Deck 19: Economic Growth, Productivity, and Living Standards

Question 1

If you left $2,500 on deposit with a bank promising to pay you a 5 percent compound annual rate of interest, then after 50 years your deposit would be worth approximately:

A)$2,625
B)$11,467
C)$28,668
D)$328,750

Answer 1

$28,668

Question 2

Compared to the level of real GDP per person in 1870, by 2010, real GDP in the U.S was ________ times larger, while real GDP per person in Japan was ________.

A)12; smaller
B)12; 12 times larger
C)12; 30 times larger
D)30; 12 times larger

Answer 2

12; 30 times larger

Question 3

If real GDP per person were equal to $1,000 in 1900 and grew at a one percent annual rate, what would be the value of real GDP per person 100 years later?

A)$1,100
B)$2,705
C)$11,000
D)$13,780

Answer 3

$2,705

Question 4

Bank C promises to pay a compound annual interest rate of 6 percent, while Bank S pays an 8 percent simple annual interest rate on deposits. If you deposit $1,000 in each bank, after 10 years, your deposit in Bank C equals ________, while your deposit in Bank S equals ________.

A)$1,060; $1,800
B)$1,600; $1,800
C)$1,600; $2,159
D)$1,791; $1,800

Question 5

Small differences in annual growth rates of real GDP generate large differences in real GDP over time because of the:

A)importance of average labor productivity.
B)power of compound interest.
C)diminishing returns to capital.
D)limits of economic growth.

Question 6

Bank C promises to pay a compound annual interest rate of 6 percent, while Bank S pays a 10 percent simple annual interest rate on deposits. If you deposit $1,000 in each bank, after 10 years, your deposit in Bank C equals ________, while your deposit in Bank S equals ________.

A)$1,060; $1,100
B)$1,600; $2,000
C)$1,600; $2,594
D)$1,791; $2,000

Question 7

The payment of interest not only on the original deposit, but on all previously accumulated interest is called:

A)the real interest rate.
B)the nominal interest rate.
C)compound interest.
D)simple interest.

Question 8

Growth in real GDP per capita has:

A)been steady over the course of human history.
B)slowed since the mid-nineteenth century compared to before.
C)been more rapid since the mid-nineteenth century than ever before.
D)increased over the last 150 years only in the United States and Canada.

Question 9

Suppose when you are 21 years old, you deposit $1,000 into a bank account that pays 6 percent annual compound interest, and you do not withdraw from the account until your retirement at the age of 65, 44 years later. How much will be in the account when you retire?

A)$3,752
B)$12,985
C)$24,871
D)$46,794

Question 10

Over the period from 1870 to 2010, the growth of real GDP per capita tended to be more rapid between ________, particularly for ________.

A)1870-1950; Japan
B)1870-1950; the United States
C)1870-1950; Canada
D)1950-2010; Japan

Question 11

Compound interest is:

A)the payment of interest on the original deposit.
B)the interest rate adjusted for the rate of inflation.
C)the real rate of interest compounded by the rate of inflation.
D)the payment of interest on both the original deposit and all accumulated interest.

Question 12

The rise in average living standards experienced by most industrialized countries:

A)has been continuous over the course of human history.
B)was more rapid before 1870 than after 1870.
C)has been more rapid since 1950 than before 1950.
D)has resulted primarily from an increase in population worldwide.

Question 13

Real GDP per person in both Alpha and Omega is equal to $2,000. Over the next 100 years, real GDP per person grows at a 1.5 percent annual rate in Alpha and at a 2.5 percent annual rate in Omega. After 100 years, real GDP per person in Alpha is ________ smaller than real GDP per person in Omega.

A)$2,000
B)$5,410
C)$8,864
D)$14,763

Question 14

Over the period from 1950 to 2010, which country experienced the fastest average annual growth rate of real GDP per person?

A)United States
B)Japan
C)China
D)Canada

Question 15

Suppose when you are 21 years old, you deposit $1,000 into a bank account that pays annual compound interest, and you do not withdraw from the account until your retirement at the age of 65, 44 years later. How much more will be in your account if the interest rate is 6 percent rather than 5 percent?

A)$440
B)$1,549
C)$4,428
D)$8,557

Question 16

If real GDP per person were equal to $2,000 in 1900 and grew at a one percent annual rate, what would be the value of real GDP per person 100 years later?

A)$2,210
B)$4,000
C)$5,410
D)$20,000

Question 17

If you left $2,500 on deposit with a bank promising to pay you a 6 percent compound annual rate of interest, then after 50 years your deposit would be worth approximately:

A)$2,800
B)$18,420
C)$46,050
D)$250,750

Question 18

The key indicator of a country's living standard and economic well-being is:

A)the interest rate.
B)nominal GDP per person.
C)real GDP.
D)real GDP per person.

Question 19

Suppose when you are 21 years old, you deposit $1,000 into a bank account that pays annual compound interest, and you do not withdraw from the account until your retirement at the age of 65, 44 years later. How much more will be in your account if the interest rate is 6 percent rather than 4 percent?

A)$880
B)$2,390
C)$5,617
D)$7,369

Question 20

If an economy maintains a small rate of growth for a long period of time, then the size of the economy:

A)can only increase by a small amount.
B)can increase by a large amount.
C)can never double.
D)will stay nearly constant.

Question 21

Real GDP per person equals average labor productivity:

A)times one minus the unemployment rate.
B)minus the share of population employed.
C)times the labor force participation rate.
D)times the share of population employed.

Question 22

The key variable in determining changes in a country's standard of living is the:

A)interest rate.
B)inflation rate.
C)unemployment rate.
D)long-run rate of economic growth.

Question 23

In symbolic terms where Y equals real GDP, POP equals total population, and N equals the number of employed workers, Y/POP must equal:

A)Y/N × N/POP.
B)N/Y × POP/N.
C)Y/POP × N/POP
D)N/Y × N/POP

Question 24

Real GDP per person in Westland is $30,000, while real GDP in Eastland is $10,000, Westland's real GDP per person is growing at 3 percent per year and Eastland's real GDP per person is growing at 3 percent per year. If these growth rates persist indefinitely, then:

A)Eastland's real GDP per person will rise until it equals Westland's real GDP per person.
B)Westland's real GDP per person will always be at least $20,000 greater than Eastland's.
C)Eastland's real GDP per person will always be exactly $20,000 less than Westland's.
D)Eastland's real GDP per person will eventually be greater than Westland's.

Question 25

Average labor productivity times the proportion of the population employed equals:

A)real GDP.
B)real GDP per person.
C)real GDP per worker.
D)output per worker.

Question 26

Growth of real GDP per person is totally determined by the growth of average:

A)labor productivity and the proportion of the population employed.
B)labor productivity and the proportion of the population in the labor force.
C)labor force participation and the share of income going to capital.
D)labor force participation and the share of the population employed.

Question 27

Real GDP per person in Richland is $20,000, while real GDP per person in Poorland is $10,000. However, Richland's real GDP per person is growing at 1 percent per year, and Poorland's real GDP per person is growing at 3 percent per year. After 50 years, real GDP per person in Richland minus real GDP in Poorland is:

A)positive and greater than $10,000.
B)positive but less than $10,000.
C)zero.
D)negative.

Question 28

A nation's standard of living, as measured by real GDP per person, increases:

A)only if average labor productivity increases.
B)only if the share of population employed increases.
C)only if both average labor productivity and the share of population employed increase.
D)if either average labor productivity and/or the share of population employed increase.

Question 29

If the share of population employed in two countries is the same, average living standards will be higher in the country with:

A)the smaller population.
B)the larger population.
C)higher average labor productivity.
D)lower average labor productivity.

Question 30

Government policies that increase the long-term economic growth rate by a small amount result in ________ in average living standards.

A)large increases
B)small increases
C)small decreases
D)no change

Question 31

Real GDP per person in the United States was $9,864 in 1950. Over the next 48 years, it grew at a compound annual rate of 2.0 percent. If, instead, real GDP per person had grown at an average compound annual rate 2.5 percent, then real GDP per capita in the United States in 1998 would have been approximately ________ larger.

A)$2,370
B)$6,751
C)$12,530
D)$25,520

Question 32

Real GDP per person in Canada was $7,377 in 1950. Over the next 48 years it grew at a compound annual rate of 2.0 percent. If instead real GDP per person had grown at an average compound annual rate 2.5 percent, then real GDP per capita in Canada in 1998 would have been approximately ________ larger.

A)$1,770
B)$5,049
C)$9,370
D)$24,130

Question 33

Real GDP per person in Northland is $30,000, while real GDP in Southland is $10,000, However, Northland's real GDP per person is growing at 1 percent per year, and Southland's real GDP per person is growing at 3 percent per year. If these growth rates persist indefinitely, then:

A)Northland's real GDP per person will decline until it equals Southland's.
B)Northland's real GDP per person will always be between 1 and 2 percent greater than Southland's.
C)Southland's real GDP per person will always be exactly 2 percent less than Northland's.
D)Southland's real GDP per person will eventually be greater than Northland's.

Question 34

If average labor productivity in two countries is the same, average living standards will be lower in the country with:

A)the smaller population.
B)the larger population.
C)the higher share of population employed.
D)the lower share of population employed.

Question 35

Real GDP per person in both Alpha and Omega is equal to $2,000. Over the next 100 years, real GDP per person grows at a 1 percent annual rate in Alpha and at a 2 percent annual rate in Omega. After 100 years, real GDP per person in Alpha is ________ smaller than real GDP per person in Omega.

A)$2,000
B)$5,410
C)$9,080
D)$11,080

Question 36

Real GDP per person can increase:

A)only if the share of the population employed increases.
B)only if the share of the population employed decreases.
C)only if average labor productivity increases.
D)if the share of population employed and/or average labor productivity increases.

Question 37

If 50 percent of the population in a country is employed and average labor productivity equals $30,000, then real GDP per person equals:

A)$15,000.
B)$30,000.
C)$50,000.
D)$60,000.

Question 38

Real GDP per person in Richland is $20,000, while real GDP per person in Poorland is $10,000. However, Richland's real GDP per person is growing at 1 percent per year, and Poorland's real GDP per person is growing at 2 percent per year. After 50 years, real GDP per person in Richland minus real GDP in Poorland is:

A)positive and greater than $10,000.
B)positive but less than $10,000.
C)zero.
D)negative.

Question 39

If average labor productivity in two countries is the same, average living standards will be higher in the country with:

A)the smaller population.
B)the larger population.
C)the higher share of population employed.
D)the lower share of population employed.

Question 40

If real GDP per person in a country equals $40,000 and 60 percent of the population is employed, then average labor productivity equals:

A)$24,000.
B)$40,000.
C)$60,000.
D)$66,667.

Question 41

Mike and Tom debone chicken breasts for Ted's Chicken Co. Mike is new and can only debone 30 chicken breasts per hour, while Tom's experience allows him to debone 60 chicken breasts per hour. Both Mike and Tom work 40 hours per week. Their average hourly productivity as a team is ________ chicken breasts.

A)30
B)45
C)60
D)90

Question 42

If average labor productivity increases, real GDP per person:

A)increases.
B)decreases.
C)remains constant.
D)may increase or decrease depending on the change in the share of population employed.

Question 43

One factor that contributed to the growth in the share of population employed in the United States between 1960 and 2000 was increased:

A)labor union participation.
B)female labor force participation.
C)male labor force participation.
D)minimum wages.

Question 44

Suppose that the share of population employed in Country C is 50 percent, and that Countries C and D have the same real GDP per capita. Based on the information in the table, what share of Country D's population must be employed? $\begin{array}{|c|r|r}\hline \text { Country } & \text { Population (millions) } & \text { Average Labor Productivity (\$) } \\\hline \mathrm{A} & 100 & 2,000 \\\hline \mathrm{B} & 150 & 10,000\\\hline \mathrm{C} & 75 & 25,000 \\\hline \mathrm{D} & 250 & 50,000 \\\hline \mathrm{E} & 95 & 60,000 \\\hline\end{array}$

A)12.5 percent
B)25.0 percent
C)75.0 percent
D)100.0 percent

Question 45

Assume that average labor productivity is the same in each country. Based on the information in the table, which country has the highest real GDP per capita? $$\begin{array} { | c | r | r r } \hline \text { Country } & \text { Pupulatim (millims) } & { \text { Share of Populatimu Emplayed } } \\\hline \text { A } & 100 & & 60 \\\hline \text { B } & 150 & 55 \\\hline \text { C } & 75 & 50 \\\hline \text { D } & 250 & 45 \\\hline \text { E } & 95 & 40 \\\hline\end{array}$$

A)Country A
B)Country B
C)Country C
D)Country D

Question 46

The population of Alpha totals one million people, 40 percent of whom are employed. Average output per worker in Alpha is $20,000. Real GDP per person in Alpha totals:

A)$8,000.
B)$12,000.
C)$20,000.
D)$50,000.

Question 47

The population of Omega totals one million people, 30 percent of whom are employed. Average output per worker in Alpha is $30,000. Real GDP per person in Alpha totals:

A)$9,000.
B)$21,000.
C)$30,000.
D)$100,000.

Question 48

In Macroland, 500,000 of the 1 million people in the country are employed. Average labor productivity in Macroland is $20,000 per worker. Real GDP per person in Macroland totals:

A)$1,000.
B)$10,000.
C)$15,000.
D)$40,000.

Question 49

Suppose that average labor productivity in Country C is $5,000, and that Countries C and E have the same real GDP per capita. Based on the information in the table, what must be the average labor productivity in Country E?  
$$\begin{array} { | c | r | r r } \hline \text { Country } & \text { Pupulatim (millims) } & { \text { Share of Populatimu Emplayed } } \\\hline \text { A } & 100 & & 60 \\\hline \text { B } & 150 & 55 \\\hline \text { C } & 75 & 50 \\\hline \text { D } & 250 & 45 \\\hline \text { E } & 95 & 40 \\\hline\end{array}$$

A)$1,000
B)$1,500
C)$4,500
D)$6,250

Question 50

Assume that average labor productivity is the same in each country. Based on the information in the table, which country has the smallest real GDP per capita? $$\begin{array} { | c | r | r r } \hline \text { Country } & \text { Pupulatim (millims) } &{ \text { Share of Populatimu Emplayed } } \\\hline \text { A } & 100 & & 60 \\\hline \text { B } & 150 & 55 \\\hline \text { C } & 75 & 50 \\\hline \text { D } & 250 & 45 \\\hline \text { E } & 95 & 40 \\\hline\end{array}$$

A)Country A
B)Country B
C)Country D
D)Country E

Question 51

Suppose that the share of population employed in Country B is 50 percent, and that Countries B and C have the same real GDP per capita. Based on the information in the table, what share of Country C's population must be employed?  
$\begin{array}{|c|r|r}\hline \text { Country } & \text { Population (millions) } & \text { Average Labor Productivity (\$) } \\\hline \mathrm{A} & 100 & 2,000 \\\hline \mathrm{B} & 150 & 10,000\\\hline \mathrm{C} & 75 & 25,000 \\\hline \mathrm{D} & 250 & 50,000 \\\hline \mathrm{E} & 95 & 60,000 \\\hline\end{array}$

A)5.0 percent
B)20.0 percent
C)40.0 percent
D)50.0 percent

Question 52

Suppose that average labor productivity in Country C is $6,000, and that Countries C and A have the same real GDP per capita. Based on the information in the table, what must be the average labor productivity in Country A? $$\begin{array} { | c | r | r r } \hline \text { Country } & \text { Pupulatim (millims) } & { \text { Share of Populatimu Emplayed } } \\\hline \text { A } & 100 & & 60 \\\hline \text { B } & 150 & 55 \\\hline \text { C } & 75 & 50 \\\hline \text { D } & 250 & 45 \\\hline \text { E } & 95 & 40 \\\hline\end{array}$$

A)$1,800
B)$2,400
C)$5,000
D)$7,200

Question 53

In the long run, increases in output per person arise primarily from:

A)increases in female labor force participation.
B)increases in male labor force participation.
C)an increasing proportion of the population retiring
D)increases in average labor productivity.

Question 54

If real GDP per person in a country equals $20,000 and 40 percent of the population is employed, then average labor productivity equals:

A)$8,000.
B)$20,000.
C)$40,000.
D)$50,000.

Question 55

The growth of real GDP per person in the United States between 1960 and 2016 was the result of:

A)growth in average labor productivity only.
B)growth in the share of population employed only.
C)growth in both average labor productivity and the share of population employed.
D)neither the growth in average labor productivity nor the share of population employed.

Question 56

Assume that the share of population employed in all countries is 50 percent. Based on the information in the table, which country has the highest real GDP per capita?  
$\begin{array}{|c|r|r}\hline \text { Country } & \text { Population (millions) } & \text { Average Labor Productivity (\$) } \\\hline \mathrm{A} & 100 & 2,000 \\\hline \mathrm{B} & 150 & 10,000\\\hline \mathrm{C} & 75 & 25,000 \\\hline \mathrm{D} & 250 & 50,000 \\\hline \mathrm{E} & 95 & 60,000 \\\hline\end{array}$

A)Country A
B)Country B
C)Country D
D)Country E

Question 57

Mike and Tom debone chicken breasts for Ted's Chicken Co. Mike is new and can only debone 60 chicken breasts per hour, while Tom's experience allows him to debone 120 chicken breasts per hour. Both Mike and Tom work 40 hours per week. Their average hourly productivity as a team is ________ chicken breasts.

A)60
B)75
C)90
D)100

Question 58

Assume that the share of population employed in all countries is 50 percent. Based on the information in the table, which country has the smallest real GDP per capita?  
$\begin{array}{|c|r|r}\hline \text { Country } & \text { Population (millions) } & \text { Average Labor Productivity (\$) } \\\hline \mathrm{A} & 100 & 2,000 \\\hline \mathrm{B} & 150 & 10,000\\\hline \mathrm{C} & 75 & 25,000 \\\hline \mathrm{D} & 250 & 50,000 \\\hline \mathrm{E} & 95 & 60,000 \\\hline\end{array}$

A)Country A
B)Country B
C)Country D
D)Country E

Question 59

Long-run increases in living standards, as measured by real GDP per person, are primarily the result of increases in:

A)population.
B)the money supply.
C)government budget surpluses.
D)average labor productivity.

Question 60

In Econland, 500,000 of the 2 million people in the country are employed. Average labor productivity in Econland is $15,000 per worker. Real GDP per person in Econland totals:

A)$1,250.
B)$3,750.
C)$11,250.
D)$60,000.

Question 61

Getting a college degree is an example of investing in:

A)human capital.
B)physical capital.
C)technology.
D)research and development.

Question 62

Jim and Fred are the only two cashiers employed at a retail store. Each of them works the same 40 hours per week and each can check out 30 customers per hour by manually entering the price of each product purchased into the cash register. The store owner replaces the old cash registers with new ones that automatically scan product prices into the register. With the new cash registers, Jim and Fred can each check out 60 customers per hour. Their average labor productivity as a team before the new cash registers were introduced was ________ customers per hour and ________ customers per hour after the new machines were installed.

A)30; 60
B)30; 120
C)60; 120
D)1,200; 2,400

Question 63

When a worker learns how to use a new business-related software program, this is an example of investing in:

A)human capital.
B)physical capital.
C)research and development
D)the stock market.

Question 64

Mike and Tom debone chicken breasts for Ted's Chicken Co. Mike is new and can only debone 30 chicken breasts per hour by hand, while Tom's experience allows him to debone 60 chicken breasts per hour by hand. Ted buys one new machine that can debone 100 chicken breasts per hour. Both Mike and Tom work the same 40 hours per week, but one of them is assigned to operate the machine instead of deboning the chicken breasts by hand. To obtain maximum average hourly productivity, ________ is assigned to use the machine and their combined average hourly productivity as a team is ________ chicken breasts

A)Mike; 65
B)Mike; 80
C)Tom; 65
D)Tom; 80

Question 65

Human capital is:

A)the factories and machinery used by humans in the production process.
B)the talents, training, and education of workers.
C)the financial resources available to humans for investment.
D)the factories and machinery made by workers.

Question 66

Economists refer to the talents, training, and education of workers as:

A)human capital.
B)physical capital.
C)average labor productivity.
D)labor supply.

Question 67

Which of the following is an example of an investment in human capital?

A)A firm replaces manually controlled production with a computer controlled procedure.
B)A firm pays for workers to take college classes.
C)A chemical firm supports research to develop new chemicals.
D)A firm purchases new equipment for a manufacturing process.

Question 68

When a firm builds a new factory, this is an example of an investment in:

A)human capital.
B)physical capital.
C)the market.
D)research and development.

Question 69

Fred and Barney fill egg cartons with eggs. Fred just started the job and can fill only 25 cartons an hour. Barney has significant on-the-job experience and can fill 50 cartons an hour. Both Fred and Barney work 50 hours a week. Fred's average weekly productivity is ________ cartons; Barney's average weekly productivity is ________ cartons; and as a team their average weekly productivity is ________ cartons.

A)25; 50; 75
B)25; 50; 37.5
C)1,000; 2,000; 1,500
D)1,250; 2,500; 1,875

Question 70

Countries with small amounts of capital per worker tend to have ________ levels of real GDP per person and ________ levels of average labor productivity.

A)high; high
B)high; low
C)low; low
D)low; average

Question 71

Which of the following is an example of an investment in physical capital?

A)A firm trains workers to operate new machinery.
B)A firm pays for workers to take college classes.
C)A chemical firm employs chemists to develop new chemicals.
D)A firm purchases new equipment for a manufacturing process.

Question 72

Providing workers with on-the-job training will increase:

A)average labor productivity.
B)the share of the population employed.
C)the unemployment rate.
D)the labor force participation rate.

Question 73

Equipment used to produce other goods and services are called:

A)financial capital.
B)human capital.
C)physical capital.
D)inventories.

Question 74

Betty and Wilma are the only two cashiers employed at a retail store. Each of them works the same 40 hours per week. By manually entering the price of each product purchased into the cash register, Betty can check out 20 customers and Wilma can check out 30 customers per hour. The store owner replaces the old cash registers with new ones that automatically scan product prices into the register. With the new cash registers, Betty and Wilma can each check out 60 customers per hour. Their average labor productivity as a team before the new cash registers were introduced was ________ customers per hour and ________ customers per hour after the new machines were installed.

A)25; 60
B)50; 120
C)50; 60
D)1,000; 2,400

Question 75

Countries with large amounts of capital per worker tend to have ________ levels of real GDP per person and ________ levels of average labor productivity.

A)high; high
B)high; low
C)low; low
D)low; average

Question 76

Fred and Barney fill egg cartons with eggs. Fred just started the job and can fill only 20 cartons an hour. Barney has significant on-the-job experience and can fill 40 cartons an hour. Both Fred and Barney work 40 hours a week. Fred's average weekly productivity is ________ cartons; Barney's average weekly productivity is ________ cartons; and as a team their average weekly productivity is ________ cartons.

A)20; 40; 60
B)20; 40; 30
C)800; 2,000; 1,600
D)800; 1,600; 1,200

Question 77

Physical capital is the:

A)factories and machinery used to produce other goods and services.
B)talents, training, and education of workers.
C)financial resources available for investment.
D)physical labor of workers.

Question 78

The prediction that workers get additional training only when the rewards from the training are expected to exceed the costs of the training (including the opportunity costs)is based on the:

A)principle of comparative advantage.
B)principle of diminishing returns to capital.
C)scarcity principle.
D)cost-benefit principle.

Question 79

Mike and Tom debone chicken breasts for Ted's Chicken Co. Mike is new and can only debone 60 chicken breasts per hour by hand, while Tom's experience allows him to debone 120 chicken breasts per hour by hand. Ted buys one new machine that can debone 100 chicken breasts per hour. Both Mike and Tom work the same 40 hours per week, but one of them is assigned to operate the machine instead of deboning the chicken breasts by hand. To obtain maximum average hourly productivity, ________ is assigned to use the machine and their combined average hourly productivity as a team is ________ chicken breasts.

A)Mike; 80
B)Mike; 110
C)Tom; 80
D)Tom; 110

Question 80

Workers should invest in additional human capital as long as the:

A)marginal benefit exceeds the marginal cost.
B)marginal cost exceeds the marginal benefit.
C)opportunity cost exceeds the marginal benefit.
D)opportunity cost is zero.