Question 1

In an economy where net exports are zero,if saving rises in some period,then in that period

Accepted Answer

In an economy where net exports are zero, if saving rises, it implies that less of the income is being used for consumption, hence consumption falls. The increased saving leads to more funds being available for investment, causing investment to rise.

Question 2

All else equal,if there are diminishing returns,then if a country raised its capital by 100 units last year and by 100 units this year,

Accepted Answer

As there are diminishing returns, the increase in output obtained from the first 100 units of capital would have been greater than the increase in output obtained from the second 100 units of capital. Therefore, the increase in output would have been greater last year when the country raised its capital by 100 units for the first time.

Question 3

One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs.The growth that arises from capital accumulation is not a free lunch.It requires that society

Accepted Answer

The growth that arises from capital accumulation requires sacrificing consumption goods and services now in order to enjoy more consumption in the future. This is a tradeoff that people face in deciding how to allocate their resources. To accumulate capital, people must save and invest, which means using some of their current resources to produce goods and services that will generate returns in the future. This means that they have less to consume in the present, but they hope that the returns on their investment will ultimately allow them to consume more in the future.

Question 4

Refer to Scenario 12-1.If the production function has the constant-returns-to-scale property,then if we know the values of A,K/L,H/L,and N/L,we also know the value of

Accepted Answer

The answer of Refer to Scenario 12-1.If the production function...

Question 5

Consider three imaginary countries.In Mainland,saving amounts to $4,000 and consumption amounts to $8,000;in Upland,saving amounts to $2,000 and consumption amounts to $15,000;and in Lowland,saving amounts to $6,000 and consumption amounts to $11,000.The saving rate is

Accepted Answer

The saving rate is calculated by dividing saving by total income. Therefore, the saving rates are as follows:
- Mainland: 4,000/12,000 = 1/3 = 0.33 or 33%
- Upland: 2,000/17,000 ≈ 0.12 or 12%
- Lowland: 6,000/17,000 ≈ 0.35 or 35%
Therefore, the saving rate is highest in Lowland and lowest in Upland. Mainland's saving rate is higher than Upland's because it saves a higher proportion of its income, but Lower than Lowland's because it saves a lower proportion of its income. Therefore, the correct answer is B.

Question 6

Refer to Scenario 12-1.If the production function has the constant-returns-to-scale property,then it could be rewritten as

Accepted Answer

The constant-returns-to-scale property means that if all inputs are increased by a certain factor, output will increase by the same factor. This implies that output is proportional to the level of inputs used in production. Therefore, the production function can be rewritten as Y/L = AF(K/L, H/L, N/L) or Y/L = AF(1, K/L, H/L, N/L) where the term in the parentheses captures the level of inputs used in production. The only answer choice that reflects this property is A.

Question 7

The traditional view of the production process is that capital is subject to

Accepted Answer

The traditional view of the production process is that as more and more units of capital are added to the production process, the marginal product of each additional unit of capital will eventually decrease, resulting in diminishing returns. This is due to the fact that the other inputs (such as labor) are fixed in the short run, and so adding more capital eventually leads to overcrowding and inefficiencies in the production process.

Question 8

"When workers have a relatively small quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity by a relatively large amount." This statement

Accepted Answer

The statement is consistent with the view that capital is subject to diminishing returns. As the quantity of capital increases, the marginal productivity of capital decreases, leading to the phenomenon of diminishing returns. Therefore, when workers have a relatively small quantity of capital, an additional unit of capital would have a relatively large impact on increasing their productivity.

Question 9

Accumulating capital

Accepted Answer

Accumulating capital involves sacrificing consumption goods in the present, so that resources can be used to invest in capital goods and increase future production and consumption possibilities. This involves a tradeoff between present consumption and future consumption, as resources used for saving and investment cannot also be used for immediate consumption.

Question 10

Refer to Scenario 12-1.In the production function,which of the following represents technology?

Accepted Answer

Technology is represented by factor A in the production function, which refers to the level of technology or efficiency in using the other production factors.

Question 11

"When workers already have a large quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity only slightly." This statement

Accepted Answer

The statement assumes that the quantities of human capital, natural resources, and technology are being held constant. This means that the only factor being considered is the additional unit of capital, which has only a slight impact on productivity when workers already have a large quantity of capital to use in producing goods and services. This statement does not represent an unconventional view of the production process, and it does not assert that capital is subject to increasing returns.

Question 12

If there are diminishing returns to capital,then

Accepted Answer

The answer of If there are diminishing returns to capital,then
...

Question 13

Consider three imaginary countries.In Aziria,saving amounts to $3,000 and consumption amounts to $7,000;in Graniva,saving amounts to $2,000 and consumption amounts to $8,000;and in Tanistan,saving amounts to $4,500 and consumption amounts to $10,500.The saving rate is

Accepted Answer

The answer of Consider three imaginary countries.In Aziria,saving amounts to...

Question 14

All else equal,if there are diminishing returns,then which of the following is true if a country increases its capital by one unit?

Accepted Answer

Diminishing returns means that as more of a variable input (in this case, capital) is added, the marginal product (additional output) of that input will eventually decrease. So, if a country adds one more unit of capital, the increase in output will be less than the increase from the previous unit of capital because of diminishing returns. Therefore, output will rise but by less than it did when the previous unit was added, which means choice B is correct.

Question 15

Other things the same,when an economy increases its saving rate

Accepted Answer

When an economy increases its saving rate, consumption falls now because people are saving more and spending less. However, production will rise later because the increased saving rate generates more investment, which leads to increased production in the long-run.

Question 16

Country A and country B both increase their capital stock by one unit.Output in country A increases by 15 while output in country B increases by 12.Other things the same,diminishing returns implies that country A is

Accepted Answer

The answer of Country A and country B both increase...

Question 17

When a society decides to increase its quantity of physical capital,the society

Accepted Answer

When a society decides to increase its quantity of physical capital, it has to invest in new equipment, machines, and buildings. This requires the society to set aside some of its current production for investment purposes, which means that it is deciding to consume fewer goods and services in the present. This trade-off between present consumption and investment in physical capital is necessary for the society to achieve long-term economic growth. Therefore, option C is the correct answer.

Question 18

"When workers already have a large quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity only slightly." This statement

Accepted Answer

The answer of "When workers already have a large quantity...

Question 19

Refer to Scenario 12-1.If the production function has the constant-returns-to-scale property,then it is possible that the specific form of the production function is

Accepted Answer

Option C has the constant-returns-to-scale property, which means that if all inputs of the production function are increased by a certain factor, the output also increases by the same factor. This property is captured by the equation Y = 2(LKH)^1/4. The other options do not have the constant-returns-to-scale property. Option A has linear terms, so increasing all inputs by the same factor would not necessarily increase output by the same factor. Option B has a simple average of the inputs, which does not capture the complex interaction between inputs in the production process. Option D has exponents that do not add up to 1, so it does not have constant returns to scale.

Question 20

Country A and country B are the same except country A currently has a lower level of capital.Assuming diminishing returns,if both countries increase their capital by 100 units and other factors that determine output are unchanged,then

Accepted Answer

The answer of Country A and country B are the...

Quiz 25: Production and Growth

In an economy where net exports are zero,if saving rises in some period,then in that period

All else equal,if there are diminishing returns,then if a country raised its capital by 100 units last year and by 100 units this year,

One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs.The growth that arises from capital accumulation is not a free lunch.It requires that society

Refer to Scenario 12-1.If the production function has the constant-returns-to-scale property,then if we know the values of A,K/L,H/L,and N/L,we also know the value of

Consider three imaginary countries.In Mainland,saving amounts to $4,000 and consumption amounts to $8,000;in Upland,saving amounts to $2,000 and consumption amounts to $15,000;and in Lowland,saving amounts to $6,000 and consumption amounts to $11,000.The saving rate is

Refer to Scenario 12-1.If the production function has the constant-returns-to-scale property,then it could be rewritten as

The traditional view of the production process is that capital is subject to

"When workers have a relatively small quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity by a relatively large amount." This statement

Accumulating capital

Refer to Scenario 12-1.In the production function,which of the following represents technology?

"When workers already have a large quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity only slightly." This statement

If there are diminishing returns to capital,then

Consider three imaginary countries.In Aziria,saving amounts to $3,000 and consumption amounts to $7,000;in Graniva,saving amounts to $2,000 and consumption amounts to $8,000;and in Tanistan,saving amounts to $4,500 and consumption amounts to $10,500.The saving rate is

All else equal,if there are diminishing returns,then which of the following is true if a country increases its capital by one unit?

Other things the same,when an economy increases its saving rate

Country A and country B both increase their capital stock by one unit.Output in country A increases by 15 while output in country B increases by 12.Other things the same,diminishing returns implies that country A is

When a society decides to increase its quantity of physical capital,the society

"When workers already have a large quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity only slightly." This statement

Refer to Scenario 12-1.If the production function has the constant-returns-to-scale property,then it is possible that the specific form of the production function is

Country A and country B are the same except country A currently has a lower level of capital.Assuming diminishing returns,if both countries increase their capital by 100 units and other factors that determine output are unchanged,then