Deck 11: Economic Growth: Why Is the Economic Road so Bumpy

Question 1

Which of the following is the most commonly used measurement of economic growth? Changes in

A)Real GDP
B)The money supply
C)Nominal GDP
D)The federal government debt
E)The level of international trade

Answer 1

A

Question 2

A decline in the level of economic activity occurs during which phase of the business cycle?

A)Expansion
B)Peak
C)Contraction
D)Trough
E)Depression

Answer 2

C

Question 3

Of the following,which of the following values most closely approximates the average annual rate of growth for the U.S.economy since 1960?

A)1.65%
B)10.22%
C)5.35%
D)4.02%
E)3.26%

Answer 3

E

Question 4

Which of the following statements is true about economic growth?

A)Economic growth is a short-run process
B)Growth of an economy is generally a smooth process that occurs over time
C)Economic growth is a long-run process resulting from the compounding of many events
D)To measure economic growth,economists analyze changes in the national debt
E)The U.S.economy has never experienced a year of negative economic growth

Question 5

Which of the following lists the four phases of the business cycle in the correct sequence?

A)Expansion,peak,contraction,trough
B)Expansion,contraction,peak,trough
C)Expansion,peak,contraction,depression
D)Expansion,peak,depression,trough
E)Peak,recession,trough,depression

Question 6

Which of the following is consistent with economic growth?

A)Lower unemployment
B)Increased GDP
C)Increased aggregate demand
D)Increased sales
E)All of the above

Question 7

Which phase of the business cycle best describes an economy that is experiencing a positive rate of economic growth?

A)Expansion
B)Peak
C)Contraction
D)Trough
E)Depression

Question 8

Countries A and B start out with real GDP equal to $1,000.If country A grows at a rate of 5% while country B grows at a rate of 10%,what is country A's level of real GDP after 3 years?

A)$1,000
B)$1,050
C)$1,158
D)$1,500
E)$2,500

Question 9

What is the average length of a typical business cycle in the modern U.S.economy?

A)12 months
B)36 months
C)60 months
D)95 months
E)120 months

Question 10

Which decade resulted in the lowest average annual rate of economic growth in the U.S.?

A)1950s
B)1960s
C)1970s
D)1980s
E)Unknown

Question 11

The last depression experienced by the U.S.economy occurred

A)During the 1970s
B)In 1982
C)During the 1930s
D)Between 1974-1975
E)In 1990

Question 12

When the economy ends an expansion,it enters which phase of the business cycle?

A)Expansion
B)Peak
C)Contraction
D)Trough
E)Depression

Question 13

Which of the following is not a phase of every business cycle?

A)Trough
B)Expansion
C)Contraction
D)Depressions
E)Peak

Question 14

What term is used to describe an erratic short-run fluctuation in economic activity around the long-run trend?

A)Economic depression
B)Economic boom
C)Business cycle
D)Recession
E)Diminishing returns

Question 15

When economic output hits a short-run economic low,the economy is in which phase of the business cycle?

A)Expansion
B)Peak
C)Contraction
D)Trough
E)Depression

Question 16

Which of the following decades had the highest average annual rate of economic growth in the U.S.?

A)1930s
B)1960s
C)1970s
D)1980s
E)1990s

Question 17

Why is economic growth an important economic and social issue?

A)Economic growth leads to improvements in our standard of living
B)Lower levels of unemployment and poverty can be achieved through economic growth
C)A growing economy provides consumers with more choices and opportunities
D)All of the above
E)Economic growth is not an important economic issue

Question 18

An exceptionally strong and prolonged contraction is known as

A)A trough
B)A recession
C)An economic bust
D)A super contraction
E)A business cycle

Question 19

Why do small differences in economic growth rates today result in significant differences in the level of economic activity in the future?

A)Growth rates discount over time
B)Economic growth compounds year after year
C)Economics grow in an arithmetic fashion
D)Business cycles are less likely at higher rates of growth
E)All of the above

Question 20

Countries A and B start out with real GDP equal to $1,000.If country A grows at a rate of 5% while country B grows at a rate of 10%,what is country B's level of real GDP after 3 years?

A)$1,000
B)$1,100
C)$1,210
D)$1,300
E)$1,331

Question 21

What was the primary opportunity cost of the former Soviet Union's policy to heavily invest in capital for economic growth?

A)An inability to trade with other nations
B)Democracy
C)Foregone consumer goods
D)Technological innovations
E)Foregone military goods

Question 22

What are the two primary determinants of economic growth?

A)The availability of resources and productivity factors
B)Technology and money
C)The quantity of capital and the quantity of money
D)The ability to trade and the size of the labor force
E)Comparative advantage and the law of diminishing returns

Question 23

In an economy,10 workers can produce 500 units of output and 20 workers produce 800 units of output.Which of the following is true? The average product with

A)10 workers is 500
B)10 workers is 5
C)20 workers is 800
D)20 workers is 300
E)20 workers is 40.

Question 24

The economic variables that make up the Leading Economic Indicators Index tend to move in the ______ direction as overall economic output and do so _____ changes in real GDP.

A)Opposite; prior to
B)Same; after
C)Opposite; after
D)Same; prior to
E)Same; simultaneously as

Question 25

Why does spending on capital tend to increase economic growth more than spending of consumption goods? Because

A)Capital lasts longer than consumer goods
B)Capital can be used to produce future goods and services
C)Capital puts technology to use
D)People

Question 26

What is the result of a growing labor force?

A)Lower rates of interest in the capital market
B)Higher rates of unemployment
C)The economy's production possibilities curve shifts outward
D)The economy's production possibilities curve shifts inward
E)The economy's rate of growth must slow to accommodate more people

Question 27

Monetary theories of the business cycle postulate that cycles are strongly influenced by the policy actions of the

A)U.S.Congress
B)Federal Reserve
C)World Trade Organization
D)National Bureau of Economic Research
E)U.S.Department of Commerce

Question 28

Which of the following terms is used to describe the purchase of capital?

A)Savings
B)Consumption
C)Technology
D)Investment
E)Production

Question 29

Which group is responsible for announcing the dates for each phase of a U.S.business cycle?

A)The Federal Reserve
B)The National Bureau of Economic Research
C)The Department of Commerce
D)The Bureau of Labor Statistics
E)The Federal Business Cycle Committee

Question 30

How do you calculate the average product of labor?

A)Total quantity of inputs divided by total output
B)The average number of workers times the average level of output produced
C)Total output produced divided by total units of labor employed
D)Total units of labor employed divided by the total output produced
E)The average number of labor units employed times the quantity of capital employed

Question 31

Which of the following is NOT true about business cycles?

A)All business cycles have four distinct phases
B)The average length of a U.S.business cycle is about 60 months
C)Since 1960,the U.S.has experienced six complete business cycles
D)The last economic depression in the U.S.occurred in the 1930s
E)The turning points of a business cycle can be easily predicted

Question 32

In an economy,100 workers can produce 500 units of output and 110 workers produce 600 units of output.Which of the following is true? The average product with

A)100 workers is 500
B)100 workers is 5
C)110 workers is 600
D)10 workers is 100
E)Both a)and c)

Question 33

What is technology?

A)The tools of production
B)The human input of production
C)Computers,robots,and factories
D)The means and methods of production
E)The mix of labor and capital used in production

Question 34

Which of the following is the best definition of "productivity"?

A)A measurement of how efficiently resources are converted into goods and services through a production process
B)A measurement of how technology increases the ability of an economy to produce goods and services
C)The ratio of inputs to output
D)The quantity of goods and services produced during a given period of time by labor
E)The total output produced in an economy given its set of resources and the current state of technology

Question 35

Initially 10 workers produce 100 units of output in an economy.The next year,20 workers produce 250 units of output in the same economy.Productivity in the economy has

A)Doubled
B)More than doubled
C)Increased
D)Decreased
E)Not changed

Question 36

Which of the following economists is associated with the business cycle theory of innovations?

A)John Maynard Keynes
B)William Stanley Jones
C)Joseph Schumpeter
D)Ansel Sharp
E)Adam Smith

Question 37

What was the first theory put forth by an economist to explain the phenomena of business cycles?

A)Inventory theory
B)Schumpeter's theory of innovation
C)Real business cycle theories
D)Theory of expectations
E)Jevons' sunspot theory

Question 38

Which of the following focuses primarily on aggregate supply variables?

A)Theory of expectations
B)Exogenous theories
C)Monetary theories
D)Real business cycle theories
E)Jevons' sunspot theory

Question 39

What do you call business cycle theories based on the belief that economic activity follows general trends of optimism and pessimism?

A)Theories of expectations
B)Real business cycle theories
C)Theories of innovation
D)Theories of externalities
E)Sunspot theories

Question 40

The most commonly used tool to forecast future changes in economic activity is the

A)Leading economic indicators index
B)Supply of money
C)Unemployment rate
D)Lagging economic indicators index
E)Federal budget deficit

Question 41

How has the increasing importance of the U.S.service sector contributed to the slowdown in economic growth?

A)Services are less important to the economy than goods
B)The productivity of the service sector is hard to accurately measure
C)Most investment takes place in the goods producing sector of the economy
D)Services cannot be easily exported to foreign nations
E)Technological advances have had a smaller impact on the service sector

Question 42

Which of the following statements is true?

A)In the foreseeable future,real GDP will grow slower than the U.S.population
B)Based on past economic performance,it is likely that standards of living in the U.S.will fall during the early part of the 21^st century
C)Real per capita GDP will likely increase in the near future due in part to the slowdown in the rate of population growth
D)In economics,the past is a very poor predictor of the future
E)The rate of economic growth does not affect individual people

Question 43

Which theories concerning the business cycle focus on factors outside of the economy?

A)Expectations theories
B)Inventory theories
C)Exogenous theories
D)Monetary theories
E)Theories of innovation

Question 44

For an economy to expand its investment in the production of capital goods,it must

A)Enhance its current level of technology
B)Forego some production of consumer goods and services
C)Expand its geographic territory
D)Increase its real supply of money
E)Reduce the level of savings by consumers

Question 45

Which of the following is NOT a component of the Index of Leading Economic Indicators?

A)Stock market prices
B)An index of consumer expectations
C)New building permits granted
D)Real money supply
E)None of the abovE.All are part of the index

Question 46

Human capital

Question 47

How many complete business cycles has the U.S.experienced since 1960?

A)7
B)1
C)12
D)2
E)23

Question 48

Which famous economist is associated with the Sunspot Theory of business cycles?

A)Joseph Schumpeter
B)Milton Friedman
C)William Stanley Jevons
D)John Maynard Keynes
E)Charles Alan Register

Question 49

Which of the following is cited as contributing to the recent slowdown in economic growth?

A)Slower rates of technological advancement
B)Changes in composition of the labor force
C)Low rates of saving and investment
D)Government regulation and public debt
E)All of the above

Question 50

How much does the federal government spend annually on research and development?

A)Less than 1% of GDP
B)About 10% of GDP
C)More than 25% of its budget
D)Zero
E)Exactly 5% of its budget

Question 51

The first decade of the 21^st century has been characterized by ______.

A)A booming economy through the period
B)A recession at the start of the decade,followed by a slow recovery and then a second recession
C)Stagflation
D)One recession followed by an unprecedented economic boom
E)None of the above

Question 52

What is the "crowding out" effect?

A)Consumption spending is reduced because of spending on capital
B)Capital spending is reduced because people purchase great quantities of consumer goods
C)Private investment is reduced because government borrowing diverts dollars away
D)Government spending creates a larger demand for capital goods
E)Savings is insufficient to support the level of capital investment in the economy

Question 53

Which set of theories can be used to explain all business cycles?

A)Exogenous theories
B)Theories of innovation
C)Inventory theories
D)Monetary theories
E)None of the abovE.No one theory can explain every business cycle

Question 54

Which of the following is responsible for officially tracking the Index of Leading Economic Indicators?

A)The U.S.Department of Commerce
B)The Conference Board
C)The Bureau of Labor Statistics
D)The Council of Economic Advisors
E)The Federal Reserve Board of Governors

Question 55

The economic growth of an economy is generally measured by examining changes in

A)Employment
B)Real GDP
C)Income
D)Government revenues
E)Current GDP

Question 56

Which of the following is a "pro-growth" economic policy?

A)Raising the tax on capital gains
B)Encouraging people to save less
C)Reducing public dollars available for education
D)Investing in human capital
E)None of the above

Question 57

Relative to the past,business cycles in the U.S.are becoming

A)Shorter in duration
B)More severe
C)Longer in duration
D)(a)and (b)
E)Non-existent

Question 58

Which of the following statements is true?

A)The U.S.economy grew at a higher rate in the 1980s than it did in the 1960s
B)The Leading Economic Indicators Index is useful for predicting economic recessions,but not economic expansions
C)The economist most often associated with theories of innovation used to explain business cycles is Milton Friedman
D)A small reduction in economic growth can have large long-run effects on real GDP
E)All of the above statements are false

Question 59

The quantity of capital in the U.S.economy has grown at a rate ________ the growth in the labor forcE.

A)Slower than
B)About the same as
C)Faster than
D)Only half as much as
E)Unknown

Question 60

In response to an economic recession,monetary theories of the business cycle predict that the Federal Reserve would

A)Increase the supply of money to create an expansion
B)Reduce the supply of money to create an expansion
C)Raise interest rates to increase real economic growth
D)Increase the demand for money to bring about economic growth
E)Lower taxes to avoid a full depression

Question 61

The Following Questions Refer to the graph below.
An increase in labor resources will cause which of the following shifts on the graph?

A)BF to AG
B)AG to BF
C)D to C
D)C to D
E)D to E

Question 62

The Following Questions Refer to the graph below.
A trough in the business cycle is illustrated on the graph

A)At point T²
B)At point T³
C)Between T¹ and T²
D)Between T² and T³
E)Along the straight line

Question 63

Which of the following factors was NOT one of the reasons why a recession started in 2008?

A)The collapse of a speculative bubble in the real estate market
B)A spike in interest rates
C)A significant rise in the world price of oil
D)A series of financial fraud schemes in the financial industry
E)All of the above

Question 64

The Following Questions Refer to the graph below.
The straight line on the graph represents

A)An economic expansion
B)An economic contraction
C)A business cycle
D)A long-run growth trend
E)A boom period

Question 65

According to Real Business Cycle Theory,the primary factor that increases aggregate supply is

A)Savings
B)Increases in the size of the labor force
C)Technological improvements
D)Government spending
E)Reductions in regulation

Question 66

The longest sustained period of economic growth in modern U.S.history occurred during the

A)1920s
B)1950s
C)1960s
D)1980s
E)1990s

Question 67

The Following Questions Refer to the graph below.
A movement from point D to point C is consistent with

A)An increase in capital goods without a decrease in consumer goods
B)Technological change between 2012 and 2017
C)An increase in productivity between 2012 and 2017
D)All of the above
E)None of the above

Question 68

Economic growth is necessary to create new jobs,increase incomes,and raise standards of living.

Question 69

Which of the following contributed to the inflation-free economic expansion of the 1990s and early 2000s?

A)Fed policies to raise interest rates
B)An increase in aggregate supply
C)Improvements in productivity
D)Improvements in technology
E)All of the above

Question 70

The Following Questions Refer to the graph below.
An economic contraction is illustrated on the graph

A)At point T²
B)At point T³
C)Between T¹ and T²
D)Between T² and T³
E)Along the straight line

Question 71

Productivity gains in the 1990s were a result of which of the following?

A)Capital investment
B)Improved labor quality
C)Technological progress
D)Increased use of computers
E)All of the above

Question 72

The Following Questions Refer to the graph below.
An economic expansion is illustrated on the graph

A)At point T²
B)At point T³
C)Between T¹ and T²
D)Between T² and T³
E)Along the straight line

Question 73

The decline that occurred in real GDP in the fourth quarter of 2008 was ________ .

A)The smallest decrease on record
B)The average reduction
C)Smaller than the decrease in the third quarter
D)The largest in over 50 years
E)There was no decline in real GDP during 2008

Question 74

Which of the following is NOT something that will increase economic growth?

A)Expenditures on research and development
B)Increased education
C)Using resources to develop additional capital
D)Replacing old machinery
E)All of the above will increase economic growth

Question 75

Economic growth is an important social issue,but it is not related to other problems such as unemployment and poverty.

Question 76

The Following Questions Refer to the graph below.
An economy's production possibilities curve will shift out the farthest in 2017 if it chooses to operate at which point in 2012?

A)A
B)B
C)C
D)F
E)E

Question 77

Saving in an economy is important for economic growth because

A)If households don't save,they cannot consume in the future
B)Without saving,aggregate demand increases
C)One person's saving is another person's consumption
D)It is the source of funds for investment
E)Of none of the above; saving is not important for economic growth

Question 78

The Following Questions Refer to the graph below.
Economic growth is represented on the graph as a movement from

A)BF to AG
B)AG to BF
C)D to C
D)C to D
E)D to E

Question 79

The Following Questions Refer to the graph below.
An increase in productivity is consistent with which of the following movements?

A)BF to AG
B)AG to BF
C)D to C
D)C to D
E)D to E

Question 80

The Following Questions Refer to the graph below.
A peak in the business cycle is illustrated on the graph

A)At point T²
B)At point T³
C)Between T¹ and T²
D)Between T² and T³
E)Along the straight line