Question 1

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

Accepted Answer

As the amount of physical capital per worker increases, the total output (Y) is increasing at a decreasing rate, indicating diminishing returns to physical capital per worker.

Question 2

The aggregate production function exhibits _____ returns to physical capital.

Accepted Answer

As the amount of physical capital increases, the marginal product of capital (i.e. the additional output produced by an additional unit of capital) diminishes. This is due to the fact that at some point, additional units of capital will have a smaller impact on production because other inputs (such as labor and technology) become limiting factors. Therefore, the aggregate production function exhibits diminishing returns to physical capital.

Question 3

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 and more physical capital is added to the production process while holding the level of human capital per worker and the state of technology constant, the marginal productivity of each additional unit of physical capital will decline. In other words, each successive increase in physical capital will lead to a smaller increase in total output or productivity.

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

As more and more physical capital is combined with a fixed amount of human capital and a fixed technology, the additions to aggregate output or real GDP will eventually decline, indicating diminishing returns to physical capital. This is because adding more and more physical capital without increasing human capital and technological improvements eventually leads to a point where the marginal product of each additional unit of physical capital decreases, resulting in lower additions to aggregate output or real GDP. However, this does not necessarily mean that aggregate output or real GDP will decline overall.

Question 5

Use the following to answer questions 
Figure: Productivity 
-(Figure: Productivity) Look at the 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 6

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

Diminishing returns to physical capital means that as the amount of physical capital per worker increases, the marginal product of labor (or the additional output produced by each additional unit of labor) decreases. Therefore, each increase in the amount of physical capital per worker leads to a smaller increase in the marginal product of labor.

Question 7

Workers are more productive than in the past because they:

Accepted Answer

Workers being better educated and having more human capital (skills, knowledge, and experience) allows them to be more productive with their time and resources. A four-day week or physical size does not directly contribute to productivity, and having more natural resources may not necessarily lead to increased productivity without the proper knowledge and skills to utilize them effectively.

Question 8

Use the following to answer questions 
Scenario: The Aggregate Production Function
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.
-(Scenario: The Aggregate Production Function) Look at the scenario The Aggregate Production Function. If K / L = $81, then real GDP per worker is:

Accepted Answer

The answer of Use the following to answer questions 
Scenario:...

Question 9

Growth accounting estimates the:

Accepted Answer

Growth accounting estimates the contribution of each major factor in the aggregate production function to economic growth.

Question 10

Which of the following does NOT qualify as physical capital?

Accepted Answer

Mineral deposits are a natural resource and therefore do not qualify as physical capital, which refers to human-made equipment and structures used to produce goods and services.

Question 11

Use the following to answer questions 
Scenario: The Aggregate Production Function
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.
-(Scenario: The Aggregate Production Function) Look at the scenario The Aggregate Production Function. If real GDP per worker equals $3,200, physical capital per worker equals:

Accepted Answer

Using the given formula, we can rearrange it as K / L = Y / L / 50. Substituting the value of Y / L as $3,200, we get K / L = $3,200 / 50 = $64. Therefore, physical capital per worker equals $64.

Question 12

Which of the following accurately describes what is happening along a typical aggregate production function?

Accepted Answer

The aggregate production function shows that as more physical capital per worker is added, productivity increases at a decreasing rate due to diminishing returns. This means that each additional unit of physical capital adds less and less to the output. Therefore, option C is the correct choice. Option A is incorrect because increasing physical capital usually results in an initial productivity increase before diminishing returns set in. Option B is incorrect because at some point, the cost of additional physical capital may outweigh the productivity gains. Option D is incorrect because increasing the number of workers does not necessarily lead to an increasing rate of real GDP per worker throughout the entire production function.

Question 13

Investment in human capital shifts the aggregate production function:

Accepted Answer

Investment in human capital, such as education and training, increases the level of skills and knowledge of the workforce. This leads to a more efficient use of existing resources, as well as the development of new ideas and technologies. As a result, the aggregate production function shifts upward, meaning that more output can be produced with the same level of inputs. This leads to economic growth and higher levels of productivity.

Question 14

According to the text, productivity is driven by all of the following EXCEPT:

Accepted Answer

The text mentions that productivity is driven by physical capital, human capital, and technological progress. However, it does not mention that natural resources are a driver of productivity. Therefore, choice D is the correct answer.

Question 15

The aggregate production function does NOT depend on:

Accepted Answer

The aggregate production function takes into consideration physical capital, human capital, and technology, but it does not rely on the amount of natural resources available.

Question 16

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 17

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 suggest that as the amount of capital increases, the marginal product of capital decreases. Therefore, doubling the amount of physical capital available for one worker will increase output, but by a diminishing amount. Thus, the increase in output will be less than a factor of two. Therefore, the correct answer is B.

Question 18

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 is an example of:

Accepted Answer

This scenario describes diminishing returns to physical capital, where an increase in physical capital leads to smaller and smaller increases in productivity.

Question 19

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

Accepted Answer

An increase in physical capital per worker leads to movement along the aggregate production function as it increases output per worker. Technological progress, on the other hand, shifts up the aggregate production function as it increases the productivity of all factors of production, including physical capital. Therefore, the correct choice is C.

Question 20

Use the following to answer questions 
Figure: Productivity 
-(Figure: Productivity) Look at the 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 with everything else remaining unchanged is shown as a movement along the vertical axis (from point A to point B). Therefore, the movement from B to C represents an increase in productivity due to an increase in physical capital per worker.

Quiz 23: Long-Run Economic Growth

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