Deck 25: Production and Growth

Question 1

Which of the following is indicated by the data on real income per person for various countries over the past 100 or so years?

A)If,in a relatively poor country,real income per person had grown by 3.5 percent per year for the last 100 years,it would be a relatively rich country today.
B)Rich countries became richer and poor countries became poorer.
C)In the United States,real income per person today is about four times as high as it was 100 years ago.
D)All of the above are correct.

Answer 1

A

Question 2

Which of the following would,by itself,reveal the most about a country's standard of living?

A)its level of capital
B)the number of hours worked
C)its availability of natural resources
D)its productivity

Answer 2

D

Question 3

Last year a country had 800 workers who worked an average of 8 hours and produced 12,800 units.This year the same country had 1000 workers who worked an average of 8 hours and produced 14,000 units.This country's productivity was

A)higher this year than last year.A possible source of this change in productivity is a change in the size of the capital stock.
B)higher this year than last year.A change in the size of the capital stock does not affect productivity.
C)lower this year than last year.A possible source of this change in productivity is a change in the size of the capital stock.
D)lower this year than last year.A change in the size of the capital stock does not affect productivity.

Answer 3

C

Question 4

Strike Out Bowling Balls produces 800 bowling balls per day using 2 workers who each work 8 hours per day.What is Strike Out's productivity?

A)800 bowling balls
B)100 bowling balls per hour
C)50 bowling balls per hour
D)None of the above is correct.

Question 5

Which of the following is correct?

A)Although levels of real GDP per person vary substantially from country to country,the growth rate of real GDP per person is similar across countries.
B)Productivity is not closely linked to government policies.
C)The level of real GDP per person is a good gauge of economic prosperity,and the growth rate of real GDP per person is a good gauge of economic progress.
D)Productivity may be measured by the growth rate of real GDP per person.

Question 6

Country A has a population of 1,000,of whom 800 work 8 hours a day to make 128,000 final goods.Country B has a population of 2,000,of whom 1,800 work 6 hours a day to make 270,000 final goods.

A)Country A has higher productivity and higher real GDP per person than country B.
B)Country A has lower productivity and lower real GDP per person than country B.
C)Country A has higher productivity,but lower real GDP per person than country B.
D)Country B has lower productivity,but higher real GDP per person than country B.

Question 7

Which of the following is a good gauge of economic progress?

A)the level of real GDP per person,but not the growth rate of real GDP per person
B)the level of real GDP per person and the growth rate of real GDP per person
C)the growth rate of real GDP per person,but not the level of real GDP per person
D)neither the level nor the growth rate of real GDP per person

Question 8

Which of the following can be measured by the level of real GDP per person?

A)productivity and the standard of living
B)productivity but not the standard of living
C)the standard of living but not productivy
D)neither the standard of living nor productivity

Question 9

In some East Asian countries,average income,as measured by real GDP per person,has recently grown at an average annual rate that implies output will double about every

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

Question 10

A country experiencing a growth rate of 8% per year can go from being one of the poorest to one of the richest in

A)one generation.In the last couple of decades China's growth rate has been higher than 8%.
B)one generation.However,in the last couple of decades not even China's growth rate has been this high.
C)three generations.In the last couple of decades China's growth rate has been higher than 8%.
D)three generations.However,in the last couple of decades not even China's growth rate has been this high.

Question 11

Country A experienced a growth rate of real GDP per person of 0.5 percent per year throughout the 1900's.In view of other countries' experiences,country A's growth was

A)exceptionally high.
B)moderately high.
C)moderately low.
D)exceptionally low.

Question 12

Alexis and Tara both mine salt.Alexis mines 400 pounds in 40 hours.Tara mines 300 pounds in 20 hours.Which of the following is correct?

A)Alexis's productivity is greater than Tara's.This difference could be explained by Alexis having more physical capital than Tara.
B)Alexis's productivity is greater than Tara's.This difference cannot be explained by a difference in the physical capital each has.
C)Tara's productivity is greater than Alexis's.This difference could be explained by Tara having more physical capital than Alexis.
D)Tara's productivity is greater than Alexis's.This difference cannot be explained by a difference in the physical capital each has.

Question 13

Dilbert's Incorporated produced 5,000,000 units of accounting software in 2008.At the start of 2009 the pointy-haired boss reduced total annual hours of employment from 10,000 to 8,000 and production was 4,800,000.These numbers indicate that productivity

A)fell by 4%.
B)fell by 20%.
C)rose by 12%.
D)rose by 20%.

Question 14

Which of the following is correct?

A)Countries with the highest growth rates over the last 100 years are the ones that had the highest level of real GDP 100 years ago.
B)Most countries have had little fluctuation around their average growth rates during the past 100 years.
C)The ranking of countries by income changes substantially over time.
D)Over the last 100 years,Japan had the highest real GDP growth rate,and now has the highest real GDP per person.

Question 15

Suppose that real GDP grew more in Country A than in Country B last year.

A)Country A must have a higher standard of living than country B.
B)Country A's productivity must have grown faster than country B's.
C)Both of the above are correct.
D)None of the above are correct.

Question 16

Industrial machinery is an example of

A)a factor of production that in the past was an output from the production process.
B)technological knowledge.
C)a production function.
D)an item which always has the property called constant returns to scale.

Question 17

Which of the following items plays a role in determining productivity?

A)physical capital
B)natural resources
C)technological knowledge
D)All of the above are correct.

Question 18

The average citizen of India in 2008 had

A)less real income than the typical resident of Canda in 1870.
B)less real income than the typical resident of the United Kingdom in 1870.
C)higher real income than a resident of Japan in 2008.
D)higher real income than a resident of China in 2008.

Question 19

Which of the following is correct?

A)Over the last 100 years Japan had a higher average growth rate than the United States.It follows that,today,the standard of living in Japan is higher than in the United States.
B)The typical person in Bangladesh today has about twice the real income of a typical American 100 years ago.
C)The typical citizen of China today has about one-half as much real income as the typical citizen of America today.
D)None of the above is correct.

Question 20

Which of the following statements is true?

A)Productivity is calculated as hours worked divided by output produced.
B)Americans have a higher standard of living than Indonesians because American workers are more productive than Indonesian workers.
C)Both A and B are correct.
D)None of the above are correct.

Question 21

Human capital is the

A)knowledge and skills that workers acquire through education,training,and experience.
B)stock of equipment and structures that is used to produce goods and services.
C)total number of hours worked in an economy.
D)same thing as technological knowledge.

Question 22

Foreign saving is used for domestic investment when foreigners engage in

A)foreign direct investment.
B)foreign portfolio investment.
C)either foreign direct investment or foreign portfolio investment.
D)None of the above is correct.

Question 23

Which of the following statements is true?

A)Natural resources per worker influence productivity only when those natural resources are renewable.
B)The prices of most natural resources are stable or falling relative to other prices.
C)Technology requires greater use of natural resources.
D)The terms human capital and technological knowledge are used interchangeably.

Question 24

The slope of the production function with capital per worker on the horizontal axis and output per worker on the vertical axis

A)is positive and gets steeper as capital per worker rises.
B)is positive and gets flatter as capital per worker rises.
C)is negative and gets steeper as capital per worker rises.
D)is negative and gets flatter as capital per worker rises.

Question 25

Suppose that a country increased its saving rate.In the long run it would have

A)higher productivity,and another unit of capital would increase output by more than before.
B)higher productivity,but another unit of capital would increase output by less than before.
C)lower productivity,and another unit of capital would increase output by more than before.
D)lower productivity,but another unit of capital would increase output by less than before.

Question 26

The traditional view of the production process is that capital is subject to

A)constant returns.
B)increasing returns.
C)diminishing returns.
D)diminishing returns for low levels of capital,and increasing returns for high levels of capital.

Question 27

Which of the following is an example of a nonrenewable resource?

A)coal
B)honey
C)livestock
D)All of the above are correct.

Question 28

"When workers already have a large quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity only slightly." This statement

A)represents the traditional view of the production process.
B)is an assertion that capital is subject to diminishing returns.
C)is made under the assumption that the quantities of human capital,natural resources,and technology are being held constant.
D)All of the above are correct.

Question 29

Which of the following would not be considered physical capital?

A)a new factory building
B)a computer used to help Mercury Delivery Service keep track of its orders
C)on-the-job training
D)a desk used in an accountant's office

Question 30

The notion that our ability to conserve natural resources is growing more rapidly than their supplies are dwindling is supported by the fact that

A)most economists do not regard the availability of natural resources as a determinant of productivity.
B)the quantity of natural resources does not enter into any production function.
C)inflation-adjusted prices of most natural resources have been stable or fallen over time.
D)inflation-adjusted prices of most natural resources have risen over time.

Question 31

Which of the following are human capital and physical capital,respectively?

A)for an accounting firm: the accountants' knowledge of tax laws and computer software
B)for a grocery store: grocery carts and shelving
C)for a school: chalkboard and desks
D)for a library: the building and the reference librarians' knowledge of the Internet

Question 32

If a good has become more scarce,then we know for sure that

A)the demand for it increased.
B)the supply of it decreased.
C)either the demand for it increased or the supply of it decreased.
D)both the supply of it and the demand for it decreased.

Question 33

All else equal,if there are diminishing returns,then if a country raised its capital by 100 units last year and by 100 units this year,

A)the increase in output was greater for this year than last year.
B)the increase in output was greater last year than this year.
C)the increase in output is the same in both years.
D)None of the above is necessarily correct.

Question 34

Figure 12-1.
Refer to Figure 12-1.The curve becomes flatter as the amount of capital per worker increases because of

A)increasing returns to capital.
B)increasing returns to labor.
C)diminishing returns to capital.
D)diminishing returns to labor.

Question 35

In the long run,a higher saving rate

A)cannot increase the capital stock.
B)increases the growth rate of income.
C)increases the growth rate of productivity.
D)None of the above is correct.

Question 36

If companies from foreign countries build and operate factories in China,then China's productivity

A)and the wages of Chinese workers increase.
B)increases but the wages of Chinese workers decrease.
C)decreases but the wages of Chinese workers increase.
D)and the wages of Chinese workers decrease.

Question 37

Figure 12-1.
Refer to Figure 12-1.The shape of the curve is consistent with which of the following statements about the economy to which the curve applies?

A)In the long run,a higher saving rate leads to a higher level of productivity.
B)In the long run,a higher saving rate leads to a higher level of income.
C)In the long run,a higher saving rate leads to neither a higher growth rate of productivity nor a higher growth rate of income.
D)All of the above are correct.

Question 38

Country A and country B both increase their capital stock by one unit.Output in country A increases by 15 while output in country B increases by 12.Other things the same,diminishing returns implies that country A is

A)richer than Country B.If Country A adds another unit of capital,output will increase by more than 15 units.
B)richer than Country B.If Country A adds another unit of capital,output will increase by less than 15 units.
C)poorer than Country B.If Country A adds another unit of capital,output will increase by more than 15 units.
D)poorer than Country B.If Country A adds another unit of capital,output will increase by less than 15 units.

Question 39

Other things the same,when an economy increases its saving rate

A)consumption and production rise now.
B)consumption rises now and production rises later
C)consumption falls now and production rises later.
D)consumption falls now and production falls later.

Question 40

In a market economy,the real,or inflation-adjusted,price of a resource measures its

A)contribution to revenue.
B)relative scarcity.
C)productivity.
D)contribution to efficiency.

Question 41

When a country removes trade barriers and imports appliances and exports engineering services,

A)its growth slows.
B)its productivity decreases.
C)it is essentially transforming engineering services into appliances.
D)its economic well-being decreases while that of the country that sells appliances increases.

Question 42

Although growth rates across countries vary some,rankings of countries by income remain pretty much the same over time.

Question 43

Economists differ in their views of the role of the government in promoting economic growth.A controversial idea is that government should

A)lend support to the invisible hand by maintaining property rights and political stability.
B)lower barriers and impediments to free trade.
C)encourage capital formation.
D)target and subsidize specific industries important for technological progress.

Question 44

If they could increase their growth rates slightly,countries with low income would catch up with rich countries in about ten years.

Question 45

If Country A produces 7,000 units of goods and services using 700 hours of labor,and if Country B produces 5,500 units of goods and services using 500 units of labor,then productivity is lower in Country A than in Country B.

Question 46

The president of a poor country has announced that he will implement the following measures which he claims are designed to increase growth: 1.Reduce corruption in the legal system; 2.Reduce reliance on market forces because they allocate goods and services in an unfair manner; 3.Restrict investment in domestic industries by foreigners because they take some of the profits out of the country; 4.Encourage trade with neighboring countries; and 5.Increase the fraction of GDP devoted to consumption.How many of these measures will have a positive effect on growth?

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

Question 47

Which of the following terms is used to refer to the ability of people to exercise authority over the resources they own?

A)natural rights
B)property rights
C)input control
D)collective control

Question 48

Real GDP per person in rich countries,such as Germany,is sometimes more than 10 times that of poor countries like India.

Question 49

An increase in a country's saving rate permanently raises its productivity.

Question 50

Human capital is the term economists use to refer to the knowledge and skills that workers acquire through education,training,and experience.

Question 51

Petroleum is an example of a nonrenewable resource.

Question 52

If over a short time there is an increase in the number of people retired and a decrease in the number of people working,then productivity

A)and real GDP per person rise.
B)rises but real GDP per person falls.
C)falls and real GDP per person rises.
D)and real GDP per person fall.

Question 53

In medieval Europe an important technological advance was the use of the padded horse collar for plowing.Once this idea was thought of,other people used it.This illustrates that knowledge is generally a

A)public good.
B)societal good.
C)private good.
D)normal good.

Question 54

International data on real GDP per person gives us a sense of how standards of living vary across countries.

Question 55

Productivity can be computed as the number of hours worked divided by output.

Question 56

According to some estimates,over the last two decades China has had an annual average growth rate of about 12 percent.

Question 57

Inward-oriented policies

A)include imposing tariffs and other trade restrictions.
B)have generally increased productivity and growth in the countries that pursued them.
C)promote the production of goods and services that the country produces most efficiently.
D)All of the above are correct.

Question 58

Educational attainment tends to be

A)low in countries with high population growth.
B)low in countries with low population growth.
C)high in countries with high population growth.
D)None of the above are true.

Question 59

If a production function has constant returns to scale,then if all inputs double so does production.

Question 60

Countries that pursued outward-oriented policies in the 20th century

A)experienced lower rates of economic growth than did countries that pursued inward-oriented policies.
B)experienced higher levels of political instability than did countries that pursued inward-oriented policies.
C)include Singapore,South Korea,and Taiwan.
D)All of the above are correct.

Question 61

What is the difference between human capital and technology?

Question 62

Compare and contrast the population theories of Malthus and Kremer.

Question 63

Why is productivity related to the standard of living?
In your answer be sure to explain what productivity and standard of living mean.Make a list of things that determine labor productivity.

Question 64

The catch-up effect refers to the idea that poor countries,despite their best efforts,are not likely ever to experience the economic growth rates of wealthier countries.

Question 65

When Americans invest in Russia,the income of Russians (that is,Russian GNP)rises by more than production in Russia (that is,Russian GDP).

Question 66

In addition to investment in physical and human capital,what other public policies might a country adopt to increase productivity?

Question 67

Foreign direct investment and domestic investment have the same effect on all measures of economic prosperity.

Question 68

Two countries with the same saving rates must have the same growth rate of real GDP per person.

Question 69

If a rich country reduced subsidies to domestic producers of goods that poor countries have a comparative advantage producing,the standard of living in these poor countries would likely rise.

Question 70

What is a production function?
Write an equation for a typical production function,and explain what each of the terms represents.