Deck 17: Growth and Productivity: Long-Run Possibilities

Question 1

If a country currently produces a mix of output that lies inside its production possibilities curve,then macro stabilization policies try to

A)Shift the aggregate demand curve to the right.
B)Shift the aggregate demand curve to the left.
C)Shift the short-run aggregate supply curve to the left.

Answer 1

Shift the aggregate demand curve to the right.

Question 2

A sustained increase in total output is possible only if the aggregate

A)Supply curve shifts to the left.
B)Demand curve shifts to the left.
C)Supply curve shifts to the right.

Answer 2

Supply curve shifts to the right.

Question 3

In the short run,movement toward a fixed production possibilities curve comes from

A)Expansion of the production possibilities curve.
B)Shifting the aggregate demand curve to the left.
C)Increased use of our productive capabilities.

Answer 3

Increased use of our productive capabilities.

Question 4

Economists define economic growth in terms of changes in

A)Potential GDP.
B)Current GDP or actual production.
C)Population.

Question 5

Which of the following also occurs as the production possibilities curve shifts outward?

A)Long-run aggregate supply increases.
B)GDP per capita remains constant.
C)Output decrease.

Question 6

The percentage change in real GDP from one period to another is called

A)Real GDP.
B)Nominal GDP.
C)The growth rate.

Question 7

An economy experiences economic growth whenever

A)Nominal GDP rises.
B)Long-run real GDP rises.
C)Base-year GDP rises.

Question 8

Economic growth

A)Is measured using real GDP.
B)Shifts the production possibilities curve inward.
C)Involves reduced capacity in the short run.

Question 9

Long-run economic growth can occur as the result of

A)A rightward shift in aggregate demand.
B)The employment of more of the available resources.
C)A technological advance.

Question 10

If a country moves from a point below the production possibilities curve to a point on the curve,it is experiencing

A)Increased capacity utilization.
B)Expanded capacity.
C)Long-run growth.

Question 11

The alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology are known as

A)Consumption possibilities.
B)Production possibilities.
C)Real GDP.

Question 12

A long-run increase in capacity

A)Shifts the production possibilities curve rightward.
B)Shifts the production possibilities curve leftward.
C)Moves the economy to a point closer to its existing production possibilities curve.

Question 13

Which of the following is a major goal of short-run macroeconomic policy?

A)Shift the production possibilities curve outward.
B)Move toward the production possibilities curve.
C)Shift the aggregate supply curve to the left.

Question 14

Better short-run use of current capacity

A)Moves the economy closer to the production possibilities curve,while long-run growth shifts that curve outward.
B)Increases capacity,while long-run economic growth increases capacity utilization.
C)Shifts the aggregate supply curve outward,while long-run economic growth moves the economy up the aggregate supply curve.

Question 15

Which of the following must occur to achieve large and lasting increases in output?

A)An increase in potential GDP.
B)An increase in the use of existing capacity.
C)A shift in aggregate supply to the left.

Question 16

Long-run economic growth can be achieved with

A)A rightward shift in the long-run aggregate supply curve.
B)Contractionary fiscal policy.
C)Neutral monetary policy.

Question 17

In order to shift the current production possibilities curve outward,an economy

A)Must use more of the existing resources.
B)Can raise the prices of goods and services to encourage firms to produce more.
C)Must find additional resources or better technology.

Question 18

Long-run macroeconomic growth

A)Shifts the production possibilities curve outward.
B)Shifts the aggregate demand curve to the right.
C)Shifts the aggregate supply curve to the left.

Question 19

A short-run increase in capacity utilization

A)Shifts the production possibilities curve rightward.
B)Shifts the production possibilities curve leftward.
C)Moves the economy to a point closer to its existing production possibilities curve.

Question 20

The base period is usually a year

A)From which changes in relative prices are computed.
B)From which data were first collected.
C)Used for comparing the data for other years.

Question 21

Ceteris paribus,rising employment rates imply

A)Falling per capita GDP.
B)Rising per capita GDP.
C)Higher labor force participation rates.

Question 22

Growth in GDP per capita is attained when

A)There is growth in population.
B)There is growth in output.
C)The growth of output exceeds population growth.

Question 23

If the real U.S.GDP was $10 trillion in 2000 and the U.S.population was 280 million,the per capita real GDP would have been closest to

A)$2,800 per person.
B)$28,000 per person.
C)$35,714 per person.

Question 24

The employment rate is measured as the percentage of the

A)Workforce that is employed.
B)Adult population that is employed.
C)Total population that is employed.

Question 25

The process of economic growth is

A)Not affected by previous year's growth.
B)Cumulative,whereby gains made in one year accumulate in future years.
C)Not important to economists.

Question 26

Assume the real U.S.GDP in 1998 was $7,552 billion and the U.S.population was 270 million,and the real U.S.GDP in 2000 was $10 trillion and the U.S.population was 280 million.From 1998 to 2000,the per capita real GDP

A)Increased.
B)Decreased.
C)Remained unchanged.

Question 27

Assume the real U.S.GDP in 1997 was $7,269 billion and the U.S.population was 268 million,and the real U.S.GDP in 1998 was $7,552 billion and the U.S.population was 270 million.From 1997 to 1998,the per capita real GDP

A)Remained unchanged.
B)Decreased.
C)Increased.

Question 28

If the number employed grows faster than the population,then the

A)Living standard will fall.
B)Growth rate of GDP will fall.
C)Living standard will rise.

Question 29

Which of the following measures the growth rate of an economy?

A)The percentage change in real GDP from one period to another.
B)Investment as a percentage of GDP.
C)Real GDP divided by nominal GDP.

Question 30

The number of years it takes for GDP to double is found by

A)Dividing 72 by the growth rate.
B)Multiplying 72 by per capita GDP.
C)Multiplying 72 by the growth rate.

Question 31

Ceteris paribus,if the employment rate is rising,the GDP per capita is

A)Rising.
B)Falling.
C)Not changing.

Question 32

GDP per capita is

A)The population divided by total GDP.
B)Investment as a percentage of GDP.
C)Total GDP divided by total population.

Question 33

Using the rule of 72,determine how long it would take for real GDP to double if it grew at a constant growth rate of 4 percent.

A)4 years.
B)18 years.
C)72 years.

Question 34

Approximately how long would it take for real GDP to double if it grew at a constant annual rate of 2 percent?

A)Approximately 72 years.
B)Approximately 36 years.
C)Approximately 2 years.

Question 35

Assume the real U.S.GDP in 1929 was $942 billion and the U.S.population was 122 million,and the real U.S.GDP in 1930 was $858 billion and the U.S.population was 123 million.From 1929 to 1930,the per capita real GDP

A)Remained unchanged.
B)Decreased.
C)Increased.

Question 36

If real GDP rises from $700 billion to $704 billion,the economic growth rate is

A)($704 billion/$700 billion)/100.
B)($704 billion - $700 billion)/$700 billion.
C)$700 billion/$704 billion.

Question 37

The labor force includes

A)All persons over the age 16 who are either working for pay or actively seeking paid employment.
B)All persons over the age 16 who are working for pay.
C)All persons over the age 21 who are either working for pay or actively seeking paid employment.

Question 38

The best measure of living standards is

A)The ratio of current GDP to GDP in the base period.
B)Investment as a percentage of GDP.
C)GDP per capita.

Question 39

The entry of baby boomers into the labor force and increased labor force participation of women

A)Increased the employment rate and caused per capita GDP to rise.
B)Increased the employment rate and caused per capita GDP to fall.
C)Decreased the employment rate and caused per capita GDP to rise.

Question 40

The rapid acceleration of the economic growth rate in the late 1990s

A)Was so unusual that observers believed it was an abnormality.
B)Has been sustained into the 2000s.
C)Led observers to think that faster growth would be the norm.

Question 41

Which of the following situations would cause the greatest increase in labor productivity?

A)The employment rate increases and capital remains the same.
B)The increase in the employment rate is greater than the increase in capital.
C)The increase in capital is greater than the increase in the employment rate.

Question 42

As the baby boomers reached their prime working years,there was

A)No change in productivity.
B)A decrease in average productivity.
C)An increase in average productivity.

Question 43

Which of the following would not increase labor productivity,ceteris paribus?

A)An increase in the quality of capital.
B)An increase in the number of participants in the labor force.
C)Human capital investment.

Question 44

For much of the 1970s and 1980s,the average yearly change in productivity

A)Increased geometrically.
B)Increased arithmetically.
C)Was significantly less than the average yearly change in productivity for 1995-2000.

Question 45

Human capital is

A)The knowledge and skills possessed by the labor force.
B)Able to increase only if the labor force grows.
C)Insignificant in productivity advances.

Question 46

Labor productivity is measured as the

A)Dollar value of output per unit of labor.
B)Output per labor-hour.
C)Hourly wage rate divided by output per labor-hour.

Question 47

To increase productivity,

A)The labor force must grow faster than capital spending increases.
B)Capital spending must be greater than zero.
C)Capital spending must increase faster than the labor force expands.

Question 48

Which of the following might reduce labor productivity?

A)Rising ratios of labor to capital.
B)Rising literacy.
C)Rising human capital.

Question 49

If the average worker's productivity is $12 per hour and the labor force is employed for 600 billion hours,GDP is equal to

A)$7.2 trillion.
B)$50 billion.
C)$588 billion.

Question 50

Which of the following could impede productivity improvements?

A)Lack of savings.
B)Higher ratios of capital to labor.
C)Technological advances.

Question 51

Improvements in output per worker

A)Depend only on increases in the quantity of capital equipment.
B)Depend only on increases in the quality of capital equipment.
C)Depend in large part on increases in the quality of capital equipment and the quantity of capital equipment per worker.

Question 52

The growth rate of total output equals

A)Gross investment minus depreciation.
B)Real GDP per capita growth rate.
C)The growth rate of the labor force plus the growth rate of productivity.

Question 53

If the average worker's productivity is $20 of output per hour and the labor force is employed for 500 billion hours,GDP is equal to

A)$25 billion.
B)$250 billion.
C)$10 trillion.

Question 54

In recent decades,a primary source of growth in U.S.output has been

A)Increased productivity per worker.
B)A reduction in structural unemployment.
C)Increased capacity utilization.

Question 55

Which of the following is not a source of productivity gain?

A)Higher skills.
B)Technological advance.
C)Economic growth.

Question 56

When a large number of teenagers enter the workforce,there should be

A)No change in productivity.
B)A decrease in average productivity.
C)An increase in average productivity.

Question 57

Additional capital makes its best contribution to economic growth by

A)Replacing labor.
B)Enhancing labor productivity.
C)Allowing service industries to replace manufacturing industries as primary employers.

Question 58

Which of the following would increase labor productivity,ceteris paribus?

A)An increase in the number of participants in the labor force.
B)An increase in the quality of capital.
C)Crowding out.

Question 59

If total output is $1,000 and total labor-hours are 20,labor productivity is

A)$20,000.
B)$50.
C)$20.

Question 60

The most common measure of productivity is output per

A)GDP.
B)Capita.
C)Labor-hour.

Question 61

A decrease in the marginal propensity to save is likely to

A)Increase physical capital investment.
B)Decrease physical capital investment.
C)Have no effect on physical capital investment.

Question 62

The pace of economic growth in a capitalist economy is determined by

A)Market forces and government policy.
B)Market forces only.
C)Government policy only.

Question 63

Tax credits for new investment are likely to

A)Increase physical capital investment.
B)Decrease physical capital investment.
C)Have no effect on physical capital investment.

Question 64

Crowding out occurs when the government

A)Increases taxes,thus causing a decrease in consumption.
B)Issues debt,thus making it more difficult for the private sector to issue debt.
C)Prints money,which displaces currency.

Question 65

Which of the following serves as a basis for doomsday forecasts?

A)Crowding out.
B)The price mechanism.
C)Resource constraints.

Question 66

Which of the following will accelerate long-run economic growth?

A)Crowding out.
B)Tax credits for new investments.
C)Elimination of government-subsidized college loans.

Question 67

If lower profits in foreign countries result in decreased investment from foreign countries into the United States,continued investment growth from saving will have to rely more on

A)U.S.household saving.
B)Local government saving from deficit spending.
C)Federal government saving from deficit spending.

Question 68

The best measure of net investment is

A)Gross investment per capita.
B)Real GDP per worker.
C)Gross investment less depreciation.

Question 69

From the long-run perspective of economic growth,saving

A)Threatens growth because of the paradox of thrift.
B)Causes the long-run aggregate supply curve to shift to the left.
C)Is a basic source of investment financing.

Question 70

Which of the following is a potential source of increased productivity?

A)Growth as envisioned by Malthus.
B)Environmental changes as described by doomsday forecasters.
C)Improved management.

Question 71

Research and development include all of the following except for

A)Foreign investment in current machinery.
B)Scientific research.
C)New production techniques.

Question 72

The current U.S.problems of congested highways,poor air quality,and contributing to global climate change are primarily the result of

A)Producing too many goods and services.
B)Too much government regulation.
C)Producing a mix of output with lots of negative externalities.

Question 73

The "new growth theory" of economic growth emphasizes the importance of

A)Investing in new plants and equipment.
B)Household saving as a source of funds for investment.
C)Investing in ideas.

Question 74

Countries that have higher saving rates are likely to have

A)A higher investment rate as a percentage of GDP and a lower growth rate of real GDP.
B)A higher investment rate as a percentage of GDP and a higher growth rate of real GDP.
C)A lower investment rate as a percentage of GDP and a lower growth rate of real GDP.

Question 75

Which of the following policy levers definitely enhances productivity?

A)Higher taxes.
B)Development of human capital.
C)More government regulation.

Question 76

When the federal government runs a budget surplus,there may be a

A)"Crowding in" effect that contributes to the growth of private capital investment.
B)"Crowding in" effect that limits the growth of private capital investment.
C)"Crowding out" effect that contributes to the growth of private capital investment.

Question 77

Which of the following has made the greatest contribution to advances in productivity in recent years?

A)Improvement in management.
B)Spending on research and development.
C)Increases in capital per worker.

Question 78

Whose work resulted in a doomsday forecast?

A)Thomas Malthus.
B)Robert Solow.
C)Edward Denison.

Question 79

An increase in public works spending is likely to

A)Increase physical capital investment.
B)Decrease physical capital investment.
C)Have no effect on physical capital investment.

Question 80

Which of the following has made the greatest contribution to economic growth over time?

A)Improved management techniques.
B)Higher ratios of capital to labor.
C)Research and development.