Question 1

Which item does NOT qualify as physical capital?

Accepted Answer

Mineral deposits do not qualify as physical capital as they are natural resources and not man-made tools or equipment. The other options (shovel, factory, and tractor) are all examples of physical capital.

Question 2

Use the following to answer questions: 
-(Figure: Productivity) Use Figure: Productivity. An increase in physical capital per worker with everything else remaining unchanged is shown on the diagram as a movement from:

Accepted Answer

An increase in physical capital per worker, holding everything else constant, would lead to an increase in productivity. This is represented by a movement from a lower to a higher point on the same productivity curve, such as moving from point A to point B.

Question 3

Which sector is responsible for MOST of the growth in the United States during the 1990s?

Accepted Answer

The answer of Which sector is responsible for MOST of...

Question 4

Diminishing returns to physical capital means that as more and more physical capital is combined with a fixed amount of human capital and a fixed technology, eventually:

Accepted Answer

Diminishing returns to physical capital means that each additional unit of physical capital added will lead to smaller and smaller increases in aggregate output or real GDP. Eventually, a point is reached where additions to aggregate output or real GDP decline, indicating diminishing returns to physical capital. Therefore, the best answer is C.

Question 5

Diminishing returns to physical capital means that, when the amount of human capital per worker and the state of technology are held fixed, each increase in the amount of physical capital per worker leads to:

Accepted Answer

According to the law of diminishing returns, after a certain point, the marginal product of an additional unit of input (in this case, physical capital) will decrease. Therefore, each increase in the amount of physical capital per worker will lead to a smaller increase in the marginal product of labor.

Question 6

Use the following to answer question 94: 
-(Table: Hypothetical Relationship) Use Table: Hypothetical Relationship. This economy is undergoing:

Accepted Answer

As we move from left to right across the table, the amount of physical capital per worker increases, but the total productivity increases at a decreasing rate. This indicates that there are diminishing returns to physical capital per worker in this economy.

Question 7

Because of diminishing returns to capital, doubling the amount of physical capital available for one worker to use will _____ output by _____ a factor of two.

Accepted Answer

Diminishing returns to capital means that as more physical capital is added, the increase in output will become smaller and smaller. Therefore, doubling the amount of physical capital available for one worker will increase output, but by less than a factor of two.

Question 8

During the latter half of the twentieth century, the Soviet Union made more physical capital available to its workers, but this increase resulted in successively smaller increases in productivity. This example illustrates:

Accepted Answer

The example given illustrates diminishing returns to physical capital, where adding more physical capital (in this case, making more available to workers) leads to successively smaller increases in productivity.

Question 9

Use the following to answer questions: 
-(Figure: Productivity) Use Figure: Productivity. An improvement in technology with everything else remaining unchanged is shown on the diagram as a movement from:

Accepted Answer

The answer of Use the following to answer questions: 
-(Figure:...

Question 10

Diminishing returns to physical capital implies that, when the human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to _____ productivity.

Accepted Answer

Diminishing returns to physical capital means that as more units of physical capital are added, the productivity of each additional unit will start to decrease. Therefore, each successive increase in physical capital will lead to a smaller increase in productivity.

Question 11

Investment in human capital causes _____________the aggregate production function.

Accepted Answer

Investment in human capital, such as education and training, improves the quality and productivity of workers. This results in an increase in the overall level of output, as represented by the aggregate production function. Therefore, investment in human capital causes an upward shift of the aggregate production function.

Question 12

Which statement accurately describes what is happening along a typical aggregate production function?

Accepted Answer

The statement accurately describes the concept of diminishing returns, which means adding additional units of a factor of production (such as physical capital) will eventually bring smaller and smaller increases in productivity. Eventually, adding more physical capital per worker will result in a decrease in productivity.

Question 13

According to the text, productivity is NOT driven by:

Accepted Answer

The text states that productivity is driven by physical capital, human capital, and technological progress, but does not mention natural resources as a driving force.

Question 14

The aggregate production function does NOT depend on:

Accepted Answer

The aggregate production function takes into account the quantity of physical capital per worker, human capital per worker, and the state of technology, but it does not depend on the amount of natural resources. However, the amount of natural resources available can affect the level of production that is sustainable over the long run.

Question 15

Workers today are more productive than they were in the past because they:

Accepted Answer

Workers today are more productive because they are better educated and possess more human capital, which refers to the skills, knowledge, and experience that a worker brings to their job. This allows workers to be more efficient and effective in their work, resulting in higher productivity. A, B, and D are all incorrect choices that do not accurately explain why workers today are more productive.

Question 16

Growth accounting estimates the:

Accepted Answer

Growth accounting estimates the contribution of each major factor in the aggregate production function to economic growth, including capital, labor, and productivity. It does not specifically focus on population rate or inflation rate, and while technology is one factor that can contribute to productivity, growth accounting looks at all major factors, not just technology.

Question 17

Holding the human capital per worker and technology unchanged, the estimated aggregate production function in Jamaica is Y / L = 50 * K / L, where Y = real output, L = number of workers, and K = quantity of physical capital. If real GDP per worker equals $3,200, physical capital per worker equals:

Accepted Answer

Using the estimated aggregate production function, we know that real output per worker is equal to 50 times physical capital per worker. Thus, we can calculate physical capital per worker as (real GDP per worker) / 50. Plugging in the given value of real GDP per worker ($3,200), we get:

physical capital per worker = $3,200 / 50 = $64

Therefore, the answer is B) $64.

Question 18

Holding the human capital per worker and technology unchanged, the estimated aggregate production function in Jamaica is Y / L = 50 * K / L, where Y = real output, L = number of workers, and K = quantity of physical capital. If K / L = $81, then real GDP per worker is:

Accepted Answer

Given the aggregate production function Y / L = 50 * K / L and K / L = $81, substituting the value of K / L into the equation gives Y / L = 50 * 81 = $4,050.

Question 19

The aggregate production function exhibits _____ returns to physical capital.

Accepted Answer

The aggregate production function shows that as the quantity of physical capital increases, output increases at a decreasing rate, indicating diminishing returns to capital. Eventually, adding more capital will result in no increase in output or a decrease in output.

Question 20

An increase in the amount of physical capital per worker _____, while technological progress _____.

Accepted Answer

An increase in physical capital per worker moves the economy along the aggregate production function because it results in an increase in output for a given level of technology. Technological progress, on the other hand, shifts up the aggregate production function, meaning that at any given level of physical capital per worker, the economy can produce more output than before. This is because technological progress allows for more efficient or effective use of existing resources, or the development of new resources or production methods altogether.

Quiz 9: Long-Run Economic Growth