Deck 12: Economic Growth

Question 1

Which one of the following will not cause the production possibilities curve to shift outward?

A)improvements in the stock of land
B)increased educational opportunities
C)a very low birth rate
D)increased entrepreneurial activity

Answer 1

C

Question 2

Given a constant rate of growth of real GDP, what would lead to an increasing real GDP per capita?

A)a rate of population growth that is less than the rate of growth of real GDP
B)a rate of population growth that is greater than the rate of growth of real GDP
C)an increase in the size of the labor force
D)an increase in the capital stock
E)none of the above

Answer 2

A

Question 3

Given a constant rate of growth of real GDP, what would cause a fall in real GDP per capita?

A)a rate of population growth that is less than the rate of growth of real GDP
B)a rate of population growth that is greater than the rate of growth of real GDP
C)an increase in the size of the labor force
D)a decrease in the capital stock
E)none of the above

Answer 3

B

Question 4

How much a country's economy will produce at its potential output is also called:

A)the trough of the business cycle.
B)its economic welfare.
C)the trend line.
D)the natural rate of output.
E)the macroeconomic limit.

Question 5

Which of the following did not result in economic growth?

A)Installing a network of irrigation ditches and pumping stations in order to grow fruits and vegetables in parts of southern California
B)Cyrus McCormack inventing a threshing machine for harvesting grains
C)After World War II, the U.S. instituting the GI bill, which provided education subsidies to soldiers being released from service duty
D)Many citizens emigrating from a nation when a politically repressive regime takes office

Question 6

To achieve a high standard of living, a nation should:

A)increase welfare payments to the poor.
B)use less capital and more labor in the production process.
C)promote economic growth.
D)increase the tax deduction for child dependents.

Question 7

The measure most commonly used by economists to gauge the standard of living of a nation is:

A)labor productivity.
B)productivity of labor.
C)real GDP.
D)real GDP per capita.
E)nominal GDP.

Question 8

Which of the following affects the rate of economic growth?

A)the quality of available resources.
B)the quantity of available resources.
C)technological change.
D)all of the above.

Question 9

In any country, the population will generally be better off as long as the ____ over time and population ____.

A)quantity and quality of output decreases; does not increase faster than real output
B)quantity and quality of output increases; increases faster than real output
C)quantity and quality of output increases; does not increase faster than real output
D)technology improves; increases faster than real output

Question 10

Output per capita:

A)is measured by GDP per capita.
B)is total output (GDP) divided by the number of persons among whom it will be distributed.
C)is one measure of the average level of economic well-being in a country.
D)all of the above are correct.

Question 11

The prosperity of a nation today is typically measured by its:

A)total output or gross national product.
B)output per capita.
C)gold reserves.
D)proportionate share of international trade.

Question 12

If real GDP per capita is increasing, real output is:

A)growing less rapidly than the population.
B)growing more rapidly than the population.
C)growing at the same rate as the population.
D)growing more rapidly than are prices.

Question 13

If real GDP per capita is decreasing, real output is:

A)growing less rapidly than the population.
B)growing more rapidly than the population.
C)growing at the same rate as the population.
D)growing more rapidly than are prices.

Question 14

Which of the following economists is given credit for stating that "in the long run we are all dead"?

A)Milton Friedman
B)John Maynard Keynes
C)Robert L. Sexton
D)Adam Smith

Question 15

Economic growth is measured by the:

A)advancement in the quality of a nation's technology.
B)rate of business investment and capital formation.
C)annual percentage change in per capita real output of goods and services.
D)marginal change in nominal output divided by total output from the previous year.

Question 16

Improvements in and greater stocks of land, labor, capital, and entrepreneurial activity will shift the production possibilities curve:

A)outward, such that more goods and services can be produced.
B)outward, such that the cost-of-living rises.
C)inward, such that the marketplace experiences a decrease in price and output levels.
D)inward, because more resources will be used up and not renewed.

Question 17

If real GDP is increasing more rapidly than the population, then:

A)interest rates must be falling.
B)the economy must be experiencing inflation.
C)per capita real GDP will be increasing.
D)per capita real GDP will be decreasing.

Question 18

Which of the following statements is not correct?

A)Economic growth is best measured by the annual percentage change in nominal GDP per capita.
B)An economy producing along the production possibilities curve is operating at its potential output.
C)Economic growth is a crucial determinant of people's well-being.
D)If the quality of labor improves, an economy's production possibilities curve will shift outward.

Question 19

Which one of the following will cause the production possibilities curve to shift outward?

A)improved public education
B)improved health care systems
C)larger budgets for research, development, and exploration
D)all of the above

Question 20

Which one of the following will determine the size of the production possibilities curve?

A)amount of labor
B)amount of capital
C)entrepreneurship
D)all of the above

Question 21

Country A and Country B initially have the same real GDP per capita.Country A experiences no economic growth, while Country B grows at a sustained rate of 5 percent.In 14 years, Country A's GDP will be approximately ____ that of Country B.

A)one-fourth
B)one-half
C)double
D)triple
E)five times

Question 22

For a low-income country to develop into a high-income country, ____ is (are) needed.

A)a sustained and rapid expansion in the money supply
B)sustained economic growth
C)tax breaks on consumption goods
D)deflation

Question 23

Changes in the growth rate of real GDP per capita do not reflect which of the following?

A)changes in the total production of final goods in the economy
B)changes in the production of final services in the economy
C)changes in the distribution of income
D)changes in the size of the population

Question 24

The rule of 70 which predicts the time required for the economy of a nation to double, is based on the mechanism of:

A)compound interest.
B)capital formation.
C)labor force productivity.
D)capital investments.

Question 25

As of 2009, the U.S.per capita real GDP was approximately:

A)$28,100
B)$29,900
C)$42,200
D)$45,200
E)$47,900

Question 26

If a country's annual growth rate is 2%, then its output will double in approximately ____ years.

A)2
B)10
C)25
D)35
E)50

Question 27

Which of the following factors contribute to economic growth?

A)growth in physical capital
B)an increase in the availability of natural resources
C)an increase in the productivity of labor
D)technological advances
E)all of the above

Question 28

A country will roughly double its GDP in twenty years if its annual growth rate is:

A)2.5 percent.
B)3.5 percent.
C)7.5 percent.
D)12 percent.
E)20 percent.

Question 29

A country will roughly double its GDP in five years if its annual growth rate is:

A)5 percent.
B)7 percent.
C)12 percent.
D)14 percent.
E)20 percent.

Question 30

Which of the following is not considered a factor that contributes to economic growth?

A)increased labor productivity
B)increased infant mortality rates
C)technological advances
D)the migration of resources from areas of low productivity to areas of high productivity

Question 31

Growth in a production possibilities curve diagram is shown as:

A)a movement along the curve to the southeast.
B)a movement along the curve to the southwest.
C)an outward shift of the curve.
D)an inward shift of the curve.

Question 32

An increase in growth rates will cause:

A)an inward shift of an economy's production possibilities curve.
B)an outward shift of an economy's production possibilities curve.
C)a movement from a point on an economy's production possibilities curve to a point inside the curve.
D)an economy's production possibilities curve to slope upward.
E)none of the above.

Question 33

A decrease in growth rates will cause:

A)an inward shift of an economy's production possibilities curve.
B)an outward shift of an economy's production possibilities curve.
C)a movement from a point inside an economy's production possibilities curve to a point on the curve.
D)an economy's production possibilities curve to slope upward.
E)none of the above.

Question 34

All of the following affect the growth in real GDP per capita except:

A)the total production of final goods in the economy.
B)the distribution of income.
C)the population.
D)the production of final services in the economy.

Question 35

In the long run, the most important source of increase in a nation's standard of living is a:

A)zero rate of population growth.
B)high rate of economic growth.
C)high rate of consumption.
D)high rate of labor force growth.

Question 36

There are several factors that nearly everyone agrees have contributed to economic growth in some or all countries.They do not include which of the following?

A)Growth in the quantity and quality of labor resources used
B)Increase in the use of inputs provided by the land
C)Growth in physical capital inputs
D)Technological advances
E)All of the above are included.

Question 37

For a low-income country to develop into a high-income country, ____ is (are) needed.

A)high rates of inflation
B)high interest rates
C)sustained economic growth
D)restrictions on international trade

Question 38

The ____ shows roughly how long it will take a nation to double its output at various growth rates.

A)rule of rapid growth
B)rule of 70
C)rule of 1950
D)duopoly rule
E)none of the above

Question 39

If productivity of an economy increases then:

A)the amount of goods and services produced by a worker per hour increases.
B)the population of the labor force increases.
C)the real GDP per capita decreases.
D)the population of labor force decreases.

Question 40

According to the rule of 70,

A)if a country is growing at 14% per year, its output will double in approximately 5 years.
B)if a country is growing at 10% per year, its output will double in approximately 7 years.
C)if a country is growing at 2% per year, its output will double in approximately 35 years.
D)all of the above are true.
E)none of the above are true.

Question 41

Higher levels of savings will result in all of following except:

A)greater economic growth.
B)higher capital formation.
C)more consumption in the future.
D)lower rates of investment.

Question 42

Which of the following is correct?

A)An increase in the quantity of labor always leads to economic growth.
B)Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.
C)A decrease in the productivity of labor leads to economic growth.
D)Japan and Hong Kong are rich in natural resources.

Question 43

Which of the following countries have a relative abundance of natural resources?

A)Japan
B)Canada
C)Hong Kong
D)all of the above
E)none of the above

Question 44

Which of the following countries are lacking an abundance of natural resources?

A)Australia
B)Japan
C)Brazil
D)United States
E)Canada

Question 45

The slower the rate of capital formation:

A)the greater the rate of economic growth.
B)the slower the rate of economic growth.
C)the greater the rate of population growth.
D)the slower the rate of growth of the money supply.

Question 46

Which of the following will not directly affect the size of a nation's capital stock?

A)A new factory is constructed.
B)A new machine is installed in company's plant.
C)An eighteen-year-old enrolls in college as a full-time student.
D)All of the above directly affect the size of a nation's capital stock.

Question 47

One of the most important determinants of accelerated economic growth is:

A)relaxed property rights.
B)an increase in population.
C)a high level of savings.
D)an increased rate of consumption.

Question 48

Which of the government policies below is not likely to encourage per capita economic growth?

A)High taxes on companies that spend a lot on capital formation
B)The use of tax revenues for investment and capital formation
C)Special subsidies for capital-intensive forms of production
D)Promotion of education and training programs for workers

Question 49

Is it possible to have economic growth with no opportunity cost?

A)Yes, economic growth requires no current sacrifices-only the passage of time.
B)No, but economic growth is always worth whatever sacrifice is required.
C)No, because growth depletes the stock of knowledge so that more growth today means less growth tomorrow.
D)No, because growth requires the sacrifice of consumption goods in order to invest in capital formation and research and development.

Question 50

Which of the following will not increase the rate of growth in an economy?

A)a reduction in the rate of savings
B)an increase in the productivity of labor
C)technological progress
D)higher rates of investment

Question 51

Which of the following is a new growth economist?

A)William Ratliff
B)Douglas North
C)Thomas Malthus
D)Paul Romer

Question 52

If there was an increase in technology, real GDP growth would ____ and real GDP growth per capita would ____:

A)increase; increase.
B)increase; be indeterminate.
C)decrease; decrease.
D)decrease; be indeterminate

Question 53

One of the most important determinants of economic growth is:

A)the birth rate.
B)the rate of infant mortality.
C)the savings rate.
D)the unemployment rate.

Question 54

As more capital per worker is added, a per worker production function generally becomes:

A)flatter because capital is subject to diminishing marginal returns.
B)flatter because labor is subject to diminishing marginal returns.
C)flatter because capital is subject to increasing marginal returns.
D)steeper because capital is subject to diminishing marginal returns.
E)steeper because labor is subject to increasing marginal returns.

Question 55

Which of the following is true?

A)The Rule of 70 says that the number of years necessary for a nation to double its output is approximately equal to the nation's growth rate divided by 70.
B)Economic growth is usually measured by the annual percent change in the nominal output of goods and services per capita.
C)An increase in labor input necessarily increases output per capita.
D)Neither the initial development process nor the sustained growth of an economy is dependent on a large natural resource base.
E)None of the above is true.

Question 56

Technology can enable producers to economize on:

A)labor.
B)capital.
C)land.
D)any of the above.

Question 57

New growth theorists believe that increased economic growth is driven by:

A)higher level of savings.
B)higher level of capital investments.
C)increased foreign investment.
D)technological innovation and ideas.

Question 58

Which of the following factors contribute to economic growth?

A)a decline in the stock of physical capital
B)the discovery of new oil reserves
C)a decrease in the productivity of labor
D)a decrease in the quantity of labor due to emigration

Question 59

The faster the rate of technological progress:

A)the greater the rate of economic growth.
B)the slower the rate of economic growth.
C)the greater the rate of population growth.
D)the slower the rate of growth of the money supply.

Question 60

The per-worker production function is ____ sloped and ____ at a(n) ____ rate.

A)negatively; decreases; diminishing
B)negatively; decreases; increasing
C)positively; increases; increasing
D)positively; increases; diminishing

Question 61

Over the last several decades, the amount of government investment in U.S.infrastructure has:

A)remained the same.
B)decreased.
C)increased marginally.
D)increased substantially.

Question 62

Which of the following is not considered a factor contributing to economic growth?

A)Growth in the quantity and quality of labor resources used
B)Growth in physical capital inputs (machines, tools, buildings, and inventories)
C)Growth in the money supply relative to the growth of final goods and services
D)Government protection of property rights

Question 63

When an economy experiences significant economic growth:

A)a negative relationship exists between output per capita and adult literacy rates.
B)an indirect relationship exists between output per capita and adult literacy rates.
C)a direct relationship exists between output per capita and adult literacy rates.
D)no observed relationship exists between output per capita and adult literacy rates.

Question 64

Improvements in literacy stimulate economic growth by:

A)reducing the barriers to the flow of information.
B)improving the flow of resources to more productive uses.
C)imparting skills, which raises labor productivity.
D)doing all of the above.

Question 65

Which of the following will not contribute to increasing the stock of capital of a nation?

A)an increase in savings
B)a reduction in taxes on capital gains and stock dividends
C)a lack of enforcement of private property rights
D)the subsidization of higher education

Question 66

Which of the following is false?

A)Accepting a reduction in current income to acquire education and training can increase future earning ability, which can raise the standard of living.
B)Improvements in literacy stimulate economic growth by reducing barriers to the flow of information and raising labor productivity.
C)One problem of providing enough education in poorer countries is that since children in developing countries are an important part of the labor force at a young age, there is a higher opportunity cost of education in terms of foregone contribution to family income.
D)Investment alone does not guarantee economic growth per capita.
E)None of the above are false; all are true.

Question 67

Sergei has developed a new fat substitute that has no calories and produces no side effects.In order for him to be encouraged to bring this innovation to the marketplace he is likely to want which of the following the most?

A)time to be able to thoroughly test the fat substitute
B)an ample supply of capital to start the manufacturing process
C)a trademark
D)a patent

Question 68

A nation can achieve higher economic growth if:

A)it devotes more resources to research and development.
B)the productivity of labor declines.
C)taxes are imposed on investment in capital.
D)more resources are allocated to consumption goods.

Question 69

When observing economic growth and literacy rates, it is clear that:

A)economic growth causes higher literacy rates.
B)economic growth may be a consequence of improved education.
C)improved levels of education may be the result of increasing economic growth.
D)higher levels of education lead to increases in worker productivity.
E)all of the above are likely to be true.

Question 70

Enforcement of property rights is likely to result in:

A)more incentives to invest.
B)lower rates of economic growth.
C)political instability.
D)corruption.

Question 71

Which of the following is false?

A)Generally speaking, higher levels of saving will lead to higher levels of investment and capital formation and, therefore, to greater economic growth.
B)If there was an increase in the quantity of physical capital in a country at the same time that the quantity or quality of labor resources used rose, that country would experience economic growth as a result.
C)Investment alone does not guarantee economic growth, which hinges importantly on the quality and the type of investment as well.
D)Economic growth rates tend to be higher in countries where the government enforces property rights.
E)None of the above are false; all are true.

Question 72

Education would be considered investments in:

A)physical capital
B)financial capital
C)human capital
D)all of the above
E)none of the above.

Question 73

Allowing free trade can lead to greater output because of the principle of:

A)absolute advantage.
B)rule of 70.
C)comparative advantage.
D)scarcity.

Question 74

Would companies and individuals invest as much in significant research and development if a system of patents were not available?

A)Yes they would, because they could still hope to monopolize the market.
B)Yes they would, because firms are civic-minded and highly motivated to introduce innovations that improve the standard of living.
C)No they would not, because if they made a significant investment in the development, they would be unable to protect the innovations or discoveries long enough to be sufficiently compensated for their efforts.
D)No they would not, because the benefits to society of engaging in research and development would be less than the costs to society.

Question 75

Many scholars believe that the importance of research and development is understated.Efforts in research and development can include:

A)the introduction of new products.
B)management improvements.
C)production innovations.
D)learning by doing.
E)any of the above.

Question 76

GDP is:

A)the value of all final goods and services produced domestically within a given period of time.
B)the value of all final good and services produced anywhere in the world by a nation's firms within a given period of time.
C)the value of all final goods and services produced by a government within a given period of time.
D)the sum of all currency and coins in circulation.

Question 77

Which of the following best describes the relationship between economic growth and literacy?

A)As the economy grows, literacy declines because it becomes less and less useful in a developed economy.
B)Increased literacy initially stimulates economic growth by raising labor productivity, but as the economy grows and the opportunity cost of education rises, literacy declines.
C)Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.
D)There is no correlation between economic growth and literacy.

Question 78

Which of the following would not be considered an investment in human capital?

A)education
B)training programs
C)transportation infrastructure
D)literacy programs

Question 79

In a fully employed economy, invention and discovery:

A)are automatic.
B)are achieved through sacrifices in current consumption.
C)have negative opportunity costs.
D)All of the above are correct.

Question 80

In a consumer-oriented economy, the decision to save in order to promote economic growth:

A)means a sacrifice of current consumption in order to enhance future consumption.
B)must be enforced by high levels of taxation.
C)cannot be expected to benefit future generations.
D)none of the above.