Deck 10: Economic Growth, the Financial System, and Business Cycles

Question 1

A good measure of the standard of living is

A)real GDP per capita.
B)nominal GDP per capita.
C)total real GDP.
D)total nominal GDP.

Answer 1

real GDP per capita.

Question 2

Which of the following statements describes the experiences of Chevron since it became independent in 1911?

A)strong uninterrupted growth in demand
B)long-run growth interrupted by periods of business cycle recession
C)little or no growth in the long run,and unaffected by the business cycle
D)little or no growth in the long run,but very vulnerable to the business cycle

Answer 2

long-run growth interrupted by periods of business cycle recession

Question 3

Table 10-1

Refer to Table 10-1.Using the table above,what is the approximate growth rate of real GDP from 2017 to 2018?

A)1%
B)2%
C)3%
D)4%

Answer 3

3%

Question 4

Because of technological change,oil companies like Chevron were able to produce almost twice as much output from refineries in 2016 as in 1950 while using 60 percent fewer workers.This represents ________ in output per worker,which is also known as ________.

A)an increase; labor productivity
B)a decrease; structural unemployment
C)an increase; crowding out
D)a decrease; capital growth

Question 5

If real GDP in a small country in 2017 is $8 billion and real GDP in the same country in 2018 is $8.3 billion,the growth rate of real GDP between 2017 and 2018

A)is 3.0%.
B)is 3.6%.
C)is 3.75%.
D)cannot be determined from the information given.

Question 6

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as

A)technology.
B)labor productivity.
C)real GDP.
D)human capital.

Question 7

If the growth rate of real GDP rises from 3% to 4% per year,then the number of years required to double real GDP will decrease from

A)23.3 years to 17.5 years.
B)28.0 years to 21.0 years.
C)11.2 years to 10.8 years.
D)23.3 years to 20.6 years.

Question 8

Increases in real GDP since 1900 can actually underestimate growth in the standard of living for Americans since 1900 because

A)the level of pollution in 1900 was much higher than it is today.
B)the crime rate was higher in 1900 than it is today.
C)goods and services are more expensive today as compared to 1900.
D)the quality of health care that exists today was not available in 1900.

Question 9

Since 1900,real GDP per capita has ________ and this measure ________ the actual growth in standards of living in the United States over this time.

A)increased; understates
B)increased; overstates
C)decreased; understates
D)decreased; overstates

Question 10

Technological advances generally result in

A)decreased incomes.
B)increased life expectancy.
C)increased infant mortality rates.
D)increased average number of hours worked per day.

Question 11

Since 1900,real GDP in the United States has grown

A)more rapidly than the population.
B)more slowly than the population.
C)as rapidly as the population.
D)in a random unpredictable manner relative to the population.

Question 12

Countries with high rates of economic growth tend to have

A)a labor force that is more productive.
B)a lower life expectancy at birth.
C)low rates of technological advancement.
D)a declining incidence of business cycle fluctuations.

Question 13

If you invest $10,000 in a bond that earns 8% interest per year,how many years will it take to double your money?

A)1 year and 3 months
B)2 years and 6 months
C)8 years
D)8 years and 9 months

Question 14

Economist Robert Fogel has estimated that by the year 2040,individuals in the United States will be spending

A)more time in the workforce and more time in leisure activities than they do today.
B)less time in the workforce and less time in leisure activities than they do today.
C)less time in the workforce and more time in leisure activities than they do today.
D)more time in the workforce and less time in leisure activities than they do today.

Question 15

If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in 2018,we would say that in 2018,the average American could buy ________ times as many goods and services as the average American in 1950.

A)1/8
B)4
C)8
D)12

Question 16

Table 10-1

Refer to Table 10-1.Using the table above,what is the approximate average annual growth rate from 2015 to 2018?

A)1%
B)1.5%
C)2%
D)3%

Question 17

According to the "Rule of 70," how many years will it take for real GDP per capita to double when the growth rate of real GDP per capita is 5%?

A)less than 1 year
B)5 years
C)14 years
D)35 years

Question 18

Which of the following increases labor productivity?

A)an increase in the aggregate hours of work
B)decreases in the availability of computers and factory buildings
C)inventions of new machinery,equipment,or software
D)a decline in the health of the population

Question 19

If real GDP per capita doubles between 2005 and 2020,what is the average annual growth rate of real GDP per capita?

A)4.7%
B)10.5%
C)15%
D)21%

Question 20

If real GDP grows by 3% in 2014,3.2% in 2017,and 2.5% in 2018,what is the average annual growth rate of real GDP?

A)2.6%
B)2.9%
C)3.1%
D)4.2%

Question 21

Which of the following does not describe governmental policy actions that are helpful in supporting growth in an economy? Governmental policies that

A)avoid playing any role in developing communication systems.
B)provide secure rights to private property.
C)establish an independent court system that enforces contracts.
D)facilitate the development of an efficient financial system.

Question 22

Human capital refers to which of the following?

A)the quantity of goods and services that can be produced by one worker or by one hour of work
B)the accumulated knowledge and skills workers acquire from education and training or from their life experiences
C)manufactured goods that are used to produce other goods and services
D)physical equipment that is made by human laborers,not machines

Question 23

Long-run economic growth requires all of the following except

A)technological change.
B)increases in capital per hour worked.
C)government provision of secure property rights.
D)political instability.

Question 24

According to the "Rule of 70," it will take 4 years for real GDP per capita to double when the growth rate of real GDP per capita is

A)4 percent.
B)12.25 percent.
C)17.5 percent.
D)28 percent.

Question 25

India's rapid growth can be explained by

A)reduced regulations and market-based reforms.
B)investment in human capital from 1947 through 2017.
C)the movement of workers from the agricultural sector to the manufacturing sector.
D)an increase in labor force participation.

Question 26

Which of the following describes the growth in real GDP per person in the United States from 1900 to the present?

A)It has decreased.
B)It has increased by more than eight times.
C)It has doubled.
D)It has increased twenty times.

Question 27

Potential GDP refers to

A)the level of GDP attained when all firms are producing at capacity.
B)the level of GDP attained by the country with the highest growth in real GDP in a given year.
C)the difference between the highest level of real GDP per quarter and the lowest level of real GDP per quarter within any given year.
D)the extent to which real GDP is above or below nominal GDP.

Question 28

The only way the standard of living of the average person in a country can increase is if ________ increases faster than ________.

A)production; population
B)population; GDP per capita
C)population; production
D)population; income

Question 29

Article Summary
According to the U.S.Department of Labor,nonfarm labor productivity rose at an annualized rate of 0.9 percent in the second quarter of 2017 as hours worked and output per worker both rose at their fastest pace in 18 months.Compared to the same quarter in 2016,productivity increased at a rate of 1.2 percent,its best performance in two years.,while unit labor costs fell at a rate of 0.2 percent.From 2007 to 2016,labor productivity increased at an average annual rate of 1.2 percent,well below its long-term growth rate of 2.1 percent from 1947 to 2016.This is an indication of a decline in the potential growth rate,blamed in part on a shortage of workers and low capital expenditure.
Source: Lucia Mutikani,"U.S.productivity rises in second quarter,keeps labor costs in check," reuters.com,August 9,2017.
Refer to the Article Summary.In the second quarter of 2017,labor productivity in the United States rose at its fastest pace in 18 months.Labor productivity is important for an economy because an increase in labor productivity

A)will increase the labor force participation rate.
B)allows the average consumer to increase consumption.
C)will create short-run,but not long-run,economic growth.
D)will increase output and decrease wages in the long run.

Question 30

If labor productivity growth slows down in a country,this means that the growth rate in ________ has declined.

A)labor force participation
B)the quantity of goods or services that can be produced by one hour of work
C)the working-age population
D)nominal GDP

Question 31

What two factors are the keys to determining labor productivity?

A)the business cycle and the growth rate of real GDP
B)the growth rate of real GDP and the interest rate
C)the level of technology and the quantity of capital per hour worked
D)the average level of education of the workforce and the price level

Question 32

In terms of economic growth,the key measure of the standard of living is

A)real GDP.
B)nominal GDP.
C)real GDP per capita.
D)nominal GDP per capita.

Question 33

The total amount of physical capital available in a country is know as the country's

A)labor productivity.
B)savings.
C)investment.
D)capital stock.

Question 34

Which of the following would contribute to a sustained high rate of economic growth in the long run in an economy?

A)growth in capital per hour worked accompanied by technological change
B)increases in labor force participation rates as workers who are out of the labor force pursue rising wages
C)a shift of workers in the economy from the agricultural sector to the nonagricultural sector
D)an influx of immigrant labor into an economy without any accompanying technological change

Question 35

Article Summary
According to the U.S.Department of Labor,nonfarm labor productivity rose at an annualized rate of 0.9 percent in the second quarter of 2017 as hours worked and output per worker both rose at their fastest pace in 18 months.Compared to the same quarter in 2016,productivity increased at a rate of 1.2 percent,its best performance in two years.,while unit labor costs fell at a rate of 0.2 percent.From 2007 to 2016,labor productivity increased at an average annual rate of 1.2 percent,well below its long-term growth rate of 2.1 percent from 1947 to 2016.This is an indication of a decline in the potential growth rate,blamed in part on a shortage of workers and low capital expenditure.
Source: Lucia Mutikani,"U.S.productivity rises in second quarter,keeps labor costs in check," reuters.com,August 9,2017.
Refer to the Article Summary.A slowdown in the growth rate of labor productivity,as occurred from 2007-2016,will likely result in

A)an increase in real wages and an increase in the inflation rate.
B)a decrease in nominal wages and an increase in the inflation rate.
C)an increase in the country's potential growth rate.
D)a decline in the country's potential growth rate.

Question 36

If labor productivity growth slows down in a country,this will

A)accelerate the increase in real GDP per capita.
B)accelerate the increase in nominal GDP.
C)slow down the increase in real GDP per capita.
D)slow down the increase in nominal GDP.

Question 37

Growth in potential GDP in the United States from 1949 to 2017 was estimated to be about

A)8.25% per year.
B)5.0% per year.
C)3.2% per year.
D)1.5% per year.

Question 38

Which of the following is an example of human capital?

A)a computer
B)a factory building
C)a college education
D)a software program

Question 39

When production in an economy grows more quickly than the population in that economy,which of the following must be occurring?

A)Real GDP is falling.
B)Incomes are growing at a slower rate than the population.
C)Real GDP per capita is rising.
D)Living standards are falling.

Question 40

Actual real GDP will be above potential GDP if

A)firms are producing below capacity.
B)firms are producing at capacity.
C)firms are producing above capacity.
D)inflation is rising.

Question 41

The best measure of the standard of living is

A)nominal GDP.
B)real GDP.
C)nominal GDP per capita.
D)real GDP per capita.

Question 42

The rule of 70 states that

A)it takes an economy 70 years to double its real GDP.
B)the number of years it takes an economy to double in size is 70 divided by the growth rate.
C)the number of years it takes an economy to double in size is the growth rate times 70.
D)the number of years it takes an economy to double in size is the growth rate divided by 70.

Question 43

Which of the following is most likely to be able to sustain economic growth in an economy?

A)sustained increases in the labor force participation rate
B)technological change
C)increases in capital per hour worked
D)accumulations of economic resources

Question 44

Labor productivity will increase if the ________ increases and ________.

A)quantity of capital per hour worked; technology improves
B)quantity of labor per unit of capital; technology improves
C)quantity of capital per hour worked; immigration increases while capital is fixed
D)quantity of labor per unit of capital; immigration increases while capital is fixed

Question 45

Suppose that real GDP for 2017 was $10,000 billion and real GDP for 2018 was $9,500 billion.What is the rate of growth of real GDP between 2017 and 2018?

A)-10%
B)-5%
C)-2%
D)-1%

Question 46

Potential GDP is defined as

A)the maximum of GDP that the economy can produce.
B)the amount of GDP produced if there is no frictional unemployment.
C)the level of GDP attained when all firms are producing at capacity.
D)the amount of GDP produced if there is no structural unemployment.

Question 47

If,between 2008 and 2018,the economy's real GDP grew from $20 billion to $40 billion,what was the average annual growth rate in the economy?

A)3%
B)7%
C)20%
D)100%

Question 48

Workers in high-income countries have ________ to work with than do workers in low-income countries.

A)less physical capital
B)more physical capital
C)more labor
D)more labor and less physical capital

Question 49

Table 10-2

Refer to Table 10-2.Using the table above,what is the approximate average annual growth rate from 2015 to 2018?

A)-1%
B)1%
C)2%
D)4%

Question 50

If GDP grew 3% in 1970,2.2% in 1971 and 2.5% in 1972 then,what is the average annual growth rate over this period?

A)5%
B)4%
C)2.6%
D)-2.2%

Question 51

What is human capital?

A)a slang term for the underground labor market
B)manufactured goods that are used to produce other goods
C)accumulated knowledge and skills acquired by a worker
D)the manager or owner of a business

Question 52

Table 10-2

Refer to Table 10-2.Using the table above,what is the approximate growth rate of real GDP from 2017 to 2018?

A)-2%
B)-1%
C)1%
D)2%

Question 53

If an economy is growing at a rate of 2.5% per year,how long will it take the economy to double in size?

A)60 years
B)43 years
C)36 years
D)28 years

Question 54

Labor productivity is

A)the quantity of output produced in one hour by several workers.
B)the quantity of capital one worker can produce in one day.
C)the quantity of output produced by one worker or by one hour of work.
D)the quantity of output produced in one hour by one machine.

Question 55

Suppose that real GDP for 2017 was $10,000 billion and real GDP for 2018 was $11,000 billion.What is the rate of growth of real GDP between 2017 and 2018?

A)1%
B)2%
C)5%
D)10%

Question 56

Table 10-2

Refer to Table 10-2.Using the table above,what is the approximate growth rate of real GDP from 2016 to 2017?

A)1%
B)2%
C)3%
D)4%

Question 57

If GDP grows at a rate of 3% per year,approximately how long will it take for GDP to double in size?

A)12 years
B)21 years
C)23 years
D)35 years

Question 58

If GDP is currently $13 trillion and is growing at a rate of 2.3% per year,how long will it take GDP to reach $26 trillion?

A)about 15 years
B)about 17 years
C)about 25 years
D)about 30 years

Question 59

Which of the following will result in an increase in labor productivity?

A)a decrease in the number of people attending institutions of higher education
B)a decline in the amount of human capital per worker
C)an increase in technology
D)a decline in the capital stock per hour worked

Question 60

According to Robert Fogel,economic growth ________ health,and health ________ economic growth.

A)improves; worsens
B)improves; improves
C)worsens; improves
D)worsens; worsens

Question 61

Suppose you are a famous international economic advisor.You have been asked to asses the possibilities for growth in an African country.It is a country abundant in labor and some natural resources.The capital-to-labor ratio is low.It has a free market economy.You have found that this country does not have a very strong and healthy banking system,however the political system is stable and the government does a good job protecting property rights.Assess this country's prospects for growth.Recommend two things that would enhance the country's growth.

Question 62

What is labor productivity? How does a country's standard of living relate to labor productivity?

Question 63

The growth rate of real GDP in the United States rises from 4.2% to 4.4%.Explain and calculate how this increase in the growth rate of real GDP affects the number of years it will take for real GDP to double.

Question 64

A firm can fund an expansion of its operations by

A)issuing bonds.
B)buying stock.
C)paying dividends.
D)loaning money.

Question 65

When potential GDP increases,is it necessarily the case that real GDP increases as well? Explain.

Question 66

Potential GDP is the maximum output a firm is capable of producing.

Question 67

Potential GDP in the United States

A)does not change over time.
B)grows as the economy grows.
C)changes over a given business cycle.
D)declines over time.

Question 68

Accumulating a greater number of inputs will ensure that an economy will experience economic growth.

Question 69

The key to sustained economic growth is increasing labor productivity.

Question 70

Market economies tend to grow more quickly than centrally-planned economies.

Question 71

Potential GDP is always greater than real GDP in an economy.

Question 72

How has economist Robert Fogel explained that economic growth is connected to life expectancy? Based on this connection,in what country would you expect to have a longer life expectancy,the United States or India? Explain.

Question 73

Centrally planned economies tend to grow more quickly than market economies.

Question 74

Outline the various actions the government sector could take to promote growth.

Question 75

Increases in capital per hour worked cannot sustain high rates of economic growth unless accompanied by technological change.

Question 76

Potential GDP was estimated to grow at a rate of 3.2% from 1949-2017 in the United States.Actual GDP in the U.S.

A)always grows at a slower rate than potential GDP.
B)always grows at a faster rate than potential GDP.
C)always grows at the same rate as potential GDP.
D)is the same as potential GDP if all firms in the economy were working at capacity.

Question 77

What factors increase potential GDP? Include a definition of potential GDP in your answer.

Question 78

Economic growth depends more on technological change than on increases on capital per hour worked.

Question 79

Use the rule of 70 to illustrate how small differences in growth rates can have a large impact on how rapidly the standard of living in a country increases.

Question 80

Explain why a centrally-planned economy might not grow as rapidly as a market economy.