Deck 7: Economic Growth

Question 1

If a country's growth rate is 1.25%, then it will take about 40 years for its output to double.

Answer 1

False

Question 2

Antitrust laws foster economic growth.

Answer 2

True

Question 3

Which is NOT a source of productivity growth?

A) raising the capital-to-labor ratio
B) increasing the quality of labor
C) moving resources from production to pension benefits
D) making investments in technological improvements

Answer 3

moving resources from production to pension benefits

Question 4

What is the primary explanation for the rapid growth of the U.S. economy over the past century?

A) increases in the number of immigrants
B) increases in human capital
C) increases in government spending for infrastructure
D) technological progress

Question 5

To sustain growth beyond the small fluctuations common in the business cycle, an economy's ability to produce must increase.

Question 6

An example of a natural resource is an untapped vein of platinum.

Question 7

Higher productivity leads to lower levels of economic growth.

Question 8

Investment in human capital is important because it

A) is required by employees.
B) lowers the total wage bill.
C) increases labor productivity.
D) improves morale.

Question 9

(Table) According to the table, which country will double its real GDP per capita most quickly?

A) Econia
B) Macroland
C) Nomicia
D) Zaria

Question 10

There is a positive correlation between economic freedom and high per capita real GDP.

Question 11

Which of these would promote long-run economic growth?

A) firms hiring unemployed workers
B) converting idle land into farmland
C) technological advancement
D) renting unoccupied office space to new businesses

Question 12

In recent years, developed countries like the United States, Japan, and Germany have achieved the highest annual growth rates in the world.

Question 13

An example of physical capital is a communications network used to track shipments.

Question 14

The catch-up effect is the idea that up to a certain point, developing countries can achieve greater productivity for each unit of capital invested because they have the advantage of using technologies already developed by other countries.

Question 15

Which item is NOT an example of investment in human capital?

A) policy of universal education
B) on-the-job training
C) acquisition of obsolete skills
D) apprenticeship

Question 16

Infrastructure is

A) not important in a market-based economy.
B) a country's public capital.
C) typically better when provided by private companies.
D) unimportant for economic growth because the government provides it.

Question 17

Which resource is an example of infrastructure?

A) a computer manufacturing plant
B) a coal mine
C) a newly drained swamp
D) an elementary school

Question 18

Open immigration policies in the United States, along with other increases in the labor force, have led to economic growth.

Question 19

Total factor productivity captures the factors that influence the overall effectiveness of inputs.

Question 20

According to Thomas Malthus, what part of the economy might increase at a rate such that the data would show an increase from 1,000 to 2,000 to 4,000 to 16,000?

A) population
B) food
C) GDP
D) inflation

Question 21

Labor productivity is a major determinant of

A) the size of the labor force.
B) the skill level of the labor force.
C) the money supply.
D) living standards.

Question 22

The Rule of 70 states that the number of years required for a value (such as a nation's GDP) to double in size is 70 divided by the growth rate.

Question 23

For which growth rate would the Rule of 70 be MOST accurate?

A) 1%
B) 15%
C) 20%
D) 30%

Question 24

Which occurrence is the key explanation for the high economic growth in the United States in the past century?

A) investment in human capital
B) an increase in the capital-to-labor ratio
C) technology improvements
D) an increase in the population

Question 25

When the government enforces contracts between two parties, it is acting in its role to promote economic growth by

A) ensuring a stable legal system.
B) providing physical and human capital.
C) ensuring a stable and secure financial system.
D) promoting free and competitive markets.

Question 26

The primary reason the U.S. standard of living is relatively _____ is that U.S. workers produce _____ than workers throughout most of the rest of the world.

A) high; less
B) high; more
C) low; more
D) low; less

Question 27

Labor productivity is NOT a major determinant of

A) economic growth.
B) per capita GDP.
C) the money supply.
D) living standards.

Question 28

If the growth rate in an economy is 3.5%, then its GDP will double in about

A) 3.5 years.
B) 20 years.
C) 70 years.
D) 245 years.

Question 29

The Index of Economic Freedom shows that countries with the fewest economic freedoms have the highest per capita GDP.

Question 30

Protection of property rights is

A) not part of infrastructure.
B) a tangible resource, such as a dam or a road.
C) independent of a stable legal system.
D) an intangible resource that is part of infrastructure.

Question 31

Improvements in technology

A) explain most of the economic growth in recent decades.
B) caused the last recession.
C) are relatively unimportant for today's standard of living.
D) have slowed in the past 100 years.

Question 32

During the most recent global economic downturn, extreme poverty continued to fall.

Question 33

Every year in India, about 1 million more people fall into poverty.

Question 34

Technology

A) is a physical resource.
B) improves the productivity of all factors.
C) is a manufactured product used to produce other goods and services.
D) is another term for entrepreneurial ability.

Question 35

Thomas Malthus believed that population increased _____ and food resources increased _____.

A) arithmetically; geometrically
B) geometrically; arithmetically
C) irresponsibly; economically
D) meagerly; substantially

Question 36

Economic growth is most commonly measured by

A) GDP.
B) GDP per capita.
C) Genuine Progress Indicator per capita.
D) real GDP per capita.

Question 37

(Table) According to the table, which country was MOST likely to experience catch-up growth?

A) Econia
B) Macroland
C) Nomica
D) Croland

Question 38

If a country has a low capital-to-labor ratio, then it tends to have _____ labor productivity _____ wages.

A) low; but high
B) high; but low
C) low; and low
D) high; and high

Question 39

Which situation indicates that total output in a country has grown the most when the starting output is the same in all situations?

A) Output per worker grows by 10% while the labor force grows by 10%.
B) Output per worker grows by 4% while the labor force grows by 12%.
C) Output per worker remains constant while the labor force grows by 11%.
D) Output per worker grows by 11% while the labor force remains constant.

Question 40

One reasonably objective measure of the level of government promotion of free and competitive markets is the Index of Economic Freedom, which incorporates information about freedoms in _____ categories.

A) 12
B) 25
C) 100
D) 500

Question 41

Most economists believe that freeing up markets can enhance development in poorer countries.

Question 42

Technological progress that aids in the productivity of the United States does not help other countries to grow.

Question 43

If an economy's GDP will double in 25 years, then its growth rate must be about

A) 2.5%.
B) 2.8%.
C) 25%.
D) 28%.

Question 44

The government decides to give tax-exempt status to a new organization whose mission is to award college scholarships to members of the armed forces. In doing so, the government is acting in its role to promote economic growth by

A) ensuring a stable legal system.
B) enhancing physical and human capital.
C) ensuring a stable and secure financial system.
D) promoting free and competitive markets.

Question 45

The Rule of 70 states that the number of years required for a value to double in size is 70.

Question 46

Countries with strong legal systems tend to have more economic prosperity than those without.

Question 47

Given the form of a typical production function, which of these would have the greatest impact on the output of a country?

A) A increases by 50%.
B) L increases by 50%.
C) K increases by 50%.
D) N increases by 50%.

Question 48

Investments in human capital help to improve productivity.

Question 49

The percentage of the world's population that is very poor, as opposed to living in extreme poverty, is about

A) 10%.
B) 15%.
C) 20%.
D) 25%.

Question 50

If real gross domestic product increased 0.625% from the first quarter to the second quarter of 2013, the annualized growth rate was 2.5%.

Question 51

Increases in _____ often lead to economic growth.

A) technology
B) population
C) the money supply
D) government regulations

Question 52

Which statement is NOT true?

A) Economic growth leads to lower poverty rates.
B) Economic growth leads to a more equitable distribution of income.
C) Economic growth leads to longer life expectancies.
D) Economic growth leads to increased consumption of goods and services.

Question 53

Public schools are an example of infrastructure.

Question 54

Which factor is NOT generally viewed by economists as critical to economic growth?

A) strong and fair legal system
B) stable monetary system
C) access to large amounts of natural resources
D) economic freedom

Question 55

If your goal was to have the largest amount of money in your bank account as possible in two years, which option would you choose? (Assume that the beginning deposit and all interest earnings remain in the account for the full two years.)

A) a beginning deposit of $930, earning 8% per year
B) a beginning deposit of $950, earning 5% per year
C) a beginning deposit of $1,000, earning 4% per year
D) a beginning deposit of $1,010, earning 3% per year

Question 56

Physical capital includes

A) the physical talents of people.
B) the ability to take physical resources and use them in creative ways to produce goods and services.
C) manufactured products that are used to produce other goods and services.
D) land and raw resources that come from the earth.

Question 57

Because it consists of _____ items, a nation's infrastructure is difficult to measure.

A) only tangible
B) only intangible
C) tangible and intangible
D) A nation's infrastructure is not difficult to measure.

Question 58

Which strategy is an example of increasing the capital-to-labor ratio?

A) replacing the roof on a factory building
B) sending workers to training classes
C) giving a construction crew more backhoes
D) increasing the number of workers harvesting crops in a field

Question 59

Government funding of Los Alamos National Labs is an example of the government acting in its role to promote economic growth by

A) ensuring a stable legal system.
B) enhancing physical and human capital.
C) ensuring a stable and secure financial system.
D) promoting free and competitive markets.

Question 60

Growth is the most important contributor to reducing extreme poverty.

Question 61

Decreasing the accessibility to college in order to funnel workers into the workforce faster will

A) decrease productivity of the economy.
B) increase productivity of the economy.
C) increase real wages.
D) have no impact on the economy.

Question 62

By investing heavily in the consumption of goods, the government promotes a higher level of labor productivity in the United States.

Question 63

Historically, immigration has helped fuel economic growth in the United States.

Question 64

One way a stable financial system supports economic growth is that it

A) subsidizes borrowers of financial capital.
B) facilitates the movement of capital from savings to investment.
C) keeps tax rates low.
D) increases the incidence of unanticipated price changes.

Question 65

According to Thomas Malthus, a fixed quantity of land and a growing human population will eventually produce

A) a stationary state in which the economy grows but at a fixed rate.
B) accelerating economic growth.
C) continuous yet variable economic growth.
D) a deteriorating state in which growth will decline.

Question 66

The legal enforcement of contract rights is an important component of intangible infrastructure that promotes economic growth.

Question 67

Rocky Gap Furniture hires 10 employees working eight hours each to produce 100 rocking chairs. What is the productivity of these workers?

A) 1.25 chairs per hour
B) 2.5 chairs per hour
C) 50 chairs per hour
D) 100 chairs per hour

Question 68

If it will take 10 years for a nation's income to double, then its growth rate must be 7%.

Question 69

Increases in _____ often lead to economic growth.

A) capital
B) population
C) the money supply
D) government regulations

Question 70

Which of these does NOT increase productivity?

A) research and development
B) improvements in labor quality
C) capital investment
D) an increase in the money supply

Question 71

The Rule of 70 would be most accurate for estimating the doubling time in which situation?

A) The growth rate is steady at 4%.
B) The growth rate is variable but averages 4%.
C) The growth rate is steady at 15%.
D) The growth rate is variable but averages 15%.

Question 72

A country's infrastructure does not affect its economic growth.

Question 73

In general, free societies have more economic growth than totalitarian societies do.

Question 74

Economic growth is hindered if consumers and businesses do not have a good idea of the likely rate of inflation in the near future.

Question 75

Which is NOT an example of infrastructure?

A) the Hoover Dam
B) the federal highway system
C) airports
D) Walmart stores

Question 76

Which change is likely to increase wages the MOST in a country?

A) Drainage of swampy land allows 2% more land to be farmed.
B) The labor force grows by 2%.
C) The capital-to-labor ratio rises by 2%.
D) Since the growth rate is 2% in all listed situations, wages would increase equally in all of them.

Question 77

Which statement about short-run economic growth is NOT true?

A) It occurs when an economy makes use of underutilized resources.
B) It is easier to achieve than long-run economic growth.
C) It is likely to occur when countries are recovering from an economic downturn.
D) It is likely to occur when obstacles preventing resources from being used are put in place.

Question 78

Which technology most strongly affected the growth in U.S. productivity in recent decades?

A) railroads
B) microcomputers
C) ticker tape
D) petrochemicals

Question 79

Whispering Valley Furniture hires 5 employees working eight hours each to produce 80 rocking chairs. Rocky Gap Furniture hires 10 employees working eight hours each to produce 160 rocking chairs. Which company's workers are more productive?

A) Whispering Valley Furniture's workers are more productive.
B) Rocky Gap Furniture's workers are more productive.
C) The two companies' workers are equally productive.
D) The two companies are not comparable because they don't have the same number of employees.

Question 80

The Rule of 70 is a valuable tool for understanding the power of compounding growth rates over time.