Question 1

Which of the following represents the best indicator of improving living standards?
A) The growth rate of nominal GDP per capita.
B) The growth rate of nominal GDP.
C) The growth rate of real GDP per capita.
D) The growth rate of real GDP.
E) The rate of inflation.

Accepted Answer

Real GDP per capita measures the total output of a country adjusted for inflation and divided by the number of people in the country, which provides a more accurate measure of the changes in living standards over time. The growth rate of real GDP per capita represents the rate of change in an economy's output per person, which is a good indicator of improving living standards. Nominal GDP and inflation do not account for changes in the cost of living, while real GDP per capita does.

Question 2

The assumption that the aggregate production function exhibits decreasing returns to capital (K) implies that a 5% increase in K will cause:
A) no change in Y/N.
B) a decrease in Y/N.
C) a decrease in K/N.
D) Y to increase by less than 5%.
E) Y to increase by exactly 5%.

Accepted Answer

The assumption of decreasing returns to capital means that each additional unit of capital will not add as much to output as the previous unit. Therefore, a 5% increase in K will lead to a less than 5% increase in output (Y). Hence, only option D is correct – Y will increase by less than 5%.

Question 3

Suppose there are two countries that are identical with the following exception: the saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run:
A) the growth rate of output per capita will be the same in both countries.
B) output per capita will be the same in both countries.
C) the capital- labour ratio will be the same in both countries.
D) the growth rate of output per capita will be greater in A than in B.
E) the growth rate of output per capita will be greater in B than in A.

Accepted Answer

According to the Solow-Swan model of economic growth, the long-run growth rate of output per capita is determined by exogenous factors like technology growth and labor force growth, not by the saving rate. The saving rate affects the level of output per capita and the capital-labor ratio, but not the long-run growth rate.

Question 4

Research by Richard Layard indicates that happiness:
A) does not change as output per capita changes.
B) decreases as output per capita decreases.
C) appears to depend on people's relative incomes.
D) decreases as output per capita increases.
E) increases as output per capita increases.

Accepted Answer

Richard Layard's research indicates that happiness appears to depend on people's relative incomes. This means that people's perception of their own income in relation to others plays a role in their happiness, rather than just the overall level of output per capita.

Question 5

In Australia, output per capita in 2009 was almost four times that in:
A) 1950.
B) 1900.
C) 1850.
D) 1990.
E) 1970.

Accepted Answer

Output per capita in Australia in 2009 was almost four times that in 1950.

Question 6

Given the narrow interpretation of technology, technology will include which of the following?
A) The political environment.
B) The list of blueprints defining the types of products and the techniques available to produce them.
C) The organisation and sophistication of markets.
D) How well firms are run.
E) None of the above.

Accepted Answer

The narrow interpretation of technology is focused on the types of products and techniques available to produce them, which is captured by the list of blueprints defining these products and techniques. The other options, such as the political environment, markets, and how well firms are run, are not directly related to technology in this interpretation.

Question 7

The ratio of 2009 real output per capita to 1950 real output per capita was lowest in which of the following countries?
A) Japan.
B) United Kingdom.
C) United States.
D) Australia.
E) Germany.

Accepted Answer

The answer of The ratio of 2009 real output per...

Question 8

Assume that there are decreasing returns to capital, decreasing returns to labour, and constant returns to scale. Now suppose that both capital and labour increase by 10%. Given this information, we know that output (Y) will:
A) not change.
B) increase by 10%.
C) increase by more than 10%.
D) increase by less than 20% but more than 10%.
E) increase by less than 10%.

Accepted Answer

Given constant returns to scale, if all inputs (capital and labour) are increased by the same percentage (10% in this case), output (Y) will increase by that same percentage, which is 10%.

Question 9

Over the past fifty years, convergence has generally occurred for all of the following groups of countries with the exception of:
A) OECD countries.
B) the "four tigers" in Asia.
C) the five richest countries.
D) European countries.
E) sub- Saharan Africa.

Accepted Answer

While other regions and groups have seen some convergence in economic growth and development, sub-Saharan Africa has generally lagged behind and experienced persistent poverty and underdevelopment.

Question 10

Which of the following periods experienced the smallest growth of output per capita?
A) 1500 to 1700.
B) Roman empire to roughly the year 1500.
C) 1950 to 2000.
D) 1700 to 1820.
E) 1820 to 1950.

Accepted Answer

The period from the Roman empire to roughly the year 1500 is commonly referred to as the "Malthusian era," in which output per capita remained relatively stagnant due to limited technological progress and population growth often outpacing agricultural productivity.

Question 11

Which of the following must occur to sustain economic growth in the long run?
A) Faster population growth.
B) A higher saving rate.
C) Technological progress.
D) Capital accumulation.
E) Constant increases in the capital- labour ratio.

Accepted Answer

Technological progress is essential for long-term economic growth as it leads to more efficient production processes, innovation, and improvements in productivity, which are crucial for sustaining growth beyond the limits of capital and labor increases.

Question 12

Over the long sweep of human history, output per capita in the currently rich economies:
A) grew dramatically during the 20th century.
B) always grew at a positive rate.
C) has not grown much at all.
D) grew in the 1950s and 1960s at about the same rate as the previous thousand years.
E) grew dramatically during the 19th century.

Accepted Answer

The statement "grew dramatically during the 20th century" is supported by historical data and economic analysis, which show a significant increase in output per capita in the currently rich economies during this time period.

Question 13

An upward- sloping straight line on a linear scale will become a(n) on a logarithmic scale.
A) upward sloping straight line
B) horizontal line
C) upward sloping curve that gets continually steeper
D) upward sloping curve that gets continually flatter
E) downward sloping straight line

Accepted Answer

An upward-sloping straight line on a linear scale becomes an upward-sloping curve that gets continually flatter on a logarithmic scale because the logarithmic scale compresses the scale for higher values, making the rate of increase appear to slow down.

Question 14

Which of the following characterises the economic growth for OECD countries since 1950?
A) There has been a large increase in standard of living.
B) There has been a large increase in output per person.
C) There has been convergence of output per person across countries.
D) All of the above.
E) None of the above.

Accepted Answer

Since 1950, OECD countries have experienced significant economic growth, leading to a large increase in both standard of living and output per person. Additionally, there has been a convergence of output per person across countries, which has contributed to more economic equality among OECD nations. Therefore, all of the above choices are correct.

Question 15

Suppose there are two countries that are identical with the following exception: the saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run:
A) output per capita will be the same in both countries.
B) the capital- labour ratio (K/N) will be greater in A than in B.
C) the capital- labour ratio (K/N) will be the same in the two countries.
D) the capital- labour ratio (K/N) will be greater in B than in A.
E) more information is needed to answer this question.

Accepted Answer

A higher saving rate in country A means that it will have more investment and accumulation of capital over time than in country B. As a result, the capital-labor ratio (K/N) will be higher in country A than in country B, leading to higher output per capita in country A in the long run.

Question 16

"Convergence" has been occurring among the OECD countries because:
A) the richer countries have had higher growth rates than the poorer ones.
B) the richer countries give away more of their output than the poorer ones.
C) the poorer countries have had higher growth rates than the richer ones.
D) the poorer countries have had positive growth rates, while the richer ones have had negative growth rates.
E) the procedures for measuring output per capita have been changing.

Accepted Answer

Convergence occurs when poorer countries have higher growth rates than richer countries, resulting in a narrowing of the income gap between them. This has been observed among the OECD countries, indicating that the poorer member countries have been catching up with the richer ones.

Question 17

Which of the following periods experienced the highest growth of output per capita?
A) 1500 to 1700.
B) 1950 to 2000.
C) 1700 to 1820.
D) 1820 to 1950.
E) Roman empire to roughly the year 1500.

Accepted Answer

The period between 1950 to 2000 saw the highest growth of output per capita due to factors such as technological advancements, increased globalization, and improvements in education and healthcare.

Question 18

Suppose there are two countries that are identical with the following exception: the saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run:
A) economic growth will be higher in A than in B.
B) economic growth will be higher in B than in A.
C) output per capita will be the same in the two countries.
D) output per capita will be greater in B than in A.
E) output per capita will be greater in A than in B.

Accepted Answer

In the long run, a higher saving rate in country A leads to a higher level of capital accumulation, which results in a higher output per capita compared to country B.

Question 19

"Leapfrogging" refers to:
A) the interchangeability of capital and labour in the aggregate production function.
B) "one- upsmanship" by politicians who use growth statistics to help win elections.
C) the increased likelihood that a country with very high growth will have a recession, during which some other country will have the highest growth rate.
D) the tendency for a country's output per capita to catch up to, and then exceed, that of another country.
E) the typical irregular pattern of growth: rapid in some decades, and almost non- existent in others.

Accepted Answer

Leapfrogging refers to the tendency for a country's output per capita to catch up to and then exceed that of another country. This can occur when a developing country quickly adopts advanced technologies and skips over the intermediate stages of development that other countries went through to achieve similar levels of productivity. This can lead to accelerated economic growth and potentially higher living standards for the population.

Question 20

Over the last hundred years:
A) output has decreased in as many years as it has increased.
B) movements in output due to contractions and expansions are dominated by the movement caused by long- run growth.
C) Australia's output has approximately doubled.
D) All of the above.
E) None of the above.

Accepted Answer

Movements in output over the last hundred years are primarily characterized by long-run growth, despite the occurrence of contractions and expansions. This long-run growth has led to significant increases in output over time, far exceeding mere doubling as suggested in one of the options.

Quiz 10: The Facts of Growth

Which of the following represents the best indicator of improving living standards?

The assumption that the aggregate production function exhibits decreasing returns to capital (K) implies that a 5% increase in K will cause:

Suppose there are two countries that are identical with the following exception: the saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run:

Research by Richard Layard indicates that happiness:

In Australia, output per capita in 2009 was almost four times that in:

Given the narrow interpretation of technology, technology will include which of the following?

The ratio of 2009 real output per capita to 1950 real output per capita was lowest in which of the following countries?

Assume that there are decreasing returns to capital, decreasing returns to labour, and constant returns to scale. Now suppose that both capital and labour increase by 10%. Given this information, we know that output (Y) will:

Over the past fifty years, convergence has generally occurred for all of the following groups of countries with the exception of:

Which of the following periods experienced the smallest growth of output per capita?

Which of the following must occur to sustain economic growth in the long run?

Over the long sweep of human history, output per capita in the currently rich economies:

An upward- sloping straight line on a linear scale will become a(n) on a logarithmic scale.

Which of the following characterises the economic growth for OECD countries since 1950?

Suppose there are two countries that are identical with the following exception: the saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run:

"Convergence" has been occurring among the OECD countries because:

Which of the following periods experienced the highest growth of output per capita?

Suppose there are two countries that are identical with the following exception: the saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run:

"Leapfrogging" refers to:

Over the last hundred years: