Download Practice Problems 37-40

Practice Problems 37-40
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
1. When measuring a nation's standard of living, of the following, the best measure is:
A. nominal GDP.
B. market GDP.
C. real GDP.
D. nominal GDP per capita.
E. real GDP per capita.
____
2. A country's living standard is best measured by the:
A. per capita nominal GDP.
B. real GDP.
C. nominal GDP.
D. per capita real GDP.
E. unemployment rate.
____
3. Which of the following is a chief measure of economic growth over time?
A. Inflation.
B. Increases in real per capita GDP.
C. Decline in real interest rates.
D. Increases in the available labor supply.
E. The value of the nation’s currency.
____
4. Suppose a panel of economists is predicting that a nation's real GDP per capita will have an average annual
growth rate of 2%. Based upon the Rule of 70, how many years will it take for this nation's real GDP per
capita to double?
A. 35
B. 70
C. 140
D. 20
E. 50
____
5. If real GDP doubles in 10 years, its average annual growth rate is approximately _______.
A. 1%
B. 2%
C. 3%
D. 4%
E. 7%
____
6. Assume an economy whose real GDP per capita is growing at a constant rate over a 17.5-year period doubles
in size at the end of that period. What must the growth rate of real GDP per capita be for this economy?
A. 1%
B. 2%
C. 4%
D. 15%
E. 10%
____
7. According to the rule of 70, if a country doubles its level of real GDP per capita every 20 years, that country
must be growing at a rate of:
A. 2%.
B. 3.5%.
C. 35%.
D. 70%.
E. 5%
____
8. According to the rule of 70, if a country's real GDP per capita grows at a rate of 2% instead of at a rate of 3%,
it would take _____ for that country to double its level of real GDP per capita.
A. 35 additional years
B. 11.67 additional years
C. 23.3 additional years
D. 30 additional years
E. 15 additional years.
____
9. To find the approximate number of years it takes the economy to double, one would:
A. divide its growth rate by 70.
B. divide 70 by its growth rate.
C. divide its growth rate by 100.
D. multiply its growth rate by 20.
E. multiply its growth rate by 70
____ 10. Which of the following choices would be a factor that contributes to a nation's rapid long-run economic
growth?
A. Faster technological progress.
B. Faster population growth.
C. Less physical capital per worker.
D. Lower levels of average human capital.
E. Higher tax rates on high-tech industries.
____ 11. Productivity declines when:
A. the number of hours worked exceeds the number of workers.
B. population growth exceeds real GDP growth.
C. the ratio of adult civilians employed outside the home rises.
D. real GDP growth exceeds population growth.
E. the literacy rate grows and more workers complete college.
____ 12. Productivity is equal to:
A. real GDP divided by number of workers.
B. real GDP divided by number of capital inputs.
C. number of workers per machine.
D. total output produced.
E. real GDP divided by the unemployment rate.
____ 13. According to the Rule of 70, if a country’s real GDP per capita has doubled in 20 years, the nation’s growth
rate has been approximately :
A. 3.5%
B. 6%
C. 7%
D. 1%
E. 2%
____ 14. Human capital refers to:
A. output per worker.
B. the education and knowledge embodied in the workforce.
C. society's investment in capital goods.
D. people working with capital goods.
E. management information systems.
____ 15. Economic growth will likely involve:
A. a reduction in investment.
B. a decrease in the capital stock.
C. higher saving.
D. lower saving.
E. a downward shift in the aggregate production function.
____ 16. Technological progress allows workers to produce more:
A. because it increases the amount of physical capital available.
B. because it increases the amount of human capital available.
C. even when the amount of physical capital and human capital do not change.
D. only if the amount of physical capital grows at the same rate.
E. only if the amount of human capital grows at the same rate.
____ 17. An increase in the amount of physical capital per worker _________, while technological progress ________.
A. makes the aggregate production function steeper; changes the slope of the aggregate
production function
B. makes the aggregate production function steeper; makes the aggregate production function
flatter
C. moves the economy along the aggregate production function; shifts up the aggregate
production function
D. shifts up the aggregate production function; moves the economy along the aggregate
production function
E. moves the economy along the aggregate production function; shifts down the aggregate
production function
____ 18. If technology advances, then:
A. more output can be obtained from the same inputs.
B. more inputs are needed to produce the same output.
C. less output can be obtained from the same inputs.
D. less can be obtained even with more inputs.
E. the same amount of output can be obtained from the same inputs.
____ 19. Workers today are more productive than workers in the past because:
A. workers now are physically stronger on average.
B. workers now have more physical capital embodying better technology to work with.
C. there are more workers now working with the same number of machines than in the past.
D. they are paid more.
E. workers are threatened with dismissal more often.
____ 20. Long-run economic growth has been mostly dependent on:
A. rising productivity.
B. a low unemployment rate.
C. an increase in the population which eventually leads to an increase in the labor population.
D. countries following the rule of 70.
E. free trade.
____ 21. Physical capital would include:
A. the education or knowledge a worker has in his or her physical being.
B. the tools a worker has to work with.
C. the money available for the worker to use.
D. shares of stock.
E. the natural resources a worker has to work with.
Increase in physical capital per worker
Growth rate of productivity
First 1% increase in physical capital per worker
0.55% increase in real GDP per worker
Second 1% increase in physical capital per worker 0.40% increase in real GDP per worker
Third 1% increase in physical capital per worker
0.35% increase in real GDP per worker
Table 38-1: Hypothetical Relationship between Physical Capital per Worker and the Growth Rate
of Productivity
____ 22. Use Table 38-1. The accompanying table represents a hypothetical relationship between physical capital per
worker and the growth rate of productivity. This table indicates that the economy is experiencing:
A. increasing returns to physical capital per worker.
B. decreasing total productivity.
C. constant total productivity.
D. diminishing returns to physical capital per worker.
E. constant returns to physical capital per worker.
____ 23. Which of the following contributes to economic development?
A. Low saving and investment rates.
B. A command socialist economic system.
C. Investment in infrastructure.
D. Complete absence of government involvement.
E. High rates of absenteeism at the workplace.
____ 24. All else equal, a nation that has a high rate of ____ will cause a high rate of _____ and therefore a higher
growth rate of _____ capital.
A. investment; savings; human
B. savings; investment; natural
C. savings; investment; physical
D. savings; consumption; physical
E. consumption; investment; natural
____ 25. Long-run economic growth is:
A. higher in countries when it has a weak rule of law and excessive government intervention.
B. lower in countries when it has a strong government and independent judiciary.
C. lower in countries when the courts enforce property rights and a government that protects
its citizens.
D. higher in countries when it has a strong rule of law and political stability.
E. higher in countries when it has a strong rule of law and a corrupt judiciary.
____ 26. Economies with higher growth rates tend to be those that have:
A. large amounts of natural resources.
B. a stable government that protects property rights.
C. high levels of government regulation.
D. a large defense budget.
E. high rates of illiteracy.
____ 27. Economies with higher growth rates tend to be those that increase their:
A. government regulation.
B. human capital.
C. consumption.
D. resources.
E. defense budgets.
Figure 39-1: Technological Progress and Productivity Growth
____ 28. Use the “Technological Progress and Productivity Growth” Figure 39-1. Which of the following moves
would be most likely to result over time from excessive government intervention that results in a decline in
property rights?
A. A to B
B. B to C
C. C to B
D. C to A
E. B to A
____ 29. Greenhouse gas emission is an example of:
A. a negative externality.
B. a public good.
C. a positive externality.
D. a private good.
E. a problem that cannot be solved with economic incentives.
____ 30. Economists mostly agree that the problem of climate change should involve government action in the form of
market-based incentives such as:
A. tax rebates to those helping the environment.
B. a reduction in the personal income tax for being green.
C. a carbon tax or a cap and trade system.
D. a reduction in the price of green cars and appliances.
E. a reduction in the tax on gasoline.
____ 31. Investment spending:
A. must be paid for by consumption by domestic households.
B. comes from either savings from domestic households or savings of foreign households.
C. is paid for by capital outflows.
D. must be paid for by government spending.
E. rises when consumption rises.
____ 32. Programs that provide early education to children from impoverished families are an example of government
investing in
A. human capital
B. political stability
C. natural resources
D. banking systems
E. infrastructure
____ 33. A government action that would spur economic growth would be
A. removal of childhood vaccination programs.
B. faster population growth.
C. universal access to affordable education.
D. higher taxes on income from savings.
E. a declining stock of physical capital.
____ 34. When the value of an asset falls due to age, wear, or obsolescence, it is called:
A. devaluation.
B. depreciation.
C. deflation.
D. disinflation.
E. degeneration.
____ 35. A nation’s capital stock will continue to grow if the growth rate of new
A. capital investment exceeds the rate of inflation.
B. capital investment exceeds the rate of consumer spending.
C. capital investment exceeds the rate of depreciation on existing capital.
D. consumer spending exceeds the rate of unemployment.
E. consumer spending exceeds the rate of inflation.
investment goods
f
b
c
d
a
e
consumer goods
Figure 40-1: Growth in Production Possibilities
____ 36. (Figure 40-1: Economic Growth in Production Possibilities) Which of the following movements is
considered economic growth?
A. d to f
B. a to b
C. b to c
D. f to d
E. e to c
____ 37. (Figure 40-1: Economic Growth in Production Possibilities) Economic growth is best represented by a
movement from
A. d to e
B. a to c
C. b to c
D. f to a
E. e to f
____ 38. (Figure 40-1: Economic Growth in Production Possibilities) Of the following choices, which combination
of investment and consumer goods would provide the greatest potential for future long term growth?
A. a
B. b
C. c
D. d
E. e
____ 39. The economy of Foxystan has seen an increase in real potential GDP. Foxystan must have experienced
A. economic growth and a rightward shift of LRAS.
B. economic growth and a rightward shift of SRAS.
C. a recessionary gap and a rightward shift of LRAS.
D. economic growth and a rightward shift of AD.
E. an inflationary gap and a rightward shift of SRAS.
____ 40. Which of the following choices is most likely to create a rightward shift of the LRAS curve?
A. Consumer spending
B. Contractionary monetary policy
C. Expansionary fiscal policy
D. Depreciation of physical capital
E. Research and development