Deck 14: International Macroeconomics

Question 1

The statistic most frequently used by economists to measure aggregate economic growth is the change in:

A) real per capita GDP.
B) individual life expectancy.
C) real GDP.
D) nominal GDP.

Answer 1

real GDP.

Question 2

Measuring a nation's gross domestic product over long periods of time is conceptually difficult because:

A) tastes and preferences change over time.
B) government tax policies change over time.
C) the composition of goods in the GDP changes over time.
D) producers have internalized the nominal cost of external benefits over time.

Answer 2

the composition of goods in the GDP changes over time.

Question 3

Real GDP per capita estimates are used to compare:

A) the distribution of income within an economic system.
B) individual life expectancy.
C) real economic transactions.
D) average incomes and living standards at different times.

Answer 3

average incomes and living standards at different times.

Question 4

Between 1950 and 2004, the average annual growth rate in real GDP in Canada has been:

A) zero to 1%.
B) 2% to 3%.
C) 3% to 4%.
D) 4% to 5%.

Question 5

From the list below the best measure of growth in per capita productive capacity is:

A) increases in society's total output.
B) changes in the output per unit of labour input.
C) output per capita.
D) increases in society's level of national income.

Question 6

Economic growth:

A) does not affect living standards.
B) has a relatively small effect on living standards.
C) has a relatively large effect on living standards.
D) is the sole determinant of living standards.

Question 7

Small differences in growth rates eventually produce large differences in living standards because of:

A) diminishing marginal productivity.
B) increasing returns to scale.
C) decreasing returns to scale.
D) the effects of compounding.

Question 8

Growth of per capita output occurs when:

A) population is growing.
B) output is growing.
C) growth of output is greater than the growth of population.
D) income is growing.

Question 9

With the economy at potential output, economic growth requires at least:

A) growth in actual output.
B) a fall in actual output.
C) growth in the labour force.
D) a higher rate of depreciation of the capital stock.

Question 10

Which of the following statements is false?

A) Growth of GDP ignores leisure.
B) Growth of GDP ignores the costs of pollution and resource depletion.
C) Growth of GDP over-emphasizes consumption goods bought and sold.
D) Growth of GDP ignores income-distribution.

Question 11

Growth accounting attempts to measure the factors that determine:

A) growth in output in the short run.
B) growth in potential output.
C) the depth of business cycles.
D) the duration of business cycles.

Question 12

The factors of production are:

A) land, labour, capital, and technology.
B) land, labour, capital, and entrepreneurship.
C) inputs, managerial ability, and technology.
D) fixed in the long run.

Question 13

To the economist, productive capital is defined as:

A) plant, equipment, and residential housing.
B) buildings, equipment, and inventories.
C) stocks, bonds, and liquid assets.
D) only the nonhuman factors of production.

Question 14

The production function shows the relationship between:

A) the quantity of labour employed and the quantity of output produced.
B) the quantity of land employed and the quantity of output produced.
C) the quantity of capital employed and the quantity of output produced.
D) the quantity of inputs employed and the quantity of output produced.

Question 15

Y = A x F(L, K) is a simple:

A) consumption function.
B) savings function.
C) export function.
D) production function.

Question 16

Based on a simple production function, potential output can be increased by _____________ or by
______________ .

A) increasing the use of labour; work sharing
B) increasing the use of all inputs; technical advances
C) increasing the use of capital; reducing break times
D) increasing the use of land; having less holidays

Question 17

A simple production function can be written as:

A) Y = A x F (L, K).
B) C = a + bY.
C) S = - a + bY.
D) Y=C+I+G+(X-Z).

Question 18

In the equation for the production function Y = A x F (L, K), 'A' stands for:

A) the amount of labour.
B) the amount of capital.
C) an adjustment factor that captures the effect of technology.
D) an adjustment factor that captures the effect of entrepreneurship.

Question 19

In terms of 'growth accounting' the sources of growth in potential output are:

A) increased government expenditure.
B) growth in labour force, capital stock and technology.
C) growth in export markets.
D) reductions in indirect taxes like the GST.

Question 20

The Solow residual is:

A) the difference between real output and aggregate expenditure.
B) the difference between saving and investment.
C) goods and services left over after households have met their consumption plans.
D) the difference between the growth of real GDP and the effects of growth in capital and labour inputs.

Question 21

The Solow residual found by the growth accounting method is:

A) the difference between inputs of labour and of capital.
B) a measure of the effects of changes in technology on output growth.
C) the weighted inputs of capital and labour to production.
D) the revenues producers have left over after they pay their employees.

Question 22

According to the growth accounting methodology, total factor productivity improvements are measured by:

A) the Solow residual.
B) the growth of labour inputs to production.
C) the growth in capital inputs to production.
D) the growth of output.

Question 23

If the labour-income is 2/3 of national income, the basic growth accounting equation is:

A) ?Y/Y = ?A/A + ?L/L + ?K/K.
B) ?Y/Y = A + (2/3 x ?L/L) + ?K/K.
C) ?Y/Y = ?A/A + (2/3 x ?L/L) + (1/3 x ?K/K).
D) ?Y/Y = ?A/A + ?L/L + (2/3 x ?K/K).

Question 24

Consider an economy with a two-variable production function with labour-income-share at 2/3 and capital-income-share at 1/3. If capital and technology remain constant and if L grows at 3%, the growth of real GDP will be:

A) 0.667%.
B) 1.667%.
C) 2%.
D) 3%.

Question 25

Consider an economy with a two-variable production function with labour-income-share at 2/3 and capital-income-share at 1/3. Assume that growth rate of real GDP is 5%. If both K and L grow at 3%, the growth of total factor productivity will be:

A) 5%.
B) 3%.
C) 2%.
D) 1%.

Question 26

Labour inputs can be used to increase output:

A) because when labour inputs are increased, production increases, up to a certain point.
B) at an increasing rate the more investment takes place in human capital.
C) only in fixed proportions with capital inputs.
D) A and B only.

Question 27

All of the following are important sources of growth except:

A) financial institutions.
B) technological development.
C) entrepreneurship.
D) government planning.

Question 28

In explaining sustained growth in potential output empirically, increased:

A) physical capital is the most important element.
B) human capital is the most important element.
C) technology is the most important element.
D) labour input is the most important element.

Question 29

Constant returns to scale occur whenever all factors of production in an economic system increase in the same proportion and:

A) output increases by an amount greater than the proportionate increase in all inputs.
B) output increases by an amount less than the proportionate increase in all inputs.
C) output increases by an amount equal to the proportionate increase in all inputs.
D) inputs increase by an amount less than the proportionate increase in output.

Question 30

Suppose the production function is Y = A x F(L, K). If all inputs are doubled and output also doubles, then there are ________ returns to scale and ____________returns of L

A) constant, increasing
B) increasing, decreasing
C) decreasing, increasing
D) increasing, constant

Question 31

Which of the following statements is false?

A) If all inputs increase by 20% and, as a result, output increases by 20%, it means that the production function exhibits constant returns to scale.
B) If all inputs increase by 20% and, as a result, output increases by more than 20%, it means that the production function exhibits increasing returns to scale.
C) If all inputs increase by 20% and, as a result, output increases by 20%, it means that the production function exhibits constant marginal productivity of labour.
D) If all inputs increase by 20% and, as a result, output increases by less than 20%, it means that the production function exhibits decreasing returns to scale.

Question 32

Suppose the inputs of labour and capital each increase by 10% and output also increases by 10%. The production function exhibits __________ returns to scale.

A) decreasing
B) constant
C) increasing
D) either increasing or constant

Question 33

Suppose the inputs of labour and capital each increase by 10 percent and output also increases by 10 percent. In that case:

A) there are increasing returns to scale.
B) the Solow residual is zero.
C) potential output is unchanged.
D) there are decreasing returns to scale.

Question 34

Assume employment income is 2/3 of net domestic income


-Refer to Table 14.1. According to the information in then table, in the period 2005-2010 the effect of changes in technology on output growth as measured by the Solow residual was:

A) to increase output by 10%.
B) zero.
C) to reduce output by 5%.
D) to increase output by 20%.

Question 35

Assume employment income is 2/3 of net domestic income


-Refer to Table 14.1. According to the information in the table, changes in technology increased total factor productivity in:

A) all time periods reported.
B) in 2005 - 2010 and 2010 - 2015.
C) in 2010 - 2015.
D) in 2015 - 2020.

Question 36

Assume employment income is 2/3 of net domestic income


-Refer to Table 14.1. According to the information in the table, improvements in technology increased total factor productivity and potential output by 7%:

A) in the period 2015 - 2020.
B) in the periods 2005 - 2010 and 2010 - 2015.
C) in all periods in the table.
D) in the period 2010 - 2015.

Question 37

A likely source of economic growth would be:

A) an improvement in the quality of the resources available to produce society's goods and services.
B) an improvement in the state of technology.
C) an increase in the quantity of resources that society has available for the production of goods and services.
D) all of the above.

Question 38

Greater labour force participation by women increases measured growth and potential output most directly by:

A) stimulating new technologies.
B) increasing capital accumulation.
C) increasing the availability of labour resources.
D) altering the nature of growth-enhancing institutions.

Question 39

The most frequently used measure of productivity is:

A) per capita gross domestic product.
B) the full employment level of gross domestic product.
C) the average number of hours worked per unit of labour.
D) the output produced by a unit of labour in a given time period.

Question 40

If the aggregate production function is Y = A x F(L,K), then the per-worker production function is:

A) Y = A x F(L).
B) Y = A x F(K/L).
C) Y/L = A x F(K/L).
D) Y/L = A x F(K).

Question 41

If the production function per labour is Y/L = A x (K/L)^1/2, then doubling K/L will:

A) double Y/L
B) increase Y/L by less than double
C) increase Y/L by more than double
D) will not increase Y/L.

Question 42

If the production function per labour is Y/L = A x (K/L)^1/3 then the growth accounting equation is:

A) growth in Y/L = growth in A + 1/3(growth in K/L).
B) growth in Y/L = growth in A + growth in K/L.
C) growth in Y/L = A + 2/3(growth in K/L).
D) undefined with the information provided.

Question 43

If the production function per labour is Y/L = A x (K/L)^1/3 and L increases by 10%, while A and K stay constant, then:

A) Y/L will increase by 10%.
B) Y/L will decrease by 10%.
C) Y/L will increase by 3.33%.
D) Y/L will decrease by 3.33%.

Question 44

An increase in the productivity per labour would not result from:

A) an increase in the country's stock of capital goods.
B) an improvement in managerial techniques.
C) an increase in the country's population.
D) increases in the country's investment in human capital.

Question 45

Growth in per capita output depends upon ___________ and ________ .

A) population growth, x-efficiency
B) labour force growth, government policy
C) investment, technological progress
D) population aging, stable technology

Question 46

If capital stock increases at the same rate as labour, and all else is equal, then per capita output will:

A) stop growing.
B) grow less rapidly.
C) grow more rapidly.
D) grow at a constant rate.

Question 47

-Refer to Figure 14.1. The diagram shows that an increase in the country's capital stock, without any change in employment, would increase the ratio of capital per worker and:

A) reduce per-worker output from y₁ to y₀.
B) increase per-worker put from y₁ to y₂.
C) reduce per-worker output from y₂ to y₁.
D) increase per-worker output from y₀ to y₁.

Question 48

-Refer to Figure 14.1. The diagram shows that an improvement in technology with no change in capital or labour inputs would move the economy from:

A) point B to point C.
B) point B to point D.
C) point C to point D.
D) point D to point B.

Question 49

-Refer to Figure 14.1. In the diagram the economy would move from point B to point D if:

A) labour inputs increased and technology improved.
B) capital stock increased but technology did not change.
C) labour and capital inputs both declined.
D) capital stock increased and technology improved.

Question 50

If capital increases at a faster rate than labour, and all else is equal, then per capita output will:

A) stop growing.
B) grow less rapidly.
C) grow more rapidly.
D) grow at a constant rate.

Question 51

The growth of real GDP per person in Canada between 1961 and 2003 was the result of:

A) growth in average labour productivity only.
B) growth in the share of population employed only.
C) growth in both average labour productivity and the share of population employed.
D) neither the growth in average labour productivity nor the share of population employed.

Question 52

The growth in per worker GDP in Canada from 2000 to 2005 was mainly the result:

A) improved technology as measured by the Solow residual.
B) increased labour force and employment.
C) strong investment and growth in capital stock which raised the capital/labour ratio.
D) a fall in the size of the labour force as the population aged, which raised the capital/labour ratio.

Question 53

The productivity slowdown of the current decade occurred:

A) only in Canada.
B) around the world.
C) only in the U.S. and the United Kingdom.
D) only in North America.

Question 54

Which of the following statements is false?

A) Innovation per worker increases when capital intensity per labour increases.
B) Major new inventions lead to waves of new investment.
C) Investments in human capital will increase labour productivity.
D) In Canada, all researches are funded by private sources.

Question 55

Technology and knowledge may be embodied in capital. For example:

A) the development of crop rotation in agriculture to promote soil fertility.
B) the development of the microcomputer.
C) the development of the "management-by-objectives" technique used in some firms.
D) development of the Salk polio vaccine.

Question 56

The development of microchips used in modern computers is an example of:

A) an increase in the nation's capital stock.
B) an increase in human capital.
C) embodiment of knowledge in capital.
D) learning by doing.

Question 57

One of the most common types of investment in human capital is:

A) increasing the number of children in the average family.
B) increasing the number of years of schooling achieved by the average individual.
C) increasing the level of health care available to the average individual.
D) implementing government programs to increase the efficiency of the migration of labour.

Question 58

One characteristic of society's investment in human capital is that it:

A) promotes the overall productivity of labour.
B) is a waste of scarce resources.
C) is essentially free.
D) promotes the overall productivity of society's capital stock.

Question 59

Which one of the following statements is false?

A) As investment in human capital improves the quality and productivity of labour, labour produces less output per worker.
B) Human capital is defined as skills and knowledge embodied in workers.
C) Formal education and on-the-job training are two methods of increasing the stock of human capital.
D) Per capita output over the last 100 years has increased, in part, because of investment in human capital.

Question 60

Innovation may be defined as:

A) the development of new methods for applying existing knowledge.
B) the discovery of new knowledge.
C) the promotion of knowledge and economic growth.
D) none of the above definitions are suitable.

Question 61

Perhaps the most important invention that ushered in the industrial age was the invention of:

A) the telegraph.
B) a way to generate power from machines.
C) the iPod.
D) artificial fibres and petroleum fuels.

Question 62

The historical growth patterns in per capita incomes for industrialized countries began:

A) in the Industrial Revolution.
B) with the American Revolution.
C) in the Middle Ages.
D) with the feudal system.

Question 63

Which of the following statements is true?

A) Agricultural output per person would fall, because population increases faster than agricultural output.
B) Agricultural output would decrease because of diminishing returns to land and labour.
C) Innovation will remove scarcity of resources.
D) The outcome of research has zero risk.

Question 64

Which of the following statements is false?

A) Labour-productivity gap between Canada can be explained by per-worker innovation gap between Canada and USA.
B) Capital labour-ratio of Bangladesh is greater than that in Canada.
C) Higher capital-labour ratio can explain higher labour-productivity.
D) Higher human capital per labour can explain higher labour productivity.

Question 65

The ____________ theory of growth identifies the steady-state rate of growth as the investment just sufficient to keep capital per person constant while labour grows.

A) exogenous
B) endogenous
C) neoclassical
D) classical

Question 66

The neoclassical theory of growth identifies the steady-state rate of growth as the _________ just sufficient to keep ____________ constant while labour grows.

A) investment, capital per person
B) savings, investment
C) technology, productivity
D) consumer demand, output

Question 67

A steady-state growth path is when:

A) the growth rate is always the same.
B) output, capital and labour grow at the same rate.
C) output per worker grows faster than capital per worker.
D) output per worker grows more slowly than capital per worker.

Question 68

Which of the following statements is false?

A) At steady-state, growth of labour-productivity is zero.
B) At steady-state, growth of capital per labour is zero.
C) Higher the growth of labour, higher is the steady-sate k.
D) Higher level of labour productivity can be explained by higher level of capital-labour ratio.

Question 69

If n is the rate of growth of the labour force, sy the rate of saving and investment per worker and k the ratio of capital per worker, the steady state condition is:

A) sy = nk.
B) y = k.
C) sy = n.
D) y = nk.

Question 70

Along the steady-state path, output, capital and labour:

A) grow at different rates.
B) grow at the same rate.
C) diverge.
D) converge.

Question 71

If output capital and labour all grow at the same rate the economy is on the ___________ growth path.

A) structural
B) cyclical
C) converging
D) steady-state

Question 72

In a growing economy, capital-widening _______ the existing capital per worker to new extra workers. Capital-deepening ______ capital per worker for all workers.

A) extends, raises
B) restricts, reduces
C) restricts, raises
D) extends, reduces

Question 73

If an economy is extending the existing capital per worker to new extra workers and raising the capital per worker for all workers, it is:

A) capital-widening and labour-deepening.
B) labour-widening and capital-deepening.
C) capital-widening and capital-deepening.
D) labour-widening and labour-deepening.

Question 74

In the neoclassical theory of growth, a higher saving rate leads to ______________.

A) a higher steady-state growth rate
B) a lower steady-state growth rate
C) a higher output per worker but no change in the steady-state growth rate
D) a lower output per worker and a fluctuating growth rate

Question 75

-Refer to Figure 14.2. If the economy is operating at point B in the diagram:

A) the economy is on a steady-state growth path.
B) total real GDP grows at the same rate as the labour force grows.
C) output per worker is constant.
D) all of the above.

Question 76

-Refer to Figure 14.2. If the economy is operating at point C in the diagram:

A) the economy has less than steady-state capital per worker.
B) the economy is in a steady state but saving and investment per worker are higher than needed to maintain capital per worker.
C) the economy is not in a steady state because saving is less than requires investment per worker to maintain capital per worker.
D) the economy is not in a steady state because saving and investment per worker are higher than needed . to maintain capital per worker.

Question 77

According to the convergence hypothesis based on the neoclassical growth model:

A) richer countries will always grow faster than poorer countries.
B) poorer countries will always grow faster than richer countries but will never become as rich.
C) all countries will eventually have the same per capita incomes.
D) countries will never share the same per capita incomes.

Question 78

According to the neoclassical growth model, richer countries should grow:

A) faster than poor countries.
B) at the same rate as poor countries.
C) slower than poor countries.
D) at a rate that increases over time.

Question 79

Suppose Slovakia and Zimbabwe have the same populations but Slovakia has three times as much capital as Zimbabwe. Under these circumstances, the neoclassical growth model would predict that:

A) Slovakia would be richer than Zimbabwe and would grow faster.
B) Slovakia would be richer than Zimbabwe and would grow slower.
C) Zimbabwe would be poorer than Slovakia at first but would eventually become richer.
D) Slovakia would always be richer than Zimbabwe.

Question 80

Large differences in human capital between poor and rich countries:

A) cannot explain the lack of convergence in per capita incomes between poor and rich countries.
B) may explain why per capita incomes in poor countries have begun to converge with those in rich countries.
C) may explain why per capita incomes in poor countries have not converged with those in rich countries.
D) cannot explain why rich countries continue to grow at rates that are similar to those in poor countries.