rule of 70, in roughly how many years will the Filipino economy double in size?

A) 21 years
B) 12 years
C) 22 years
D) 45 years
E) 33 years

Question 78

From 2009 to 2010 per capita real gross domestic product (GDP) in the United States grew by 1.8 percent. At that rate, according to the Rule of 70, in roughly how many years will per capita real GDP double?

A) 29 years
B) 68 years
C) 72 years
D) 39 years
E) 18 years

Question 79

From 2006 to 2010, per capita real gross domestic product (GDP) in Ethiopia grew an average of 7.99 percent per year. At that rate, according to the Rule of 70, in roughly how many years will the Ethiopian economy double in size?

A) 6.2 years
B) 7.8 years
C) 8.8 years
D) 5.5 years
E) 10.1 years

Question 80

From 2006 to 2010, per capita real gross domestic product (GDP) in Poland grew an average of 4.71 percent per year. At that rate, according to the Rule of 70, in roughly how many years will the Polish economy double in size?

A) 7.6 years
B) 14.9 years
C) 12.1 years
D) 8.8 years
E) 8.4 years