Deck 12: Economic Growth

Question 1

In a circular flow model, the total expenditures on an economy's output of goods and services equal the value of total income.

Answer 1

True

Question 2

In the presence of externalities, the equilibrium prices of goods and services-the figures used in GDP calculations-reflect their true values to society.

Answer 2

False

Question 3

A technological advance may come in either the form of a product or a process innovation

Answer 3

True

Question 4

Increases in the quality and quantity of an economy's resources have little effect on its potential output in the long run

Question 5

Estimates of the size of the underground economy in the United States range from 45 to 60 percent.

Question 6

If the educational attainment of a nation's population increases, the economy's production possibilities curve shifts inward​

Question 7

Economic mobility

A)is measured taking into consideration the nominal gross domestic product.
B)gives a detailed description about the distribution of income in an economy.
C)focusses on the growth in real variables of an economy
D)shows how the exports of a country exceed its imports.
E)is measured taking into consideration the rate of growth of unemployment in an economy.

Question 8

Capital formation is a key component of economic growth.

Question 9

It is impossible to have sustained economic growth unless a country or a region has abundant natural resources to sustain the growth

Question 10

Brazil has a relatively low income per capita because it has relatively few natural resources.

Question 11

Callie taking an unpaid leave for five days to enjoy a vacation with her family will be reflected as a debit item in the GDP accounts

Question 12

Productivity growth is a major determinant of a country's standard of living​

Question 13

Generally, there is an inverse relationship between savings and long-term economic growth

Question 14

Economists generally define economic growth as an increase in the nominal income of the population.​

Question 15

Personal income includes income received in the form of transfer payments

Question 16

The higher opportunity cost of obtaining an education in developing countries is one of the reasons that school enrollments are lower

Question 17

An increase in the quantity of labor always leads to economic growth

Question 18

Real GDP accurately reflects both the quantity and quality of goods and services.

Question 19

Poor infrastructure is a major deterrent to economic growth.

Question 20

Under the expenditure approach to GDP accounting, government purchases of goods and services include welfare payments

Question 21

Which one of the following is less likely to cause the production possibilities curve of an economy to shift outward?

A)Increased availability of land
B)A very high infant mortality rate
C)A very low birth rate
D)Increased entrepreneurial activity
E)Increased stock of capital

Question 22

The following table shows the rate of growth of five nations and the number of years required to double its output at various growth rates. B is expected to double its output in _____ years.Table 12.1:

A)5
B)7
C)10
D)14
E)15

Question 23

Suppose two countries Warzonka and Madiz initially have the same real gross domestic product (GDP) per capita. Warzonka experiences no economic growth, while Madiz grows at a sustained rate of 5 percent. In 14 years, Warzonka's GDP will approximately be _____ of that of Madiz.

A)one-fourth
B)half
C)double
D)triple
E)one-third

Question 24

If the population of a nation expands at a faster rate than its rate of growth of real output, then _____.

A)real output per capita would increase
B)real output per capita would decrease
C)the production possibilities curve of the nation will shift inward
D)there will be a downward movement along the production possibilities curve of the nation
E)Incorrect. Real output per capita = real output/population. See 12-1: Economic Growth

Question 25

Which of the following will not result in economic growth?

A)Installing a network of irrigation ditches and pumping stations in order to grow fruits and vegetables in parts of southern California
B)Cyrus McCormack inventing a threshing machine for harvesting grains
C)After World War II, the United States instituting the GI bill that provided education subsidies to soldiers being released from service duty
D)Many citizens emigrating from a nation when a politically repressive regime takes office
E)The discovery of new oil reserves in Montana

Question 26

The following table shows the rate of growth of five nations and the number of years required to double its output at various growth rates. D is expected to double its output in _____ years.Table 12.1:

A)5
B)35
C)10
D)14
E)15

Question 27

The per-worker production function is _____.​

A)negatively sloped and decreases at a diminishing rate
B)negatively sloped and decreases at an increasing rate
C)positively sloped and increases at an increasing rate
D)positively sloped and increases at a diminishing rate
E)a linear, downward-sloping curve

Question 28

The prosperity of a nation today is typically measured by:

A)its total output or gross national product
B)the growth rate of real output per capita.
C)gold reserves.
D) rate of growth of employment
E)rate of growth of unemployment.

Question 29

The standard of living in a nation is measured by:

A)its inflation rate
B)the rate of growth of nominal gross domestic product.
C)its unemployment rate
D)the rate of growth of real gross domestic product per capita.
E)its employment rate.

Question 30

An increase in the stock of capital in an economy:

A)causes a movement from a point on the economy's production possibilities curve to a point inside the curve.
B)causes the economy's production possibilities curve to shift inward over time.
C)causes the economy's production possibilities curve to shift outward over time.
D)causes a downward movement from a point on the economy's production possibilities curve to another point on the curve.
E)causes an upward movement from a point on the economy's production possibilities curve to another point on the curve

Question 31

As more capital per worker is added, a per-worker production function becomes:

A)flatter because capital is subject to diminishing marginal returns
B)flatter because labor is subject to diminishing marginal returns.
C)flatter because capital is subject to increasing marginal returns.
D)steeper because capital is subject to diminishing marginal returns.
E)vertical as output per worker does not change with change in capital per worker.

Question 32

The following table shows the rate of growth of five nations and the number of years required to double its output at various growth rates. Which of the following nations is most likely to enjoy the highest growth rate?Table 12.1:

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

Question 33

The following table shows the rate of growth of five nations and the number of years required to double its output at various growth rates. Which of the following nations is most likely to experience the lowest growth rate?Table 12.1: ​

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

Question 34

The faster the rate of technological progress:

A)the higher the rate of economic growth.
B)the lower the rate of economic growth.
C)the higher the rate of population growth
D)the lower the rate of growth of money supply.
E)the higher the rate of inflation

Question 35

_____ shows roughly how long it will take a nation to double its output at various growth rates.

A)The production possibilities curve
B)The Rule of 70
C)The GDP deflator
D)A per-worker production function
E)The rules of the game

Question 36

Which one of the following will result in an inward shift of an economy's production possibilities curve?

A)An improvement in public education and public health care systems
B)An improvement in the technological base of the economy by importing better capital equipment from abroad
C)An increase in the budgets for research, development, and exploration
D)An increase in the number of qualified people leaving for better opportunities abroad
E)An increase in the stock of available capital in the economy

Question 37

A country will roughly double its gross domestic product (GDP) in five years if its annual growth rate is _____.

A)5 percent
B)7 percent
C)12 percent​
D)14 percent
E)14 percent.

Question 38

Which of the following is true of the production possibilities curve of an economy?

A)Along the curve, the economy produces at its potential output.
B)An increase in the stock of capital in the economy results in a downward movement along the curve.
C)An improvement in the productive skills of labor results in an upward movement along the curve.
D)A decrease in the availability of land due to a natural calamity results in a downward movement along the curve.
E)An increase in the quantity supplied of consumption goods shifts the production possibilities curve outward.

Question 39

_____ would most likely to result in the economic growth of a nation.

A)A decrease in the stock of physical capital
B)An increase in the productivity of labor
C)A decrease in the productivity of labor
D)A decrease in the supply of labor due to emigration
E)An increase in the rate of growth of population

Question 40

While measuring economic growth, economists typically focus on real gross domestic product (GDP) per capita in order to account for variations in:

A)the size of a population
B)labor productivity
C)the quality of goods and services
D)the rate of growth of unemployment
E)foreign exchange reserves.

Question 41

Allowing free trade can lead to greater output because of:

A)the principle of absolute advantage.
B)the Rule of 70
C)the principle of comparative advantage
D)diseconomies of scale.
E)the rule of law

Question 42

In an economy with full employment, invention and discovery:

A)are automatic
B)are achieved through sacrifices in current consumption.
C)have negative opportunity costs.
D)are achieved through lower rates of savings in the future.
E)require involvement of private firms to support basic research.

Question 43

Which of the following will lead to greater economic growth?​

A)Individuals consuming their entire current income
B)Governments investing more in national defense
C)Governments investing in U.S. infrastructure
D)Governments importing capital equipment from abroad without investing in research
E)High taxes on companies that spend a lot on capital formation

Question 44

Which of the following government policies is not likely to encourage economic growth?

A)High taxes on companies that spend a lot on capital formation
B)The use of tax revenues for investment and capital formation
C)Special subsidies for capital-intensive forms of production
D)Promotion of education and training programs for workers
E)Imports of better capital equipment from abroad

Question 45

Which of the following is most likely to result in accelerated economic growth?

A)Relaxed property rights
B)Higher rates of growth of population
C)Higher level of savings
D)Increased rates of consumption
E)Lower labor force participation rates

Question 46

Which of the following is true of the rule of law?

A)It shows the time taken by a nation to double its output.
B)It is the ability of a nation's government to protect private property rights.
C)It is the ability of nations and individuals with different production capabilities to engage in free trade
D)It shows the time taken by a nation to come up with better technologies for themselves
E)It shows the increase in the skill level of a population and raise their standard of living.

Question 47

Identify the correct statement

A)Some economists argue that higher productivity leads to greater infrastructure.
B)Some economists argue that higher investments in national defense lead to greater economic growth
C)The per-worker production function is negatively sloped.
D)Improvements in and greater stocks of capital in an economy shifts the production possibilities curve inward
E)Some economists argue that an increase in labor input always increases output per capita.

Question 48

Which of the following is an example of an intermediate good?

A)A pair of jeans sold by a clothing retailer
B)A piece of cloth sold to a suit manufacturer
C)A share of Walmart stock
D)A used Ford Mustang sold from one neighbor to another
E)A cargo ship purchased by the U.S. Navy

Question 49

According to Romer, economic growth can continue unimpeded if _____.

A)a nation continues to import capital equipment from abroad without investing in research
B)a nation continues to import cheap labor from abroad​
C)a nation continues to encourage the creation of new ideas
D)a nation continues to invest more on defense equipment
E)a nation continues to import more goods than it exports

Question 50

Higher levels of savings will result in

A)slower economic growth
B)lower capital formation.
C)more current consumption.
D)higher rates of investment.
E)less consumption in the future.

Question 51

Gross domestic product calculations include:

A)the opportunity cost of leisure
B)activities in an underground economy
C)positive externalities.
D)government purchases of goods and services.
E)nonmarket transactions

Question 52

Identify the correct statement.

A)According to the Rule of 70, the number of years necessary for a nation to double its output is approximately equal to the nation's growth rate divided by 70.
B)Economic growth is usually measured by the annual percent change in the nominal output of goods and services per capita.
C)An increase in labor input necessarily increases output per capita.
D)Neither the initial development process nor the sustained growth of an economy is dependent on a large natural resource base.
E)Improvements in and greater stocks of land, labor, capital, and entrepreneurial activity shift the production possibilities curve inward.

Question 53

Correct. The college tuition paid by John to enroll in a course will be included in GDP calculations. See 12-4: Measuring Economic Growth and Its Components​

A)Transfer payments
B)Imports
C)Intermediate goods
D)Depreciation
E)Unreported income from legal sources

Question 54

Which of the following is mostly likely to be included in gross domestic product (GDP) calculations?

A)The college tuition paid by John to enroll in a course
B)A check for $50 Jennifer received on her birthday
C)A tip of $50 Anna received that is not reported to the IRS
D)The revenue Borris received from a yard sale
E)The purchase of 100 pounds of cake flour by Mary's bakery

Question 55

Which of the following will lead to greater economic growth?

A)Individuals consuming their entire current income
B)Governments investing more in national defense
C)Governments investing in human capital and technology
D)Governments taxing new capital equipment to offset a budget deficit
E)High taxes on companies that spend a lot on capital formation

Question 56

Gross domestic product (GDP) is defined as the:

A)value of all final goods and services produced in a country during a period of time​
B)value of all final goods produced by a country's resources that are in foreign countries during a period of time.
C)value of all intermediate goods and services produced in a country during a period of time
D)value of all final goods that can be produced in a country by utilizing all resources during a period of time.
E)value of the income earned by the owners of resources in a country during a period of time

Question 57

Which of the following is included in gross domestic product (GDP)?

A)A U.S. company purchasing stock of a foreign company
B)The value of an accountant's services
C)A U.S. company purchasing stock of another U.S. company
D)The purchase of a used Ford by a U.S. citizen
E)A social security payment received by a retired teacher

Question 58

In an economy with an unstable government or judiciary, entrepreneurial activity _____.

A)is more because of higher reliance on private enterprises
B)is less because of an unreliable infrastructure for protecting property rights
C)is more because of fewer governmental restrictions
D)is less because of less taxation of commercial and research activities
E)is more because of higher incentive to invest in the economy

Question 59

If a country increases its saving rate, _____.

A)its current consumption decreases
B)its current consumption increases
C)its future interest rate increases
D)its future saving capabilities decreases
E)its future consumption decreases

Question 60

Identify the correct statement

A)Effective protection of property rights results in greater economic growth
B)Higher investments in national defense lead to greater economic growth.
C)The per-worker production function is negatively sloped
D)Improvements in and greater stocks of capital in an economy shifts the production possibilities curve inward
E)An increase in labor input necessarily increases output per capita

Question 61

The net national product (NNP) is the:

A)difference between gross domestic product and depreciation.
B)difference between gross national product and depreciation
C)sum of gross domestic product and depreciation
D)sum of gross domestic product indirect business taxes
E)difference between gross domestic product and net income of foreigners.

Question 62

The amount of income received by households before taxes is called:

A)national income
B)gross domestic product
C)personal income
D)gross national product
E)net national product

Question 63

Net exports are defined as:

A)exports plus imports.
B)exports minus imports
C)imports minus exports
D)exports plus imports minus tariffs.
E)exports divided by imports.

Question 64

Suppose the nominal gross domestic product (GDP) in an economy in 2012 was the same as it was in 2011, but the real GDP has decreased. It can, therefore, be concluded that the:

A)total production of goods and services did not change in 2012
B)economy experienced deflation during 2012​
C)price level did not change during 2012​
D)total production of goods and services declined during 2012
E)total production of goods and services increased during 2012

Question 65

Household income after taxes is called:

A)national income.
B)gross domestic product
C)disposable personal income
D)gross national product.
E)net national product

Question 66

The aggregate income in an economy comprises:

A)consumption, net exports, government purchases, and transfer payments
B)wages, rent, profit, and interest
C)salaries and profits only.
D)net exports and transfer payments only
E)the income earned worldwide by U.S. firms and residents.

Question 67

According to the expenditure method, _____.

A)GDP = C + I + G + X − M
B)GDP = C + I + G - X −M
C)GDP = C + I − G + X + M
D)GDP = C − I + G + M - X
E)GDP = C + I + G - X −M.

Question 68

Which of the following is included in the calculations of gross domestic product?

A)Mr. Kelly buys a used lawn mower from his neighbor Mr. Templeton.
B)A local ice cream store sells $17,000 worth of cones and sundaes on Fourth of July.
C)Suzanne buys a love seat and chair for $85 at the yard sale on the corner.
D)Fred sells his second tractor to his son.
E)A sheet of glass purchased by General Motors for the side window of a new car

Question 69

The difference between gross domestic product (GDP) and net income of foreigners is called _____.

A)personal income
B)national income
C)gross national product
D)net national income
E)transfer payments

Question 70

Which of the following is subtracted from gross domestic product to get national income?

A)Proprietors' income
B)Corporate profit
C)Indirect business tax
D)Personal income tax
E)Statistical discrepancy

Question 71

The nominal gross domestic product (GDP) in the United States in 2013 was $10,000 billion, but the real GDP was only $9,000. It follows that the price index in 2013 was equal to _____.​

A)111
B)100
C)90
D)80
E)70

Question 72

Which of the following is a measure of the income earned by owners of resources used in making final goods and services?

A)Personal income
B)National income
C)Net national product
D)Gross domestic product
E)Gross national product

Question 73

Real gross domestic product (GDP) in base-year dollars equals:

A)nominal GDP divided by the current price index, times 100.
B)the current price index divided by the nominal GDP, times 100
C)the current price index times the nominal GDP.
D)nominal GDP times the current price index, divided by 100.
E)nominal GDP minus the current price index.

Question 74

If nominal gross domestic product (GDP) increased from $5,000 billion in 2010 to $5,500 billion in 2011 and the GDP deflator increased from 130 to 140 over the same time period, then the real GDP in 2011 is _____.

A)$4,643 billion
B)$3,928 billion
C)$5,385 billion
D)$5,500 billion
E)$6,385 billion

Question 75

According to the circular flow of income:

A)governments sell goods and services to households
B)firms sell goods and services to domestic and foreign consumers.
C)firms provide transfer payments such as unemployment insurance payments
D)households use factors of production to produce goods and services.
E)the value of aggregate income equals the value of gross national product.

Question 76

Suppose in 2009, the United States imported $1.5 billion worth of goods and services and sold $4 billion worth of goods and services outside its borders. Therefore, in 2009 net exports were:

A)−$4.4 billion
B)$4.4 billion​
C)$2.5 billion
D)−$2.5 billion
E)$5.5 billion

Question 77

Which of the following is not a part of U.S. GDP?

A)The expenditure on U.S. defense equipment
B)The value of a Ford Mustang produced in the United States and sold in Canada
C)The salary of the governor of Minnesota
D)The value of a Rhode Island attorney's services
E)The purchase of a used Ford by a U.S. citizen

Question 78

The main difference between gross domestic product (GDP) and gross national product (GNP) is that GNP excludes:

A)net income of foreigners.
B)the consumption of fixed capital.
C)transfer payments.
D)government purchases
E)net exports of goods and services.

Question 79

If the GDP deflator increases from one year to the next, it can be concluded that the economy has experienced

A)economic growth
B)recession
C)disinflation
D)inflation​
E)deflation

Question 80

Gross domestic product (GDP) equals $5 trillion. If consumption equals $3.5 trillion, investment equals $1 trillion, and government spending equals $1.5 trillion, then:

A)exports exceed imports by $1 trillion
B)imports exceed exports by $1 trillion
C)net exports equal zero.
D)exports exceed imports by $1.5 trillion
E)imports exceed exports by $1.5 trillion