Question 1

Which of the following is true regarding the per person income of the world during the past 1000 years
A)The world's income per person has approximately doubled during the past 1000 years and most of that growth has occurred since 1900.
B)The world's income per person changed very little during the 800 years prior to 1813, but it has increased by nearly tenfold during the past 200 years.
C)The world's income per person has grown steadily during the past 1000 years.
D)The world's per person income grew at an annual rate of more than 2 percent during 1000-1813, but the annual growth rate has declined as the population increased during the past 200 years.

Accepted Answer

According to the given options, the most accurate statement regarding the per person income of the world during the past 1000 years is that the world's income per person changed very little during the 800 years prior to 1813, but it has increased by nearly tenfold during the past 200 years. Option A is incorrect because it states that most of the growth has occurred since 1900, which is not entirely true as there was significant growth during the Industrial Revolution (18th-19th century). Option C is incorrect because it states that the world's income per person has grown steadily during the past 1000 years, which is not true as there were long periods of stagnation. Option D is incorrect because it states that the per person income grew at an annual rate of more than 2 percent during 1000-1813, but does not accurately reflect the entire period.

Question 2

The replacement of the phonograph by the cassette tape player and the eventual replacement of the latter by CD and MP3 players is an example of
A)economies of scale.
B)planned obsolescence.
C)diseconomies of scale.
D)creative destruction.

Accepted Answer

The replacement of outdated technologies by newer ones is an example of creative destruction, where new technologies or products displace the existing ones in the market. The phonograph was replaced by cassette tapes, which were in turn replaced by CDs and MP3 players.

Question 3

Life expectancy at birth for the world rose from 24 years to 26 years between 1000 and 1820, but by 2003, life expectancy had risen to
A)36 years.
B)44 years.
C)52 years.
D)64 years.

Accepted Answer

By 2003, advancements in medicine, technology, and living conditions had significantly increased global life expectancy to 64 years.

Question 4

Economic growth is important because expansion in the output of goods and services
A)necessarily creates more jobs (more work for people).
B)makes it possible for individuals to consume more and achieve higher living standards.
C)leads to an increase in the general level of prices.
D)generates additional tax revenues for the government.

Accepted Answer

Economic growth allows for production of more goods and services, which results in people being able to consume more and enhance their standard of living. The other options (A, C, and D) are not necessarily true in all cases. Economic growth may not always lead to more jobs, it may lead to inflation (and increase in prices) if the supply of money does not increase accordingly, and sometimes the government may not benefit from additional tax revenues due to certain fiscal policies.

Question 5

Which of the following is most likely to help promote the efficient use of resources and rapid economic growth?
A)high tariffs and imposition of other trade restrictions
B)high marginal tax rates
C)an open and competitive capital market
D)high rates of inflation

Accepted Answer

An open and competitive capital market promotes efficient allocation of resources by allowing for investment and capital flow based on market demand and supply. This can lead to rapid economic growth as businesses have access to the necessary funds to grow and expand. High tariffs and trade restrictions, high marginal tax rates, and high rates of inflation can all hinder economic growth by creating barriers to trade, discouraging investment, and reducing consumer purchasing power.

Question 6

If a poor country is going to grow rapidly and achieve a high level of per capita income, which of the following is most important?
A)abundant natural resources
B)substantial aid from rich countries
C)central planning and a high level of government expenditures
D)institutions and policies that encourage productive activities

Accepted Answer

A country's growth and achieving high per capita income is primarily dependent on institutions and policies that encourage productive activities. Without such policies and incentives, a country cannot attract investment or develop industries that can drive growth. Abundant natural resources, while helpful, are not sufficient to drive growth in the absence of sound institutions and policies. Substantial aid from rich countries can provide a temporary boost, but it cannot sustain growth over the long term. Central planning and high level of government expenditures have proved to be a hindrance to growth in many cases. Therefore, institutions and policies that encourage productive activities are the most important factor in promoting rapid growth and achieving a high level of per capita income.

Question 7

When competition is present and private ownership rights are clearly defined and securely enforced by the legal system, business firms will have a strong incentive to
A)innovate and develop better products and lower cost production methods.
B)spend time attempting to plunder (take) the resources of others.
C)engage in wasteful activities that increase the cost of producing goods and services.
D)use resources during the current period rather than conserving them for the future.

Accepted Answer

When competition is present and private ownership rights are clearly defined and securely enforced by the legal system, firms will have a strong incentive to innovate and develop better products and lower cost production methods to remain competitive and gain market share. This will not only benefit the firm, but also consumers who will have access to better and cheaper goods and services.

Question 8

During the past 200 years, income per person has
A)increased in the developed countries of Western Europe and North America, but declined in the rest of the world.
B)declined in the developed countries of Western Europe and North America, but increased in the rest of the world.
C)increased far more rapidly in both developed and less developed countries than during the centuries prior to 1800.
D)Increased far less rapidly in both developed and less developed countries than during the centuries prior to 1800.

Accepted Answer

Income per person has increased far more rapidly in both developed and less developed countries than during the centuries prior to 1800. This period of rapid economic growth is known as the Industrial Revolution and has led to significant increases in productivity, standards of living, and economic development. While there have been disparities in the distribution of this economic growth, overall, the trend has been towards increased income per person globally.

Question 9

Which of the following is most important if a country is going to achieve and sustain rapid economic growth?
A)large government expenditures as a share of GDP
B)institutions and policies that are supportive of competition (open markets) and freedom of exchange.
C)free elections and political democracy
D)monetary policy makers who are willing to expand the supply of money rapidly

Accepted Answer

Institutions and policies that support competition and freedom of exchange are crucial for the growth of the economy. Open markets attract investments and innovation, leading to increased productivity and economic expansion. Large government expenditures and monetary policy expansion can provide short-term benefits but can also create long-term problems such as inflation, debt, and market distortions. Free elections and political democracy are essential for a stable and flourishing society but may not directly contribute to economic growth.

Question 10

Which of the following did Thomas Malthus believe would deter sustained increases in the growth of income per capita?
A)excessive growth of government expenditures
B)rapid growth of population
C)the availability of natural resources
D)adverse climate conditions

Accepted Answer

Thomas Malthus believed that rapid population growth would eventually lead to diminishing returns in agricultural production, which would in turn impede sustained increases in income per capita.

Question 11

Which of the following is most important if the living standards of people residing in a country are going to improve?
A)growth of population
B)growth of per capita GDP
C)growth of the money supply
D)growth of government expenditures as a share of GDP

Accepted Answer

Per capita GDP is a measure of a country's economic output that accounts for its number of people. If the per capita GDP increases, it means that the average income for each person in the country is rising, which allows for higher living standards. Growth in population, growth in the money supply, or growth of government expenditures as a share of GDP may not necessarily lead to an improvement in living standards.

Question 12

Which of the following is true of the per person income of the West (Western Europe and its offshoots of the United States, Canada, Australia, and New Zealand)
A)It has increased each century and grown steadily since 1500.
B)It is now approximately 20 times greater than the figure of 200 years ago.
C)It rose steadily between 1000 and 1800, but income growth has slowed during the past 200 years.
D)While income per person has increased since 1800, there has been little change in life expectancy and other indicators of quality of life during this time period.

Accepted Answer

The per person income of the West has increased each century and grown steadily since 1500. It is now approximately 20 times greater than the figure of 200 years ago.

Question 13

The major sources of economic growth are
A)gains from trade, entrepreneurial discovery, and investment.
B)high taxes, an expansion in the size of government, and restrictions on investments by foreigners.
C)rapid expansion in the supply of money, trade restrictions, and government licensing of business activities.
D)free and open elections and politicians who are willing to place the general welfare of the populace above their political ambitions.

Accepted Answer

A) gains from trade, entrepreneurial discovery, and investment are the major sources of economic growth as they encourage innovation, competition, and specialization, which in turn leads to increased productivity, higher incomes, and improved living standards.

Question 14

During the past 1000 years, the income per person of the world has
A)increased each century, and it is now five times greater than the level of 1000 years ago.
B)risen rapidly in Western Europe, North America, Japan, and Australia, but there has been little change in income per person in other parts of the world.
C)increased by approximately tenfold during the past 200 years, but there was only a small increase during the 800 years prior to 1800.
D)persistently increased, but the largest increases occurred during the 1200 to 1800 era.

Accepted Answer

According to the information given, the income per person of the world has increased by approximately tenfold during the past 200 years, but there was only a small increase during the 800 years prior to 1800. Therefore, option C is the best choice.

Question 15

According to Angus Madison, a leading authority in the area, world per capita GDP
A)increased by about 50 percent during the 800 years following year 1000, but it increased by nearly tenfold during the past 200 years.
B)increased by nearly tenfold during the 800 years between 1000 and 1813, but it increased by only 50 percent during the past 200 years.
C)has grown steadily during the past 1000 years.
D)Grew at an annual rate of more than 2 percent during 1000-1813, but the annual growth rate has declined as the population increased during the past 200 years.

Accepted Answer

World per capita GDP increased modestly by about 50 percent from 1000 to 1800, but it surged nearly tenfold in the past 200 years due to industrialization and technological advancements.

Question 16

For a country to double its per capita income every twenty years, it would have to sustain an annual economic growth rate equal to
A)1.75 percent.
B)2 percent.
C)3.5 percent.
D)4 percent.

Accepted Answer

To calculate the annual growth rate required to double per capita income in twenty years, we use the rule of 70. The rule of 70 states that to find the number of years required to double a quantity, divide 70 by the annual growth rate.

Therefore, to double per capita income in twenty years, the annual growth rate would be:

70/20 = 3.5 percent

Question 17

Measured in 1990 dollars, the GDP per person of the world was $667 in 1820. By 2003, the world's income per person had risen to
A)nearly $1200, almost twice the level of 1820.
B)$2,422, almost four times the level of 1820.
C)a little more than $3,600, approximately six times the level of 1820.
D)$6,516, nearly ten times the level of 1820.

Accepted Answer

The answer of Measured in 1990 dollars, the GDP per...

Question 18

When per capita real GDP is increasing, real output is growing
A)more rapidly than prices.
B)more rapidly than population.
C)less rapidly than prices.
D)less rapidly than population.

Accepted Answer

The answer of When per capita real GDP is increasing,...

Question 19

Which of the following is most important if a country wants to move from a low-income to a high-income status?
A)high rates of monetary growth.
B)sustained economic growth.
C)high real interest rates.
D)high nominal interest rates.

Accepted Answer

Sustained economic growth is the most important factor for a country to move from a low-income to a high-income status. This means that the country's real GDP per capita must consistently increase over time. High rates of monetary growth, high real interest rates, and high nominal interest rates may be beneficial for economic growth, but they are not as critical as sustained economic growth.

Question 20

Which of the following is true for the world as a whole?
A)During the past 200 years, the income per person of the world has increased sharply, but there has been little change in the years of life expectancy at birth.
B)During the past 200 years, the years of life expectancy at birth has increased sharply, but there has been little change in the world's income per person.
C)During the 800 years between 1000 and 1800, the increases in both world income per person and life expectancy at birth were small, but both of these indicators have increased sharply during the past 200 years.
D)Both income per person and life expectancy rose steadily during 1000-1800, but neither of these indicators have increased much during the past 200 years as the population of the world has become larger and larger.

Accepted Answer

Option C correctly states that both world income per person and life expectancy at birth increased sharply in the past 200 years, but there were only small increases in both indicators between 1000 and 1800. Option A and B are incorrect because they present either income or life expectancy as having remained unchanged, which is not true. Option D is incorrect because both income per person and life expectancy increased during the 1000-1800 period, but there has been a significant increase in both indicators in the past 200 years, despite the growing population.

Quiz 16: Creating an Environment for Growth and Prosperity

Which of the following is true regarding the per person income of the world during the past 1000 years

The replacement of the phonograph by the cassette tape player and the eventual replacement of the latter by CD and MP3 players is an example of

Life expectancy at birth for the world rose from 24 years to 26 years between 1000 and 1820, but by 2003, life expectancy had risen to

Economic growth is important because expansion in the output of goods and services

Which of the following is most likely to help promote the efficient use of resources and rapid economic growth?

If a poor country is going to grow rapidly and achieve a high level of per capita income, which of the following is most important?

When competition is present and private ownership rights are clearly defined and securely enforced by the legal system, business firms will have a strong incentive to

During the past 200 years, income per person has

Which of the following is most important if a country is going to achieve and sustain rapid economic growth?

Which of the following did Thomas Malthus believe would deter sustained increases in the growth of income per capita?

Which of the following is most important if the living standards of people residing in a country are going to improve?

Which of the following is true of the per person income of the West (Western Europe and its offshoots of the United States, Canada, Australia, and New Zealand)

The major sources of economic growth are

During the past 1000 years, the income per person of the world has

According to Angus Madison, a leading authority in the area, world per capita GDP

For a country to double its per capita income every twenty years, it would have to sustain an annual economic growth rate equal to

Measured in 1990 dollars, the GDP per person of the world was $667 in 1820. By 2003, the world's income per person had risen to

When per capita real GDP is increasing, real output is growing

Which of the following is most important if a country wants to move from a low-income to a high-income status?

Which of the following is true for the world as a whole?