Econ Exam #1 HW, BCT, EOC, PCT d

Suppose a new colony is created on the moon with the following production function: 𝑂𝑢𝑡𝑝𝑢𝑡=𝐴×(𝐿+𝐾+𝐻+𝑁)Output=A×(L+K+H+N) where 𝐿=𝐾=𝐻=𝑁=5L=K=H=N=5 and 𝐴=3A=3 This colony can produce _________ units of output.

60

Foreign investment in a developing economy can result in increased economic growth. (select all that apply) a. a higher income level. b. more job opportunities. c. the eradication of poverty. d. increased economic growth

a, b, d

Why is a stable financial system important to economic growth? (select all that apply) a. It prevents wild fluctuations in the value of the currency. b. It facilitates smooth business activities. c. It redistributes income from creditors to debtors. d. It permits credit institutions to arise.

a, b, d

How can a government encourage more savings and investment? (select all that apply) a. Offset tax liabilities with investment tax credits b. Focus taxation more heavily on consumption c. Subsidize contributions to pension funds d. Stringently regulate business activity

a, b, c

Investing in human capital is good for both individuals and the economy as a whole because it (Select all that apply): a. increases the prices of goods, which makes businesses more profitable. b. raises living standards. c. enables more workers to use and create better production technologies. d. results in positive externalities in the form of increased productivity.

b, c, d

Per capita income (or output) is the general measure used to compare the standards of living between countries. An increase in real income (or output) tends to correspond to a higher standard of living. However, real income (or output) can increase while real per capita income (or output) decreases, reducing a country's standard of living. How might this be possible? Real income (or output) could increase while real per capita income (or output) decreases if a counry's population growth rate is ________than its growth rate in real income (or output). a. higher than b. lower than c. equal to

A. Higher than

Look at By the Numbers at the begining of this chapter. Compare how many years it took for real GDP per capita in the United States to double from $5,000 to $10,000 with how many years it took for it to double from $25,000 to $50,000. a. It took ________(fewer, More) years for the economy to double from $25,000 to $50,000 than it did from $5,000 to $10,000. b. Therefore, economic growth during the later period must have been __________ (Slower, Faster) than during the earlier period.

A; Fewer B. Faster

The European Union faced many challenges in recent years, especially with disparities in economic growth among member countries, even leading citizens of the United Kingdom to vote whether they wished to remain in the union. In 2015, average real GDP growth in the European Union was 1.5%, while the top three fastest growing members, the United Kingdom, Ireland, and Poland, achieved average growth of 3.3%. Is the effect of a 3.3% growth rate much different from that of 1.5%?a. Yes. However, it will take the same amount of time for GDP growing at 1.5% and 3.3% to double over time. b. No. Because the difference between 1.5% and 3.3% is small, the difference between their effects on GDP and economic growth will also be small. c. Yes. As shown by the rule of 70, a small difference between growth rates has larrge implications for growth of GDP over time. d. No. Growth rates of 1.5% and 3.3% will converge over time.

C

Look at By the Numbers at the begining of this chapter. Compare the life expectancies for the countries whose GDP per capita was less than $10,000 in 2015 with those with GDP per capita greater than $35,000. What is the relaionship between GDP per capita and life expectancy? Countries with GDP per capita __________-(Greater, less) than $10,000 had life expectancies ranging from 49 to 68, whereas countries with GDP per capita ______(Greater, less) than $35,000 all had life expectancies greater than 79 years. Therefore, there is a _______(positive, negative) relationship between GDP per capita and life expectancy.

Less, greater, positive

2. Assume two countries have the same real gross domestic product.A small but lasting difference in the economic growth rates of these two countries will lead to big differences in their real gross domestic product over time. This is due to a. differences in the methods used to estimate economic growth. b. the power of linear growth. c. the power of compounding. d. differences in birth rates among countries.

The power of compounding

A government can promote economic growth by (Select all that apply): a. creating tax incentives and other subisidies to encourage investment in physical capital. b. omitting to enforce intellectual property rights to promote competition. c. adequately funding public and private research centers. d. providing grants, loans, and tax incentives to students and teachers.

a, c, d

In 2016 U.S. GDP was approximately $18 trillion, while India's GDP was approximately $2.25 trillion. However, India is growing faster than the United States. Answer the following questions by using the Rule of 70 to approximate the number of years needed for GDP to double. a. If the U.S. economy grows at 3% per year, in what year will U.S. GDP double to $36 trillion? b. If India's economy grows at 7% per year, in what year will its GDP double to $4.5 trillion? a. The year that U.S. GDP will double is: b. The year that India GDP will double is:

a. 2040 b. 2026

Energy independence has been a goal for many decades. But only in the past several years has the increased focus on renewable energy sources, such as solar, wind, and water, taken on greater significance. How might energy independence contribute to economic growth? Energy independence would enhance economic growth a. by pushing down interest rates, stimulating investment. b. through a combination of increased job growth and greater labor productivity. c. through lower oil prices, shifting the aggregate supply curve to the right. d. by decreasing imports, thereby pushing up GDP by an equivalent amount.

b

Finland consistently ranks very high in global rankings of educational achievement in science and math. This was a result of its focus on small class sizes and highly trained teachers for primary and secondary education in addition to teaching being considered a highly prestigious profession. At the college level, many countries fully subsidize college tuition, and in Saudi Arabia, the King Abdullah Scholarship Program offers to send its citizens to study at many prestigious universities around the world for free. Which statement is true? a. Government-provided education is a public good that gives citizens professional training and intellectual enrichment.. However, it cannot pay for itself, even in the long run. b. Education enables human capital formation, which improves productivity, increasing economic growth, and ultimately raising tax revenues. Thus, government investment in education can pay for itself in the long run.

b