Deck 22: Economic Growth

Question 1

Suppose a country's population grows by 2 percent a year and, at the same time, its real GDP grows by 5 percent a year. Real GDP per person is increasing by ________ a year.

A)2 percent
B)5 percent
C)10 percent
D)16 percent
E)3 percent

Answer 1

3 percent

Question 2

Suppose a country is producing $20 million of real GDP. If the economy grows at 10 percent per year, approximately how many years will to take for real GDP to grow to $80 million?

A)14
B)7
C)4
D)30
E)3.5

Answer 2

14

Question 3

In 2012, Northland had real GDP of $4.21 billion and a population of 2.98 million. In 2013, real GDP was $4.59 billion and population was 2.97 million. What was Northland's growth rate of real GDP in 2013?

A)0.38 percent
B)3.8 percent
C)8.3 percent
D)9.0 percent
E)11.1 percent

Answer 3

9.0 percent

Question 4

In 2012, Northland had real GDP of $4.21 billion and a population of 2.98 million. In 2013, real GDP was $4.59 billion and population was 2.97 million. Northland's real GDP per person in 2013 was

A)$1,545.
B)$380.
C)$1,413.
D)$132.
E)$1.41.

Question 5

During 2014, the country of Economia had real GDP of $115 billion and the population was 0.9 billion. In 2013, real GDP was $105 billion and the population was 0.85 billion. In 2013, real GDP per person was

A)$128.
B)$124.
C)$135.
D)$117.
E)$1,235.

Question 6

Using the Rule of 70, if the country of Flowerdom's current growth rate of real GDP per person is 10 percent a year, how long will it take the country's real GDP per person to double?

A)0.7 years
B)1 year
C)10 years
D)49 years
E)7 years

Question 7

Choose the statement that is incorrect.

A)The growth rate of real GDP per person can be calculated approximately by subtracting the population growth rate from the real GDP growth rate.
B)Real GDP per person grows only if real GDP grows faster than the population grows.
C)The standard of living depends on real GDP per person.
D)Real GDP increases when the economy returns to full employment in an expansion phase of the business cycle.
E)The return to full employment in an expansion phase of the business cycle is economic growth.

Question 8

A movement ________ illustrates a return to full employment in a business cycle expansion.

A)from a point inside the PPF to a point on the PPF
B)up along the PPF
C)down along the PPF
D)from a point on the PPF to the origin
E)from a point outside the PPF to a point inside the PPF

Question 9

Using the Rule of 70, if the country of Flowerdom's current growth rate of real GDP per person is 7 percent a year, how long will it take the country's real GDP per person to double?

A)1 year
B)2 years
C)10 years
D)49 years
E)7 years

Question 10

In which of the following decades did Canada experience the slowest economic growth?

A)1960s
B)1970s
C)1980s
D)1940s
E)1990s

Question 11

Slowdonia's current growth rate of real GDP per person is 1 percent a year. How long will it take to double real GDP per person?

A)10 years
B)35 years
C)70 years
D)100 years
E)Real GDP per person will never double

Question 12

Slowdonia's current growth rate of real GDP per person is 2 percent a year. How long will it take to double real GDP per person?

A)half a year
B)approximately 10 years
C)28.6 years
D)35 years
E)2 years

Question 13

Canada's economic growth rate was highest in which of the following decades?

A)the 1930s
B)the 1960s
C)the 1970s
D)the 1980s
E)the 1990s

Question 14

If real GDP per person is growing at 4 percent per year, it will double in

A)17.5 years.
B)25 years.
C)4 years.
D)8 years.
E)56 years.

Question 15

During 2014, the country of Economia had real GDP of $115 billion and the population was 0.9 billion. In 2015, real GDP was $105 billion and the population was 0.85 billion. In 2014, real GDP per person was

A)$124.
B)$135.
C)$117.
D)$12,778.
E)$128.

Question 16

In 2012, Northland had real GDP of $4.21 billion and a population of 2.98 million. In 2013, real GDP was $4.59 billion and population was 2.97 million. Between 2012 and 2013, Northland's standard of living

A)increased.
B)decreased.
C)did not change.
D)might have increased, decreased, or remained unchanged.
E)doubled.

Question 17

Growthland's real GDP per person was $112,000 in 2013 and $117,000 in 2014. What is the growth rate of Growthland's real GDP per person in 2014?

A)4.3 percent
B)4.5 percent
C)5 percent
D)12 percent
E)17 percent

Question 18

Economic growth is

A)a sustained expansion of the population.
B)a sustained expansion of consumption expenditure over a given period.
C)always accompanied by a rising price level.
D)equal to real GDP per capita multiplied by 70.
E)the expansion of production possibilities.

Question 19

The Rule of 70 is used to

A)estimate how much of an economy's growth rate is attributable to increases in capital per hour of labour.
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.
E)estimate how much of an economy's growth rate is attributable to technological advance.

Question 20

Real GDP per person in the country of Flip is $10,000, and the growth rate is 10 percent a year. Real GDP per person in the country of Flap is $20,000 and the growth rate is 5 percent a year. When will real GDP per person be greater in Flip than in Flap?

A)in 2 years
B)in 15 years
C)never
D)in 10 years
E)in 7 years

Question 21

If the money wage rate is $10.00 an hour and the price level is 60, the real wage rate is

A)$16.67 an hour.
B)$18.75 an hour.
C)$10.00 an hour.
D)$12.50 an hour.
E)$6.00 an hour.

Question 22

During the last 10 years, which of the following had the lowest level of real GDP per person?

A)Eastern Europe
B)Central and South America
C)Africa
D)Japan
E)China

Question 23

Use the figure below to answer the following question.

Figure 22.3.1
Refer to Figure 22.3.1. The country of Kemper is on its aggregate production function at point W in the above figure. If the population increases with no change in capital or technology, the economy will

A)move to point such as Y.
B)remain at point W.
C)move to point such as X.
D)move to point such as Z.
E)either remain at point W or move to point X.

Question 24

The aggregate production function is graphed as

A)a downward-sloping curve.
B)an upward-sloping straight line.
C)an upward-sloping line that becomes flatter as the quantity of labour increases.
D)an upward-sloping line that becomes steeper as the quantity of labour increases.
E)a production possibilities frontier.

Question 25

If the money wage rate is $15.00 an hour and the price level is 120, the real wage rate is

A)$8.50 an hour.
B)$10.75 an hour.
C)$12.50 an hour.
D)$15.00 an hour.
E)$18 an hour.

Question 26

Use the information below to answer the following questions.
Fact 22.2.1
China was the largest economy for centuries because everyone had the same type of economy-subsistence-and so the country with the most people would be economically biggest. Then the Industrial Revolution sent the West on a more prosperous path. Now the world is returning to a common economy, this time technology- and information-based, so once again population triumphs.
Consider Fact 22.2.1. In 1890, the United States surpassed China to become the world's largest economy because

A)the benefits of the Industrial Revolution were greater in the United States than in China.
B)the United states was a strong, united country following the Civil War and reconstruction.
C)the U.S. population growth rate was much lower than China's population growth rate.
D)the U.S. population exceeded China's population.
E)China began to import a significant portion of life-sustaining goods and services.

Question 27

Between 1926 and 2014, the average growth rate of real GDP per person in Canada was ________ percent a year. During this period, ________ grew at a faster rate than the population.

A)2.0; GDP;
B)2.0; real GDP
C)1.0; inflation
D)3.0; real GDP
E)3.0; GDP

Question 28

An increase in labour hours will lead to

A)an upward shift of the aggregate production function.
B)a movement along the aggregate production function.
C)both a movement along and an upward shift of the aggregate production function.
D)neither a movement along nor a shift of the aggregate production function.
E)a downward shift of the aggregate production function.

Question 29

Between 1926 and 2014 real GDP per person in Canada grew at an average rate of

A)2.8 percent a year.
B)1.7 percent a year.
C)2.0 percent a year.
D)3.6 percent a year.
E)4.3 percent a year.

Question 30

Convergence between real GDP per person in Canada and Japan was relatively ________ during the 1960s; convergence has recently been ________.

A)slow; increasing
B)rapid; decreasing
C)rapid; increasing at an even faster rate
D)slow; decreasing
E)rapidly; continuing at the 1960s pace

Question 31

The decreasing slope of the aggregate production function reflects

A)diminishing returns.
B)rising unemployment.
C)decreasing costs.
D)increasing aggregate demand.
E)a decrease in potential GDP.

Question 32

Compared to growth in other countries, between 1960 and 2010 Canada

A)fell behind most other countries.
B)dramatically caught up to and passed other countries.
C)worsened dramatically versus the United States, but did better versus other countries.
D)did as well or better than most countries except certain Asian countries.
E)none of the above

Question 33

According to the law of diminishing returns, along the aggregate production function, an additional unit of

A)capital produces more output than an additional unit of labour.
B)labour decreases output.
C)labour produces more output than the previous unit.
D)labour produces less output than the previous unit.
E)labour increases the real wage rate.

Question 34

Use the information below to answer the following questions.
Fact 22.2.1
China was the largest economy for centuries because everyone had the same type of economy-subsistence-and so the country with the most people would be economically biggest. Then the Industrial Revolution sent the West on a more prosperous path. Now the world is returning to a common economy, this time technology- and information-based, so once again population triumphs.
Consider Fact 22.2.1. China's was the world's largest economy until 1890 because

A)people in all countries had approximately the same subsistence level of income.
B)the Industrial Revolution gave the greatest growth to the countries with the largest populations.
C)it was the country with the largest land mass.
D)it was a large exporter of goods and services.
E)it had a diverse climate.

Question 35

When the quantity of labour demanded exceeds the quantity of labour supplied, the real wage rate

A)rises to eliminate the labour market shortage.
B)falls to eliminate the labour market surplus.
C)rises to eliminate the labour market surplus.
D)falls to eliminate the labour market shortage.
E)does not change, but the money wage rate rises to eliminate the labour market shortage.

Question 36

If the real wage rate is $10.00 an hour and the price level is 60, the money wage rate is

A)$16.75 an hour.
B)$18.50 an hour.
C)$10.00 an hour.
D)$6.00 an hour.
E)$16.67 an hour.

Question 37

Between 1960 and 2010, growth rates in real GDP per person in Hong Kong, Korea, Singapore, Taiwan, and China ________ the growth rate of real GDP per person in Canada. China's real GDP per person in 2010 is approximately equal to real GDP per person in Hong Kong in ________.

A)exceeded; 1998
B)were less than; 1988
C)were less than; 1976
D)exceeded; 1976
E)were approximately equal to; 1968

Question 38

Of the following countries, which has the lowest level of real GDP per person?

A)China
B)Singapore
C)Hong Kong
D)Korea
E)Canada

Question 39

The gap between real GDP per person in Canada and Hong Kong has ________ since 1960. During this period, the growth rate of real GDP per person in Canada has been ________ than in Hong Kong.

A)reversed; faster
B)increased; faster
C)remained constant; equal
D)reversed; slower
E)decreased; faster

Question 40

Which of the following statements about Canada's long-term growth trends is false?

A)Economic growth rates have been steady, except for the business cycle.
B)Economic growth rates show periods of slow and high growth.
C)Economic growth rates were faster in the 1990s than in the 1980s.
D)Economic growth rates have slightly faster in the United States than in Canada.
E)African countries have fallen further behind Canada in recent years.

Question 41

Ceteris paribus, an increase in population results in a

A)higher level of labour employed and higher potential GDP per hour of labour.
B)lower level of labour employed and higher potential GDP per hour of labour.
C)higher level of labour employed and lower potential GDP per hour of labour.
D)lower level of labour employed and lower potential GDP per hour of labour.
E)constant level of labour employed and constant potential GDP per hour of labour.

Question 42

An increase in labour productivity ________ the real wage rate and an increase in population ________ the real wage rate.

A)raises; lowers
B)raises; raises
C)lowers; lowers
D)lowers; raises
E)raises; does not change

Question 43

The aggregate production function shows how ________ varies with ________.

A)real GDP; labour
B)labour; leisure
C)real GDP; leisure
D)labour; capital
E)real GDP; capital

Question 44

If real GDP is $12,150 billion and aggregate labour hours are 270 billion, labour productivity equals

A)$6.50 an hour.
B)$45 an hour.
C)$48 an hour.
D)$650 an hour.
E)$32.81 an hour.

Question 45

Use the figure below to answer the following questions.

Figure 22.3.2
Refer to Figure 22.3.2. If the real wage is $20 an hour, a labour

A)shortage will occur and the real wage will rise.
B)shortage will occur and the real wage will fall.
C)surplus will occur and the real wage will rise.
D)surplus will occur and the real wage will fall.
E)surplus will occur and the demand for labour will increase.

Question 46

If real GDP is $800 million and aggregate labour hours are 20 million, labour productivity is

A)$40 an hour.
B)$16,000 million.
C)$40 million.
D)$160 an hour.
E)$16 an hour.

Question 47

Labour productivity is

A)real GDP per hour of labour times the hours of work.
B)real GDP per hour of labour times the population.
C)the quantity of real GDP produced by an hour of labour.
D)the rate of change in real GDP per hour of labour.
E)shown as a movement along the production function.

Question 48

When labour productivity increases, the demand for labour curve ________ and the supply of labour curve ________.

A)shifts rightward; shifts rightward
B)shifts rightward; does not shift
C)shifts leftward; shifts rightward
D)shifts leftward; does not shift
E)shifts rightward; shifts leftward

Question 49

An increase in population results in

A)an upward shift in the production function.
B)a movement along the production function.
C)a leftward shift of the labour supply curve.
D)a rightward shift of the labour demand curve.
E)a rise in the real wage rate.

Question 50

Ceteris paribus, an increase in labour productivity results in a

A)higher real wage rate and higher potential GDP per hour of labour.
B)lower real wage rate and higher potential GDP per hour of labour.
C)higher real wage rate and lower potential GDP per hour of labour.
D)lower real wage rate and lower potential GDP per hour of labour.
E)constant real wage rate in the long run.

Question 51

Use the figure below to answer the following questions.

Figure 22.3.2
Refer to Figure 22.3.2. The equilibrium quantity of labour is

A)100 billion hours.
B)150 billion hours.
C)200 billion hours.
D)50 billion hours.
E)250 billion hours.

Question 52

When the population increases with no change in labour productivity, employment ________ and potential GDP ________.

A)decreases; decreases
B)increases; increases
C)decreases; increases
D)increases; decreases
E)increases; does not change

Question 53

Use the table below to answer the following questions.
Table 22.3.1


Refer to Table 22.3.1. The tables show the labour market and the production function schedule for the country of Pickett. An increase in population changes the quantity of labour supplied by 20 billion hours at each real wage rate. Potential GDP

A)does not change.
B)decreases to $3 trillion.
C)increases to $50 trillion.
D)increases to $18 trillion.
E)increases to $20 trillion.

Question 54

If new capital increases labour productivity, the supply of labour ________ and the demand for labour ________.

A)stays the same; increases
B)increases; increases
C)increases; decreases
D)decreases; stays the same
E)increases; stays the same

Question 55

Use the figure below to answer the following questions.

Figure 22.3.2
Refer to Figure 22.3.2. The equilibrium real wage rate is

A)$10 an hour.
B)$15 an hour.
C)$20 an hour.
D)any wage rate above $15 an hour.
E)any wage rate below $15 an hour.

Question 56

Use the figure below to answer the following question.

Figure 22.3.3
Refer to Figure 22.3.3. As a result of the rightward shift in the demand curve for labour from LD₀ to LD₁, potential GDP ________, and potential GDP per hour of labour ________.

A)increases; increases
B)decreases; increases
C)increases; decreases
D)decreases; decreases
E)increases; does not change

Question 57

If the population increases, then potential GDP ________, and potential GDP per hour of labour ________.

A)increases; decreases
B)increases; increases
C)decreases; increases
D)decreases; decreases
E)increases; does not change

Question 58

In the labour market, an increase in labour productivity ________ the real wage rate and ________ the level of employment.

A)raises; increases
B)raises; decreases
C)lowers; increases
D)lowers; decreases
E)raises; does not change

Question 59

Use the table below to answer the following questions.
Table 22.3.1


Refer to Table 22.3.1. The tables show the labour market and the aggregate production function schedule for the country of Pickett. Potential GDP is

A)$40 trillion.
B)$6 trillion.
C)$14 trillion.
D)$25 trillion.
E)$9 trillion.

Question 60

A movement along the aggregate production function is the result of a change in

A)capital.
B)technology.
C)the quantity of labour.
D)the interest rate.
E)the inflation rate.

Question 61

In developing nations, microloans

A)have enabled small businesses with limited access to credit to purchase capital and expand, allowing greater economic growth.
B)have increased the indebtedness of impoverished people, slowing economic growth.
C)are primarily used to finance consumption expenditure, leading to economic growth.
D)are far too small to have any discernible effect.
E)discourage saving and investment.

Question 62

Which theory of economic growth argues that growth does not automatically slow down?

A)classical growth theory
B)neoclassical growth theory
C)new growth theory
D)all of the theories
E)none of the theories

Question 63

When labour productivity decreases, the

A)demand for labour curve shifts leftward and the real wage rate falls.
B)supply of labour curve shifts rightward and the real wage rate fall.
C)supply of labour curve shifts leftward and the real wage rate rises.
D)demand for labour decreases and the supply of labour decreases, and the real wage rate rises, falls, or remains unchanged.
E)demand for labour decreases and the supply of labour increases, and the real wage rate falls.

Question 64

Labour productivity grows as

A)consumption expenditure increases.
B)depreciation increases.
C)physical capital grows.
D)human capital grows.
E)Both C and D are correct.

Question 65

Which of the following is not a source of economic growth?

A)increasing stock market prices
B)better educated workers
C)growing physical capital
D)appropriate incentive system
E)advances in technology

Question 66

For three years, there was no technological change in Longland but capital per hour of labour increased from $10 to $20 to $30 and real GDP per hour of labour increased from $3.80 to $5.70 to $7.13. Then in the fourth year, capital per hour of labour remained constant but real GDP per hour of labour increased to $10. Longland ________ experience diminishing returns because ________.

A)does; in the fourth year capital per hour of labour does not change
B)does; as capital per hour of labour increases, real GDP per hour of labour increases but by smaller amounts
C)does not; as capital per hour of labour increases, real GDP per hour of labour also increases
D)does not; in the fourth year capital per hour of labour does not change
E)does; all countries experience diminishing returns

Question 67

When labour productivity decreases, there is ________ the production function and ________ in potential GDP.

A)a movement down along; no change
B)a movement down along; a decrease
C)a downward shift of; no change
D)a downward shift of; a decrease
E)neither a movement along nor a shift of; no change

Question 68

An increase in education and training

A)increases labour productivity.
B)increases aggregate hours.
C)decreases real GDP growth.
D)increases the employment-to-population ratio.
E)is an increase in physical capital.

Question 69

________ is the accumulated skill and knowledge of human beings.

A)Labour productivity
B)Human capital
C)Capital
D)Technology
E)Human investment

Question 70

Which theory of economic growth argues that population growth lowers the real wage rate and stops economic growth?

A)classical growth theory
B)neoclassical growth theory
C)new growth theory
D)all of the theories
E)none of the theories

Question 71

The Industrial Revolution in England was largely the result of

A)growth in human capital.
B)population growth.
C)technological innovations that were financed mainly by government spending.
D)technological innovations encouraged by the patent system.
E)the elimination of the patent system.

Question 72

Human capital is the

A)machinery used by humans to produce GDP.
B)technology used by humans to produce GDP.
C)skill and knowledge accumulated by humans.
D)plant and equipment produced by humans and not by machines.
E)technology used by humans to produce real GDP.

Question 73

The new growth theory holds that growth can persist indefinitely based on the major assumption that

A)discoveries result from regulations.
B)knowledge capital does not experience diminishing returns.
C)knowledge is a public capital good.
D)discoveries bring profit.
E)knowledge destroys profit.

Question 74

Which one of the following quotations could be attributed to a supporter of the classical growth theory?

A)"Growth will last as long as technology keeps advancing."
B)"Prosperity will last as long as technology keeps advancing."
C)"Growth will last only until the increase in population brings productivity down to the subsistence level."
D)"Prosperity will last as long as there is knowledge accumulation."
E)"Growth will last as long as knowledge accumulation continues."

Question 75

Which of the following statements regarding human capital is INCORRECT?

A)Human capital is the accumulated skill and knowledge of human beings.
B)Education is the only vehicle for the creation of human capital because training simply reinforces what has already been learned.
C)The accumulation of human capital is the source of both increased labour productivity and technological advance.
D)Writing and mathematics, the most basic of human skills, are crucial elements in economic progress.
E)Human capital is the fundamental source of labour productivity growth.

Question 76

If capital per worker increases, labour productivity

A)decreases for a given level of technology.
B)increases because the level of technology increases.
C)increases for a given level of technology.
D)decreases because the level of technology decreases.
E)does not change unless technology advances at the same time.

Question 77

If capital per worker decreases, real GDP per hour of labour

A)decreases because the level of technology decreases.
B)increases because the level of technology increases.
C)increases for a given level of technology.
D)decreases for a given level of technology.
E)none of the above

Question 78

Factors that influence labour productivity include

A)the inflation rate, the real wage rate, and the exchange rate.
B)the labour demand curve.
C)physical capital, the real wage rate, and technology.
D)the demand for labour, the real wage rate, and technology.
E)physical capital, human capital, and technology.

Question 79

Labour productivity rises when

A)technological progress is stagnant.
B)firms invest more in hiring workers than in replacing worn-out capital.
C)the amount of capital per worker decreases.
D)the real wage rate falls.
E)the amount of capital per worker increases.

Question 80

Which theory of economic growth argues that, in the long run, people do not benefit from growth?

A)classical growth theory
B)neoclassical growth theory
C)new growth theory
D)all of the theories
E)none of the theories