Deck 11: Long-Run Economic Growth: Sources and Policies

Question 1

Significant economic growth did not begin in the world until

A)1000 A.D.
B)1750 A.D.
C)1820 A.D.
D)the 20th century A.D.

Answer 1

B

Question 2

Growth in real GDP per capita for the world economy was greatest during

A)the seventeenth century.
B)the eighteenth century.
C)the nineteenth century.
D)the twentieth century.

Answer 2

D

Question 3

If real GDP per capita in the United States is $8,000,what will real GDP per capita in the United States be after 5 years if real GDP per capita grows at an annual rate of 3.2%?

A)$8,520
B)$9,280
C)$9,365
D)$10,560

Answer 3

C

Question 4

Suppose that in 2013,real GDP grew in Estonia by 3% and the population increased by 5%.Therefore,in 2013,Estonia experienced

A)economic growth,but not an increase in living standards.
B)economic growth and an increase in living standards.
C)no economic growth,but an increase in living standards.
D)no economic growth and no increase in living standards.

Question 5

The Industrial Revolution began in

A)England around 1750.
B)the United States around 1820.
C)France around 1680.
D)Germany around 1780.

Question 6

If real GDP per capita in the United States is $8,000 in 2013,and if real GDP per capita is $12,000 in 2023,what is the total percent change in the growth rate of GDP per capita between 2013 and 2023?

A)3.33%
B)5%
C)33%
D)50%

Question 7

Some factors currently exist that inhibit the growth rate of the Chinese economy.One reason that General Motors has been unwilling to bring its latest technology for building electric and hybrid cars to China is

A)the introduction of free-market reforms.
B)the introduction of the relatively new resource of entrepreneurship.
C)the lack of laws that predictably enforce property rights.
D)the total lack of governmental intervention in the market place.

Question 8

Table 11-1

Refer to Table 11-1.Based on the table above,which country has a higher standard of living and why?

A)Sweden has a higher standard of living because their GDP is higher.
B)Ireland has a higher standard of living because their GDP per capita is higher.
C)Sweden has a higher standard of living because their GDP per capita is higher.
D)Ireland has a higher standard of living because growth in GDP is greater in Ireland than in Sweden.

Question 9

If a country's real GDP is rising by 3% per year while its population is rising at 5% per year,which of the following is true?

A)The country's standard of living is falling.
B)The country's standard of living is rising.
C)Growth in nominal GDP outweighs growth in the population.
D)Growth in nominal GDP is less than the growth in the population.

Question 10

The rapid growth of the Chinese economy should

A)benefit U.S.consumers as they have access to less expensive consumer goods.
B)make it more difficult for citizens of the United States to find a job.
C)not affect the mix of jobs available to citizens of the United States.
D)A and B

Question 11

China's economy has grown tremendously from 1979 to the present.The reason for this growth is

A)the introduction of the centrally planned economy in 1978.
B)the introduction of market-oriented reforms in 1978.
C)the introduction of the social networking site,Facebook.
D)the total lack of governmental intervention in the economy.

Question 12

Between 1960 and 2010,deaths among children have

A)declined in most high-income countries and have risen in most low-income countries.
B)declined in nearly all countries,including most low-income countries.
C)remained relatively unchanged in most high-income countries and have declined in most low-income countries.
D)declined in most high-income countries and have remained relatively unchanged in most low-income countries.

Question 13

Increasing the growth rate of GDP per capita and sustaining this growth rate in an economy can

A)increase infant mortality.
B)increase standards of living.
C)increase the level of poverty.
D)lower life expectancy.

Question 14

If real GDP in the United States is growing at an annual rate of 3.2% per capita and Bolivia's real GDP per capita is growing at a rate of 1.3%,which of the following would we expect in the long run? Assume real GDP per capita in the United States begins at a level above that of real GDP per capita in Bolivia.

A)Real GDP per capita in the United States will always be 1.9% higher than real GDP per capital in Bolivia.
B)The difference between the level of real GDP per capita in the United States and real GDP per capita in Bolivia will shrink over time.
C)The difference between the level of real GDP per capita in the United States and real GDP per capita in Bolivia will increase over time.
D)The difference between the level of real GDP per capita in the United States and real GDP per capita in Bolivia will always be $1.9 trillion.

Question 15

The best measure of a country's standard of living is

A)GDP per labor hour.
B)GDP per unit of capital.
C)GDP per capita.
D)total nominal GDP.

Question 16

The period of time from 1,000,000 B.C.to 1300 A.D.was a period of

A)no sustained economic growth.
B)slow and steady economic growth.
C)moderate economic growth.
D)rapid and sustained economic growth.

Question 17

If real GDP per capita in the United States is $8,000 in 2013,and if real GDP per capita is $12,000 in 2023,what is the average annual percent change in the growth rate of GDP per capita between 2013 and 2023?

A)3.33%
B)5%
C)33%
D)50%

Question 18

Which of the following accurately describes economic growth and standards of living between 1,000,000 B.C.and 1300 A.D.?

A)Standards of living in 1300 A.D.were substantially better than what they were in 1,000,000 B.C.
B)Standards of living substantially declined from 1,000,000 B.C.to 1300 A.D.
C)Significant economic growth took place between 1,000,000 B.C.and 1300 A.D.
D)No sustained economic growth occurred between 1,000,000 B.C.and 1300 A.D.

Question 19

According to Douglass North,the Industrial Revolution occurred in England because

A)the British Parliament took control of the government and could credibly commit to upholding property rights.
B)the British monarchy took control of the government and pledged not to raise taxes arbitrarily.
C)the British courts became tied to the king and began to refuse to enforce property rights.
D)the British Parliament instituted a command economy structure and implemented a planned economy.

Question 20

If real GDP per capita in Ireland is estimated to be $7,400 in 2014,what will real GDP per capita be in 2019 if real GDP per capita grows at an annual rate of 2.8%?

A)$7,607
B)$8,496
C)$9,472
D)$20,720

Question 21

If GDP per capita rises by 2% between 2013 and 2014,which of the following is necessarily true?

A)Real GDP has risen by more than 2%.
B)The population has decreased.
C)The population has increased,but by less than 2%.
D)None of the above is necessarily true.

Question 22

Which of the following countries had the highest GDP per capita in 2012?

A)Qatar
B)United States
C)Japan
D)Norway

Question 23

In the long run,________ differences in economic growth rates result in ________ differences in GDP per capita.

A)large; small
B)large; no
C)small; large
D)small; no

Question 24

The Industrial Revolution

A)marked the beginning of significant economic growth in the world.
B)started in France around the year 1750.
C)produced goods exclusively using human or animal power.
D)had no impact on standards of living in the world.

Question 25

Most of the countries of Africa are considered newly industrializing countries.

Question 26

________ is considered a high income country,________ a developing country,and ________ a newly industrializing country.

A)Japan; Hong Kong; South Korea
B)United States; Somalia; Taiwan
C)Canada; France; Singapore
D)Honduras; New Zealand; South Korea

Question 27

High-income countries are also referred to as

A)developing countries.
B)industrial countries.
C)growing countries.
D)agrarian countries.

Question 28

In 2012,South America had a lower average GDP per capita than any other continent.

Question 29

The small group of East Asian countries that experienced high rates of growth in the 1980s and 1990s are referred to as

A)newly industrializing countries.
B)countries with low standards of living.
C)education-deprived countries.
D)industrial countries.

Question 30

During which of the following periods was growth in GDP per capita the strongest?

A)prior to 500 A.D.
B)500 A.D.to 1800 A.D.
C)1800-1900 A.D.
D)1900-2000 A.D.

Question 31

GDP in a country grew from $10 billion to $14 billion over the span of 5 years.The average annual growth rate of GDP was

A)4%.
B)7%.
C)10%.
D)40%.

Question 32

The key factors in raising standards of living in low-income countries have been increases in

A)capital accumulation and the money supply.
B)technology and knowledge.
C)foreign aid and population.
D)income and government ownership of resources.

Question 33

Small differences in economic growth rates result in small differences in living standards.

Question 34

Which of the following countries had the lowest GDP per capita in 2012?

A)France
B)Mexico
C)Democratic Republic of the Congo
D)Argentina

Question 35

Which of the following is not a reason why the Industrial Revolution occurred when and where it did?

A)The British government was committed to upholding private property rights.
B)The British government was able to eliminate arbitrary increases in taxes.
C)The British government was able to more easily seize wealth.
D)Institutional changes by the British government helped protect wealth.

Question 36

GDP in a country grew from $10 billion to $14 billion over the span of 5 years.The percentage change in GDP was

A)4%.
B)7%.
C)10%.
D)40%.

Question 37

An economy that grows too slowly fails to raise living standards.

Question 38

According to the World Bank,in 2006,China's GDP was approximately $2.7 trillion (or $2,700 billion).That same year,India's GDP was approximately $906.3 billion.With which of the following populations would China's standard of living have been considered higher than India's that year?

A)China's population = 1.3 billion; India's population = 1.1 billion
B)China's population = 8.3 billion; India's population = 1.1 billion
C)China's population = 500 million; India's population = 125 million
D)China's population = 3.5 billion; India's population = 1.1 billion

Question 39

According to Nobel laureate Douglass North,one reason why the Industrial Revolution occurred in England before many other countries was because the king in England consistently maintained control over the court system and the government.

Question 40

Most economic growth in the world occurred between 1,000,000 B.C.and 1300 A.D.

Question 41

Figure 11-1
Refer to Figure 11-1.Many countries in Africa strongly discouraged and prohibited foreign direct investment in the 1950s and 1960s.By doing so,these countries were essentially preventing a moment from

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

Question 42

An economic growth model explains

A)changes in real GDP per capita in the long run.
B)how changes in the money supply affect real interest rates.
C)changes in government tax policies over time.
D)the growth rate of the price level over time.

Question 43

When an economy faces diminishing returns,

A)the slope of the per-worker production function becomes steeper as capital per hour worked increases.
B)the slope of the per-worker production function becomes flatter as capital per hour worked increases.
C)the per-worker production function shifts to the left.
D)the per-worker production function shifts to the right.

Question 44

Figure 11-1
Refer to Figure 11-1.Diminishing marginal returns is illustrated in the per-worker production function in the figure above by a movement from

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

Question 45

If the per-worker production function shifts down,

A)it now takes more capital per hour worked to get the same amount of real GDP per hour worked.
B)an economy can increase its real GDP per hour worked without changing the level of capital per hour worked.
C)the per-worker production function becomes steeper.
D)positive technological change has occurred in the economy.

Question 46

What features made England in the eighteenth century the place where the Industrial Revolution occurred?

Question 47

If the Commerce Department adjusts the growth rate of GDP downward for the first quarter of 2014,and the Bureau of Labor Statistics adjusts the number of hours worked upward for the first quarter of 2014,what will the Bureau of Labor Statistics do in terms of revising the figures on the growth rate of labor productivity for the first quarter of 2014?

A)The BLS will adjust the growth rate downwards.
B)The BLS will adjust the growth rate upwards.
C)The BLS will not change the growth rate of productivity.
D)The BLS will adjust the level of labor productivity upward and the growth rate downward.

Question 48

How do economic growth rates affect a nation's standard of living?

Question 49

Figure 11-1
Refer to Figure 11-1.Using the per-worker production function in the figure above,the largest changes in an economy's standard of living would be achieved by a movement from

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

Question 50

An economy can improve its standard of living by

A)organizing production so that the quantity of goods produced per hour will decrease.
B)reducing the amount of human capital workers have.
C)increasing the amount of capital available per hour worked.
D)all of the above

Question 51

Figure 11-1
Refer to Figure 11-1.Within a country,the impact of wars and revolutions and their subsequent destruction of capital is reflected in the per-worker production function in the figure above by a movement from

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

Question 52

What are some of the reasons used to explain improvements in health,education,democracy,and political stability in many low-income countries?

Question 53

Suppose that an increase in capital per hour worked from $15,000 to $20,000 increases real GDP per hour worked by $500.If capital per hour worked increases further to $25,000,by how much would you expect real GDP per hour worked to increase if there are diminishing returns?

A)by less than $500
B)by exactly $500
C)by more than $500 but less than $5,000
D)by more than $5,000 but less than $20,000

Question 54

Which of the following is not one of the three sources of technological change?

A)additional amounts of existing capital
B)better machinery and equipment
C)increases in human capital
D)better means of organizing and managing production

Question 55

Which of the following would you expect to result in faster economic growth?

A)the invention of new computers that increase labor productivity
B)a decrease in the average level of education in the economy
C)a decrease in the stock of capital per worker
D)a decrease in research and development spending

Question 56

Figure 11-1
Refer to Figure 11-1.Suppose the per-worker production function in the figure above represents the production function for the U.S.economy.If the United States decided to double its support of university research,this would cause a movement from

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

Question 57

When additions of input to a fixed quantity of another input lead to progressively smaller increases in output,we say we are facing

A)diminishing returns.
B)negative returns.
C)accelerating returns.
D)decreasing production.

Question 58

Table 11-2

Refer to Table 11-2.Calculate the GDP per capita for each country in the table.Which country has the highest standard of living? Why?

Question 59

Figure 11-1
Refer to Figure 11-1.Technological change is illustrated in the per-worker production function in the figure above by a movement from

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

Question 60

In the early 1900s,Henry Ford revolutionized the automotive manufacturing industry by instituting the assembly line.What impact did the assembly line method for producing automobiles have on the per-worker production function for Ford?

A)It became flatter.
B)It shifted up.
C)It shifted down.
D)It became linear.

Question 61

Figure 11-2
Refer to Figure 11-2.Based on the per-worker production function above,if the economy raises capital per hour worked from $35,000 to $40,000,by how much will real GDP per hour worked increase?

A)$150
B)$1,850
C)$2,000
D)$5,000

Question 62

Why do some firms choose not to file for a patent and instead try to keep the results of their research a trade secret?

A)because firms must disclose information about the product or process being patented in a patent application
B)because trade secrets are never divulged
C)because a patent only gives the inventor exclusive rights to a product or process for 5 years
D)because trade secrets provide the same exclusive legal rights to a product as a patent does

Question 63

Technological improvements are more likely to occur if

A)the economy is centrally planned.
B)entrepreneurs are compensated with higher profits for taking risks.
C)economic decisions are made by politicians rather than entrepreneurs.
D)companies face little competition in their markets.

Question 64

If the slope of the per-worker production function is 1/2 in a given range,how will a $10,000 increase in capital per hour worked affect real GDP per hour worked in the same given range?

A)Real GDP per hour worked will increase by $5,000.
B)Real GDP per hour worked will increase by $20,000.
C)Real GDP per hour worked will increase by $10,000.
D)Real GDP per hour worked will decrease by $20,000.

Question 65

Because firms can free ride on the research and development of other firms,

A)firms choose a level of research and development where the marginal cost of research is equal to the economy's marginal return of research.
B)firms choose a level of research and development where the marginal cost of research is above the economy's marginal return of research.
C)firms choose a level of research and development where the marginal cost of research is below the economy's marginal return of research.
D)firms choose a level of research and development where the marginal cost of research is below the individual firm's marginal return of research.

Question 66

According to new growth theory,

A)technological change is influenced by economic incentives.
B)centrally-planned economies are the most efficient.
C)growth in real GDP per capita occurs only if there are increasing returns.
D)economic growth is determined by forces outside the control of the market system.

Question 67

Because of diminishing returns,an economy can continue to increase real GDP per hour worked only if

A)there are decreases in human capital.
B)the per-worker production function shifts downward.
C)there continue to be decreases in capital per hour worked.
D)there is technological change.

Question 68

Figure 11-2
Refer to Figure 11-2.Assuming no technological change,if the United States increases capital per hour worked by $40,000 every year between 2010 and 2014,we would expect to see

A)real GDP per hour worked will increase by the same increment each year between 2010 and 2014.
B)real GDP per hour worked will be lower in 2014 than it was in 2010.
C)the per-worker production function will get flatter over time.
D)the per-worker production function will shift up every year there is increase in capital per hour worked.

Question 69

Under the Soviet system of communism,

A)managerial pay was determined by the extent to which managers could lower the per-unit costs of production.
B)technological progress was slow because managers had little incentive to develop new technologies.
C)competitive pressures in the Soviet Union allowed the country's technological progress to keep pace with the rest of the world.
D)the per-worker production function in the Soviet Union shifted up more rapidly than production functions in other countries.

Question 70

Knowledge capital is nonrival in the sense that

A)two people can use the same knowledge to develop and produce a product.
B)firms do not compete to be the first to develop new technologies.
C)no single company can be excluded from the benefits of new technologies.
D)firms can benefit from the research and development of rival firms without paying for that benefit.

Question 71

In a small European country,it is estimated that changing the level of capital from $8 million to $10 million will increase real GDP from $2 million to $3 million.If the number of hours worked in the labor force does not change,what does this information tell you about the slope of the per-worker production function in this range?

A)The slope is -2.
B)The slope is 1/2.
C)The slope is 2.
D)The slope is 4.

Question 72

In a small European country,it is estimated that changing the level of capital from $8 million to $10 million will increase real GDP from $2 million to $3 million.What level of GDP would you expect the economy to be able to reach if spending on capital continued to rise to $12 million,assuming no technological change and no change in the hours of work?

A)GDP would increase further,but by less than $1 million.
B)GDP would increase further by exactly $1 million.
C)GDP would increase further by more than $1 million
D)GDP would increase further by exactly $4 million.

Question 73

Knowledge capital is

A)rival.
B)nonrival.
C)nonexcludable.
D)both B and C

Question 74

A patent grants an inventor exclusive rights to a product for how long?

A)14 years
B)17 years
C)20 years
D)the lifetime of the product

Question 75

According to new growth theory,

A)physical capital is nonexcludable.
B)knowledge capital is excludable.
C)knowledge capital is subject to increasing returns.
D)knowledge capital is rival and excludable.

Question 76

Firms free ride on the research and development of other firms when they

A)buy a firm's newly developed product,and then give it away to consumers.
B)use knowledge other firms have developed without paying for that knowledge.
C)license a new technology from a firm that developed the new technology.
D)choose a level of research and development that is inefficiently high.

Question 77

In a small European country,it is estimated that a $10,000 increase in capital per hour worked will increase real GDP per hour worked by $300.Based on this information,what is the slope of the per-worker production function in this range?

A)0.03
B)3.3
C)33.3
D)333

Question 78

Paul Romer,an economist at Stanford University,is most closely associated with what economic theory?

A)new growth theory
B)labor productivity theory
C)the process of creative destruction
D)the Communist Manifesto

Question 79

Which of the following government provisions would help increase the accumulation of knowledge capital?

A)patents
B)copyrights
C)education subsidies
D)All of the above are correct.

Question 80

The Soviet Union's economy grew rapidly in terms of GDP per hour worked in the 1950s,but eventually this growth slowed.Why did this occur?

A)Capital per hour worked grew rapidly from 1950 to 1980,but technological change occurred very slowly.
B)Capital per hour worked grew slowly,but technological change grew very rapidly.
C)Increasing implementation of new technologies eventually suffered diminishing marginal returns.
D)The centrally planned economy invested too heavily in technological change.