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

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.

Answer 2

A

Question 3

If real GDP per capita in the United States is $8,000 in 2016,and if real GDP per capita is $12,000 in 2026,what is the average annual percent change in the growth rate of GDP per capita between 2016 and 2026?

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

Answer 3

B

Question 4

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 5

Over the past 50 years,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 6

Suppose that in 2016,real GDP grew in Estonia by 3% and the population increased by 5%.Therefore,in 2016,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 7

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.

Question 8

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 9

The Industrial Revolution began in

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

Question 10

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 11

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 12

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 13

If real GDP per capita in the United States is $8,000 in 2016,and if real GDP per capita is $12,000 in 2026,what is the total percent change in the growth rate of GDP per capita between 2016 and 2026?

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

Question 14

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 15

One of the primary reasons that Mexico has experienced relatively low rates of economic growth is that for Mexican entrepreneurs,

A)there is a shortage of low-skilled labor to fill manufacturing jobs.
B)the government has a history of nationalizing all successful domestically-owned industries.
C)problems in the banking system have made it difficult to obtain the funding needed to finance expansion.
D)incentives from its neighboring Central American countries has attracted most of the foreign investment in the region.

Question 16

If real GDP per capita in Ireland is estimated to be $7,400 in 2016,what will real GDP per capita be in 2021 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 17

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 18

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 capita 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 19

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 jobs.
C)not affect the mix of jobs available to citizens of the United States.
D)A and B

Question 20

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

Question 21

If GDP per capita rises by 2% between 2015 and 2016,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

In 2014,South America had a lower average GDP per capita than any other continent.

Question 23

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 24

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 25

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 26

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

Question 27

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

Question 28

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 29

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 30

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 31

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 32

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 33

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

Question 34

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

Question 35

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

Question 36

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 37

Which of the following countries had the lowest GDP per capita in 2014?

A)France
B)Mexico
C)Central African Republic
D)Argentina

Question 38

Which of the following countries had the highest GDP per capita in 2014?

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

Question 39

________ 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 40

High-income countries are also referred to as

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

Question 41

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 42

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 43

If the Commerce Department adjusts the growth rate of GDP downward for the first quarter of 2016,and the Bureau of Labor Statistics adjusts the number of hours worked upward for the first quarter of 2016,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 2016?

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 44

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 45

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 46

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 47

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 48

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 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 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 51

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 52

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 53

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

Question 54

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 55

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 56

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 57

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 58

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 59

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

Question 60

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 61

Knowledge capital is

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

Question 62

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 63

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 64

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 65

Which of the following government policies would most likely result in an increase in economic growth?

A)a decrease in the life of a patent from 20 years to 15 years
B)a decrease in the interest rate at which the government provides student loans
C)a decrease in government spending on grants issued through the National Institutes of Health
D)decreased copyright protection on music and movies

Question 66

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 67

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 68

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 69

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 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

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 72

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 2012 and 2016,we would expect to see

A)real GDP per hour worked will increase by the same increment each year between 2012 and 2016.
B)real GDP per hour worked will be lower in 2016 than it was in 2012.
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 73

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 74

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 75

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.

Question 76

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 77

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 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

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