Deck 10: The Facts of Growth

Question 1

To what extent have the three main facts of growth not held for certain countries? For which countries have they not generally held?

Answer 1

There are three main conclusions. First,standards of living have increased significantly since 1950. Second,growth rates of output per capita decreased starting in the mid 1970s. And third,the levels of output per capita have tended to converge over time. These three main conclusions do not apply to many African countries. For example,standards of living have actually decreased for some countries.

Question 2

When switching from the "current exchange rate" method to the "purchasing power parity" method,India's standard of living in dollars

A)decreases.
B)remains essentially the same.
C)rises, but still remains far below that of the U.S.
D)rises almost to the level of the U.S.
E) leapfrogs over that of the U.S.

Answer 2

rises, but still remains far below that of the U.S.

Question 3

Over the last hundred years,

A)movements in output due to recessions and recoveries dominate the movement caused by long-run growth.
B)output has decreased in as many years as it has increased.
C)U)S. output has approximately doubled.
D)all of the above
E) none of the above

Answer 3

none of the above

Question 4

Using current exchange rates,the U.S.standard of living is ranked

A)higher than it would be under the purchasing power parity method.
B)lower than it would be under the purchasing power parity method.
C)number one in the world.
D)among the lowest in the world.
E) none of the above

Question 5

Which of the following best characterizes the economic growth for OECD countries since the mid-1970s?

A)Growth has come to a complete halt.
B)Growth has slowed down.
C)Growth has not changed since the 1950s and 1960s.
D)Growth has increased slightly.
E) Growth has increased dramatically.

Question 6

If output per capita grows by a constant 6% per year,then the standard of living would grow by about ________ over 3 years.

A)12%
B)17%
C)18%
D)19%
E) 20%

Question 7

Explain why economists do not use exchange rates to compare standards of living across countries.Also,discuss what economists do to avoid these problems.

Question 8

Between 1950 and 2004,standards of living in the OECD countries

A)did not change at all.
B)were converging.
C)all increased at the same rate.
D)decreased at the same rate.
E) decreased, but at different rates.

Question 9

Suppose individuals wish to obtain the most accurate comparison of living standards between the Canada and Saudi Arabia.To do so,one would convert Saudi Arabian output into dollars using

A)the current nominal exchange rate.
B)the current real exchange rate.
C)the prior year's real exchange rate.
D)an average of the last five years' exchange rates.
E) purchasing power parity methods.

Question 10

In the OECD countries,there is a negative relationship between output per capita in 1950 and

A)growth since 1950.
B)output per capita in the 1990s.
C)distance from the equator.
D)population.
E) none of the above

Question 11

Which of the following countries experienced the lowest level of output per capita in 2011?

A)United States
B)France
C)Japan
D)United Kingdom

Question 12

Which of the following countries had the highest level of output per capita in 1950?

A)United States
B)France
C)Japan
D)United Kingdom

Question 13

Which of the following countries had the highest rate of growth of output per capita between 1950 and 2011?

A)United States
B)France
C)Japan
D)United Kingdom

Question 14

Over the last half-century,which of the following countries has had the highest growth rate of output per capita?

A)Japan
B)France
C)United Kingdom
D)United States

Question 15

Which of the following countries had the lowest level of output per capita in 1950?

A)United States
B)France
C)Japan
D)United Kingdom

Question 16

Research by Richard Layard indicates that an increase in a country's level of output per capita will

A)always increase happiness in that country.
B)always decrease happiness in that country.
C)generally have no effect on happiness in that country.
D)increase happiness in that country if output per capita is relatively low.

Question 17

What are the three main conclusions that can be drawn from an analysis of growth rates for developed countries?

Question 18

By 2011,which of the following countries had the highest level of real output per capita?

A)United States
B)France
C)Japan
D)United Kingdom

Question 19

Of the following,the most often used measure of changing living standards is

A)the growth rate of nominal GDP.
B)the growth rate of real GDP.
C)the growth rate of nominal GDP per capita.
D)the growth rate of real GDP per capita.
E) unemployment per capita.

Question 20

Which of the following is a main conclusion about growth for OECD countries and the four rich countries examined in the chapter?

A)There has been a large increase in the standard of living since 1950.
B)The growth rates have decreased since the mid-1970s.
C)There has been a convergence of output per capita since 1950.
D)all of the above
E) none of the above

Question 21

Given the narrow interpretation of technology,technology will include which of the following?

A)how well firms are run
B)the organization and sophistication of markets
C)the political environment
D)none of the above

Question 22

Suppose there are two countries that are identical with the following exception.The saving rate in country A is greater than the saving rate in country B.Given this information,we know that in the long run

A)output per capita will be greater in B than in A.
B)output per capita will be greater in A than in B.
C)economic growth will be higher in A than in B.
D)more information is needed to answer this question.

Question 23

Given the broadest interpretation of technology,technology will include which of the following?

A)how well firms are run
B)the organization and sophistication of markets
C)the political environment
D)the list of blueprints defining the types of products and the techniques available to produce them
E) all of the above

Question 24

For this question,assume that the production function exhibits the same characteristics as those presented in the textbook.Based on these characteristics (i.e.,assumptions),successive and equal increases in capital per worker will cause which of the following to occur?

A)Output per worker will decline.
B)Output per worker will not change.
C)Output per worker will increase by a constant amount.
D)Output per worker will increase by a larger amount.
E) none of the above

Question 25

For this question,assume that there are decreasing returns to capital,decreasing returns to labor,and constant returns to scale.A reduction in the capital stock will cause which of the following?

A)a reduction in output
B)no change in output
C)an increase in output per capita
D)increase the capital-labor ratio
E) none of the above

Question 26

Convergence refers to what phenomenon regarding growth theory?

Question 27

For this question,assume that a country experiences a permanent increase in its saving rate.Which of the following will occur as a result of this increase in the saving rate?

A)a permanently faster growth rate of output
B)a permanently higher level of output per capita
C)a permanently higher level of capital per worker
D)all of the above
E) both B and C.

Question 28

Which of the following will cause a reduction in output per worker in the long run run?

A)capital accumulation or technological progress
B)capital accumulation
C)an increase in the number of workers
D)expansionary monetary policy
E) none of the above

Question 29

Over the past fifty years,convergence has generally occurred for all of the following groups of countries with the exception of

A)the five richest countries.
B)European countries.
C)the 'four tigers' in Asia.
D)OECD countries.
E) none of the above

Question 30

Research by Richard Layard indicates that happiness

A)increases as output per capita increases.
B)decreases as output per capita increases.
C)does not change as output per capita changes.
D)appears to depend on people's relative incomes.

Question 31

"Convergence" has been occurring among the OECD countries because

A)the richer countries give away more of their output than the poorer ones.
B)the poorer countries have had higher growth rates than the richer ones.
C)the richer countries have had higher growth rates than the poorer ones.
D)the poorer countries have had positive growth rates, while the richer ones have had negative growth rates.
E) the procedures for measuring output per capita have been changing.

Question 32

Suppose there are two countries that are identical with the following exception.The saving rate in country A is greater than the saving rate in country B.Given this information,we know that in the long run

A)the growth rate of output per capita will be greater in B than in A.
B)the growth rate of output per capita will be greater in A than in B.
C)the capital-labor ratios (K / N)will be the same in both countries.
D)the growth rate of output per capita will be the same in both countries.

Question 33

Which of the following must occur to sustain economic growth in the long run?

A)technological progress
B)capital accumulation
C)a higher saving rate
D)all of the above

Question 34

When using a logarithmic scale to plot output per capita over time,an upward-sloping curve that becomes increasingly steep indicates

A)output per capita is not changing.
B)output per capita is growing by a constant amount each year.
C)output per capita is growing by a constant percentage each year.
D)output per capita is growing by an increasing percentage each year.
E) output per capita is not defined.

Question 35

For this question,assume that there are decreasing returns to capital,decreasing returns to labor,and constant returns to scale.Now suppose that both capital and labor decrease by 5%.Given this information,we know that output (Y)will

A)not change.
B)decrease by less than 5%.
C)decrease by 5%.
D)decrease by more than 5% but less than 10%.
E) none of the above

Question 36

For this question,assume that a country experiences a permanent reduction in its saving rate.Which of the following will occur as a result of this reduction in the saving rate?

A)a permanently slower growth rate of output
B)no permanent effect on the level of output per capita
C)a permanently lower level of output per worker
D)both A and B
E) both B and C

Question 37

Which of the following will not cause an increase in aggregate output (Y)in the long run?

A)an increase in N
B)an increase in K
C)an increase in technology
D)a reduction in the saving rate
E) none of the above

Question 38

"Leapfrogging" refers to

A)the typical irregular pattern of growth: rapid in some decades, and almost non-existent in others.
B)the tendency for a country's output per capita to catch up to, and then exceed, that of another country.
C)"one-upsmanship" by politicians who use growth statistics to help win elections.
D)the increased likelihood that a country with very high growth will have a recession, during which some other country will have the highest growth rate.
E) the interchangeability of capital and labor in the aggregate production function.

Question 39

An upward-sloping straight line on a linear scale will become a (an)________ on a logarithmic scale.

A)upward sloping straight line
B)upward sloping curve that gets continually steeper
C)upward sloping curve that gets continually flatter
D)horizontal line
E) downward sloping straight line

Question 40

Suppose there are two countries that are identical with the following exception.The saving rate in country A is greater than the saving rate in country B.Given this information,we know that in the long run

A)the capital-labor ratio (K / N)will be greater in B than in A.
B)the capital-labor ratio (K / N)will be greater in A than in B.
C)the capital-labor ratio (K / N)will be the same in the two countries.
D)economic growth will be higher in A than in B.

Question 41

Assume that constant returns to scale exists and that N and K both decrease by 3%.Given this information,we know that

A)output (Y)will decrease 6%.
B)Y will decrease by 3%.
C)Y will decrease by less than 3%.
D)the capital-labor ratio (K / N)will decrease.

Question 42

Assume that employment increases by 3%.Holding all other factors constant,we know with certainty that which of the following will occur?

A)output will increase by 3%
B)output per capita will increase by 3%
C)output will increase by less than 3%
D)the capital labor ratio will increase
E) none of the above

Question 43

For this question,assume that the saving rate increases.We know that this increase in the saving rate will cause which of the following?

A)a temporary increase in the level of output per capita
B)no permanent change in the level of output per capita
C)a temporary increase in the rate of growth of output per capita
D)a permanently higher rate of growth of output per capita
E) none of the above

Question 44

Is it possible for a country to experience a permanent increase in output per worker over time? If so,how can this occur?

Question 45

Decreasing returns to capital (N)implies that a 4% increase in N will cause

A)Y to increase by more than 4%.
B)Y to increase by exactly 4%.
C)Y to increase by less than 4%.
D)no change in Y / N.

Question 46

If output per capita grows by a constant 5% per year,then the standard of living would grow by about ________ over 3 years.

A)12%
B)16%
C)17%
D)18%
E) 20%

Question 47

For this question,assume that the saving rate decreases.We know that this decrease in the saving rate will cause which of the following?

A)a temporary decrease in the level of output per capita
B)no permanent change in the level of output per capita
C)a temporary decrease in the rate of growth of output per capita
D)a permanently lower rate of growth of output per capita
E) none of the above

Question 48

First,what are the primary determinants of output per worker? And second,to what extent can each cause a permanent change in economic growth?

Question 49

Assume that constant returns to scale exists and that N and K both increase by 2%.Given this information,we know that

A)output (Y)will increase by 4%.
B)Y will increase by 2%.
C)Y will increase by less than 2%.
D)Y will increase by less than 4% and more than 2%.

Question 50

Which of the following will cause a reduction in output per worker (Y / N)?

A)a reduction in the capital stock (K)
B)a reduction in the saving rate
C)a reduction in K / N
D)all of the above

Question 51

Briefly explain what effect a reduction in the saving rate will have on growth.

Question 52

If output per capita grows by a constant 3% per year,then the standard of living would grow by about ________ over 4 years.

A)13%
B)14%
C)15%
D)16%
E) 17%

Question 53

Explain each of the following: (1)constant returns to scale; (2)decreasing returns to capital; and (3)decreasing returns to labor.

Question 54

Suppose the capital stock increases by 10% and the number of employed workers increases by 5%.Given this information,explain what will happen to output and to output per worker.

Question 55

Discuss and explain what is meant by the "state of technology."

Question 56

Assume that employment decreases by 3%.Holding all other factors constant,we know with certainty that which of the following will occur?

A)output will decrease by 3%
B)output per capita will decrease by 3%
C)output will decrease by less than 3%
D)the capital labor ratio will decrease
E) none of the above

Question 57

Which of the following will cause an increase in output per worker (Y / N)?

A)an increase in the capital stock (K)
B)an increase in the saving rate
C)an increase in K / N
D)all of the above

Question 58

Constant returns to scale implies that if N and K both increase by 3% that

A)output (Y)will increase by 3%.
B)Y / N will increase by 3%.
C)Y / N will increase by less than 3%.
D)the capital-labor ratio will increase by 3%.

Question 59

Suppose the stock of capital increases by 2% and employment increases by 2%.Given this information,we know that

A)output per capita will increase by 6%.
B)output will increase by 4%.
C)output per capita will increase by less than 4% and more than 2%.
D)none of the above

Question 60

Decreasing returns to capital (K)implies that a 4% increase in K will cause

A)a reduction in output per worker (Y / N).
B)a reduction in K / N.
C)Y to increase by exactly 4%.
D)Y to increase by less than 4%.
E) no change in Y / N.

Question 61

Consider the production function
Y =
a.Compute output when K = 81 and N = 100.
b.Is this production function characterized by constant returns to scale? Explain.

Question 62

Briefly explain the relationship between output per capita and happiness.Specifically,to what extent are these two variables related?

Question 63

Explain Mathusian trap.

Question 64

Briefly explain what effect an increase in the saving rate will have on growth.

Question 65

Consider the production function,Y = ,write the production function as a relation between output per worker and capital per worker.

Question 66

Graphically show and explain the effects of an improvement in the state of technology.