Chapter 11

If the slope of the per-worker production function is 1/2 in a given range, how will a $10,000 increase in capital per hour worked affect real GDP per hour worked in the same given range?

Real GDP per hour worked will increase by $5,000

In 1973, the Club of Rome published a book titled The Limits to Growth, which predicted that economic growth would likely end in high-income countries because of...

increasing pollution and the depletion of natural resources

An economy can improve its standard of living by?

increasing the amount of capital available per hour worked

The "new economy" that emerged in the mid-1990s is based on...

information technology

If the per-worker production function shifts down,

it now takes more capital per hour worked to get the same amount of real GDP per hour worked

According to new growth theory,

knowledge capital is subject to increasing returns

You are an economic advisor to the president. You are asked to recommend a policy to promote long-term economic growth in the economy. Which of the following policies would you choose?

an investment tax credit

Knowledge capital is nonrival in the sense that...

two people can use the same knowledge to develop and produce a product

Growth in the United States from 1800 to 1900 can be characterized as?

positive and increasing

Diminishing marginal returns is illustrated in the per-worker production function in the figure above by a movement from...

A to C

If real GDP per capita in the United States is $8,000 in 2011, and if real GDP per capita is $12,000 in 2021, what is the average annual percent change in the growth rate of GDP per capita between 2011 and 2021?

5%

If real GDP per capita in the United States is $8,000 in 2011, and if real GDP per capita is $12,000 in 2021, what is the total percent change in the growth rate of GDP per capita between 2011 and 2021?

50%

Paul Romer, an economist at Stanford University, is most closely associated with what economic theory?

new growth theory

The period of time from 1,000,000 B.C. to 1300 A.D. was a period of...

no sustained economic growth

Based on the per-worker production function above, if the economy raises capital per hour worked from $35,000 to $40,000, by how much will real GDP per hour worked increase?

$150

If real GDP per capita in Ireland is estimated to be $7,400 in 2012, what will real GDP per capita be in 2017 if real GDP per capita grows at an annual rate of 2.8%?

$8,496

f real GDP per capita in the United States is $8,000, what will real GDP per capita in the United States be after 5 years if real GDP per capita grows at an annual rate of 3.2%?

$9,365

In a small European country, it is estimated that a $10,000 increase in capital per hour worked will increase real GDP per hour worked by $300. Based on this information, what is the slope of the per-worker production function in this range?

0.03

In a small European country, it is estimated that changing the level of capital from $8 million to $10 million will increase real GDP from $2 million to $3 million. What level of GDP would you expect the economy to be able to reach if spending on capital continued to rise to $12 million, assuming no technological change and no change in the hours of work?

GDP would increase further, but by less than $1 million

Which of the following is true regarding the productivity slowdown in the United States during the mid-1970s?

High oil prices raised the costs of doing business for markets worldwide, and reduced output worldwide as well

The productivity slowdown of the mid-1970s can be explained by which of the following?

a decline in labor quality

Significant economic growth did not begin in the world until...

1750 A.D.

Growth in real GDP per hour worked in the United States was slowest during what period of time?

1973-1994

In the United States, the annual growth rate of real GDP per hour worked between 1995 and 2010 averaged...

2.1%

A patent grants an inventor exclusive rights to a product for how long?

20 years

Within a country, the impact of wars and revolutions and their subsequent destruction of capital is reflected in the per-worker production function in the figure above by a movement from...

C to A

The Soviet Union's economy grew rapidly in terms of GDP per hour worked in the 1950s, but eventually this growth slowed. Why did this occur?

Capital per hour worked grew rapidly from 1950 to 1980, but technological change occurred very slowly

Which of the following government provisions would help increase the accumulation of knowledge capital?

All of the above are correct (copyrights, education subsidies, patents)

Many countries in Africa strongly discouraged and prohibited foreign direct investment in the 1950s and 1960s. By doing so, these countries were essentially preventing a moment from...

B to C

Suppose the per-worker production function in the figure above represents the production function for the U.S. economy. If the United States decided to double its support of university research, this would cause a movement from...

B to C

Technological change is illustrated in the per-worker production function in the figure above by a movement from...

B to C

Using the per-worker production function in the figure above, the largest changes in an economy's standard of living would be achieved by a movement from...

B to C to D

In the early 1900s, Henry Ford revolutionized the automotive manufacturing industry by instituting the assembly line. What impact did the assembly line method for producing automobiles have on the per-worker production function for Ford?

It shifted up

If real GDP in the United States is growing at an annual rate of 3.2% per capita and Bolivia's real GDP per capita is growing at a rate of 1.3%, which of the following would we expect in the long run? Assume real GDP per capita in the United States begins at a level above that of real GDP per capita in Bolivia.

The difference between the level of real GDP per capita in the United States and real GDP per capita in Bolivia will increase over time

Why do some economists point to a decline in the quality of labor as an explanation for the productivity slowdown in themid-1970s?

The skill level required to perform many jobs increased during this period of time, although the skills of the labor force did not increase as quickly

In a small European country, it is estimated that changing the level of capital from $8 million to $10 million will increase real GDP from $2 million to $3 million. If the number of hours worked in the labor force does not change, what does this information tell you about the slope of the per-worker production function in this range?

The slope is 1/2

Which of the following government policies would most likely result in an increase in economic growth?

a decrease in the interest rate at which the government provides student loans

Which of the following policies would not help promote economic growth?

a law requiring that the funds in an individual retirement account be taxed

According to Joseph Schumpeter, economic growth is achieved through...

a process termed "creative destruction."

Which of the following is not one of the three sources of technological change?

additional amounts of existing capital

Which of the following advances contributed to the "new economy" of the mid-1990s?

all of the above (expanded cell phone use, the lower cost and increased availability of laptop computers, the increased use of the Internet in selling products and services)

Why do some firms choose not to file for a patent and instead try to keep the results of their research a trade secret?

because firms must disclose information about the product or process being patented in a patent application

The rapid growth of the Chinese economy should...

benefit U.S. consumers as they have access to less expensive consumer goods

Knowledge capital is

both B and C (rival & nonrival)

Suppose that an increase in capital per hour worked from $15,000 to $20,000 increases real GDP per hour worked by $500. If capital per hour worked increases further to $25,000, by how much would you expect real GDP per hour worked to increase if there are diminishing returns?

by less than $500

Robert Lucas, a Nobel laureate in economics, argues that there are ________ returns to human capital?

increasing

An economic growth model explains...

changes in real GDP per capita in the long run

Which of the following explains the ability of the U.S. economy to avoid diminishing marginal returns and experience accelerating growth in the early to mid-20th century?

continuing technological change

Between 1960 and 2010, deaths among children have...

declined in nearly all countries, including most low-income countries

One potential problem with the Chinese government's increases in spending on capital goods is that these increases have been achieved through...

decreases in private consumption

When additions of input to a fixed quantity of another input lead to progressively smaller increases in output, we say we are facing...

diminishing returns

Suppose that in 2011 real GDP grew in Estonia by 3% and that the population increased by 5%. Therefore in 2011, Estonia experienced...

economic growth, but not an increase in living standards

Technological improvements are more likely to occur if...

entrepreneurs are compensated with higher profits for taking risks

Creative destruction means that...

firms develop new products that replace old products in the economy, thereby encouraging economic growth

China's economy is fueled primarily by...

fixed asset investment, such as investing in buildings and roads

The term "brain drain" refers to...

highly educated individuals who leave developing countries for high-income countries

All of the following policies are ways for a country to promote long-run economic growth except...

imposing stricter regulations to limit foreign direct investment

Increasing the growth rate of GDP per capita and sustaining this growth rate in an economy can...

increase standards of living

A policy that offers parents a tax reduction based on how much they are saving for their children's college education should ________ the equilibrium level of loanable funds and ________ the rate of long-term growth?

increase; increase

Enforcing property rights in an economy will...

raise the level of investment

Disease, poor nutrition, and substandard health care in developing nations can reduce growth in an economy by?

reducing human capital

Some economists argue that the apparent slowdown in economic growth in the United States during the mid-1970s may not really have reduced the standard of living because...

significant improvements in the quality of services occurred, although the quantity of these services did not increase much during this time

According to new growth theory,

technological change is influenced by economic incentives

Under the Soviet system of communism...

technological progress was slow because managers had little incentive to develop new technologies

According to Douglass North, the Industrial Revolution occurred in England because...

the British Parliament took control of the government and could credibly commit to upholding property rights

All of the following are reasons why China is unlikely to maintain high enough rates of productivity growth to catch-up with the standard of living in the United States except...

the Chinese migration of rural workers to more productive urban jobs

China's economy has grown tremendously from 1979 to the present. The reason the article gives for this growth is...

the introduction of market-oriented reforms in 1978

Which of the following would you expect to result in faster economic growth?

the invention of new computers that increase labor productivity

Some factors currently exist that inhibit the growth rate of the Chinese economy. The main reason given is?

the lack of laws that predictably enforce property rights

Assuming no technological change, if the United States increases capital per hour worked by $40,000 every year between 2010 and 2014, we would expect to see...

the per-worker production function will get flatter over time

When an economy faces diminishing returns,

the slope of the per-worker production function becomes flatter as capital per hour worked increases

Growth in real GDP per capita for the world economy was greatest during...

the twentieth century

Because of diminishing returns, an economy can continue to increase real GDP per hour worked only if...

there is technological change

Firms free ride on the research and development of other firms when they...

use knowledge other firms have developed without paying for that knowledge