Download Sample Questions_Chap 26

Exam
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1) Over a long period of time, perhaps many years, changes in real GDP come primarily from
A) leftward shifts of the AD curve.
B) rightward shifts of the AD curve.
C) upward shifts of the AE curve.
D) continuous increases in potential GDP.
E) upward shifts of the AS curve.
2) If real income grows at approximately 4 percent per year, the number of years it will take for real income to
double is approximately
A) 5.
B) 12.
C) 18.
D) 36.
E) 72.
3) If a country transfers resources from the production of consumption goods to the production of capital goods,
the result will be to
A) raise current living standards.
B) raise future consumption.
C) decrease the long-run growth rate.
D) raise current consumption.
E) lower future living standards.
4) For a given level of national income, a decrease in private consumption or government purchases will cause the
equilibrium interest rate to
A) decrease and the flow of investment to increase.
B) increase and the flow of investment to increase.
C) increase and the flow of national saving to fall.
D) decrease and the flow of investment to decrease.
E) increase and the flow of investment to decrease.
5) In the long run, an increase in the demand for investment pushes ________ the real interest rate, encourages
________ saving by households, and leads to a ________ future growth rate of potential output.
A) down; less; higher
B) up; less; lower
C) up; more; higher
D) up; more; lower
E) down; less; lower
6) The Neoclassical growth model assumes that, with a given state of technology, increases in the use of a single
factor eventually cause the
A) average product of the factor to increase.
B) material standard of living to increase.
C) marginal product of the factor to increase but at a decreasing rate.
D) marginal product of the factor to fall.
E) marginal product of the factor to increase at an increasing rate.
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7) An example of ʺembodied technical changeʺ is
A) the development of better intellectual property law.
B) education that teaches a wider portion of the labour force basic numeracy.
C) the replacement of old computer chips with new ones designed for faster processing.
D) the strengthening of social infrastructure, such as delivery of basic health-care services.
E) better methods of inventory control.
8) According to the Neoclassical growth theory, sustained rising material living standards can only be explained
by
A) growth in physical capital.
B) growth in the labour force.
C) balanced growth of labour and capital.
D) technological change.
E) growth in human capital.
9) An aggregate production function exhibits constant returns to scale when a one percent increase in labour
input
A) produces a one percent increase in output.
B) induces a one percent increase in capital input.
C) along with a one percent decrease in capital produces the same amount of output.
D) along with a one percent increase in capital produces the same amount of output.
E) along with a one percent increase in capital produces one percent more output.
10) With respect to long-run economic growth, one rationale for the idea that there may be increasing marginal
returns to investment is that
A) initial investment shifts the the aggregate demand schedule to the left, making further investment less
costly.
B) as further investment takes place the economy moves upward to the left along the marginal product
schedule.
C) initial investment shifts the the investment demand schedule to the left, making further investment less
costly.
D) as further investment takes place the economy moves down to the right along the marginal product
schedule.
E) the investment costs to ʺfollowersʺ are lower than those for ʺpioneersʺ.
11) If government policies are to be successful in enhancing a countryʹs long -run growth rate, they likely work
through generating
A) lower levels of current consumption.
B) greater private investment in physical capital.
C) an increase in current consumption and a reduction in saving.
D) an upward shift in the AS curve.
E) both A and B are correct.
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Answer Key
Testname: SAMPLE QUESTIONS_CHAP 26
1) D
ID: econ12 26-1
Diff: 1
Topic: 26.1a. the nature of economic growth
2) C
ID: econ12 26-10
Diff: 2
Topic: 26.1a. the nature of economic growth
3) B
ID: econ12 26-20
Diff: 2
Topic: 26.1b. benefits and costs of economic growth
4) A
ID: econ12 26-40
Diff: 3
Topic: 26.2a. investment, saving and growth
5) C
ID: econ12 26-50
Diff: 2
Topic: 26.2a. investment, saving and growth
6) D
ID: econ12 26-60
Diff: 2
Topic: 26.2b. Neoclassical growth theory
7) C
ID: econ12 26-85
Diff: 3
Topic: 26.2c. embodied technical change and TFP
8) D
ID: econ12 26-80
Diff: 2
Topic: 26.2b. Neoclassical growth theory
9) E
ID: econ12 26-90
Diff: 2
Topic: 26.2d. the aggregate production function
10) E
ID: econ12 26-100
Diff: 2
Topic: 26.3. new growth theories
11) E
ID: econ12 26-30
Diff: 2
Topic: 26.2a. investment, saving and growth
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