macro econ Chapter 8 quizzes 1-3

Refer to Figure 22.1. PF1 and PF2 have a diminishing slope due to:

diminishing marginal returns from capital.

Economic growth is:

an outward shift of the production possibilities curve.

Labor cost on an average accounts for about _____% of the total cost of production.

70&

2006 2007 Population800,000824,000Number of Hours Worked1,250,000,0001,250,000,000Real GDP$10,000,000,000$10,094,000,000Real GDP per Person

$12,500.00 $12,250.00 Labor Productivity $8.00 $8.08

Homework

Ch 8

What is the best measure of labor productivity in this economy?

Fish caught per hour spent fishing

Which of the following is true of the rules of the game?

Political instability and terrorist attacks can reduce the productivity of capital and labor and result in lower productivity and growth.

The following graph shows the production possibilities frontier of an economy that produces cars and computers. Suppose that an improvement in technology enables manufacturing plants in this economy to produce more output with the same amount of labor. Adjust the production possibilities frontier (PPF) to show the economy's new production possibilities after the improvement in technology. Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther. Suppose society faces a broad tradeoff between allocating resources to the production of investment goods (computers) and consumption goods (cars) before the rise in the savings rate described above. Which of the following events would be most likely to lead to the rise in the savings rate you just illustrated?

Shifts to the right Increasing production of investment goods and decreasing production of consumption goods

_____ can cause unemployment and create dislocations, as displaced workers try to find jobs elsewhere, and at the same time make existing products more affordable.

Technological changes

Identify a factor that influences the shape of the production possibilities frontier in the future.

The amount of capital produced.

Which of the following is true of human capital?

The amount of human capital is directly related to labor productivity.

Which of the following is true of technological change?

Workers displaced due to technological change usually find jobs producing other goods and services demanded in a growing economy.

Refer to Figure 22.1. PF1 is the initial per-worker production function for a farm. Suppose the number of tractors per worker increases. This would be reflected by:

a movement from point C to point D

Economists have long recognized that firms in some industries gain a performance advantage by:

clustering.

Real gross domestic product per capita declines:

during periods of recession

The rules of the game are the formal and informal institutional elements that:

encourage people to undertake productive activity.

The law of diminishing marginal returns from capital states that a(n) _____ beyond some level will result in diminishing returns of output per worker.

increase in capital per worker

As an economy accumulates more capital per worker, labor productivity:

increases and the standard of living grows.

The law of diminishing marginal returns per worker states that beyond some point, _____.

increases in capital per worker add less to output per worker

If a country spends a major part of its budget on the development of new schools, colleges, and other training institutions, we can say that the country is:

investing in human capital.

U.S. industrial policy:

is often criticized as being too focused on only the military sector.

An important source of productivity in human capital is the:

skill, experience, and education of workers.

Critics of industrial policy believe that

it could evolve into a government giveaway program.

The productivity gains from the computer revolution appear to be small, possibly because:

it is difficult to measure productivity in service sectors

Clustering

leads to new firms locating in regions already thick with other firms in similar industries.

The production possibilities frontier of an economy assumes the _____ in a given year.

level of technology available in the economy to be variable

Developing countries have a low living standard because of:

low human and physical capital per worker.

The U.S. labor productivity growth was:

lowest from 1973 to 1982 because of fluctuations in oil prices that contributed to stagflation and three recessions.

The _____ is the best measure of productivity because it is easy to quantify.

number of laborers used in production

Simon Kuznets argues that changes in the quantities of labor and capital account for:

one-tenth of the increase in economic growth.

If employment grows faster than the population as a whole, then:

output per capita can increase faster than productivity per worker.

Average annual growth in U.S. labor productivity _____ during the decade of World War II.

peaked at 4%

Industrial policy is the idea that governments using taxes, _____, regulations, and coordination of the private sectors provide domestic industries a competitive advantage over foreign competitors.

subsidies

An economy's standard of living grows over the long run because of:

technological improvements.

The standard of living tends to rise in proportion to:

the growth rate in labor productivity

An economy's output per capita will grow if:

the number of workers grows faster than the population.

An important determinant of a nation's standard of living in the long run is:

the productivity of its resources.

The prime objective of an industrial policy for any country is:

to secure a leading global role for selected domestic industries.

Labor productivity is _____ divided by _____.

total output; the units of labor employed

Basic research:

yields a higher return to society as a whole than applied research.

Which of the following is true of R&D spending in the United States?

Manufacturers in the United States undertake more R&D spending than other businesses.

The curve that shows the production possibilities for capital and consumer goods is bowed out because:

resources are not perfectly adaptable to the production of both goods.

8.

2

Which of the following is an example of a cluster in economics?

A group of theme parks in Orlando.

In which of the following ways can technological change possibly increase unemployment in a country?

By reducing the labor needed to produce a given amount of output.

Suppose the horizontal axis of a production possibilities frontier (PPF) shows capital goods and the vertical axis shows consumer goods. A point inside the PPF represents:

an inefficient output combination of the two goods in the economy.

Refer to Figure 22.1. Suppose PF1 is the initial per-worker production function. A technological breakthrough in the design of tractors would be reflected by:

an upward shift from PF1 to PF2.

The growth rate of the population between 2006 and 2007 is

3%

Calculate real GDP per person in 2006 and 2007 and enter the values in the previous table. The growth rate of real GDP per person between 2006 and 2007 is

-2% .

Suppose you were in charge of establishing economic policy for a small island country whose only industry is fishing. When people aren't fishing, they're enjoying leisure time with their families. Which of the following policies would lead to greater economic growth? Check all that apply.

1 Offering free public education to increase the human capital of the country 2 Subsidizing research and development into new fishing technologies 3 Lowering the income tax, assuming that it encourages people to work longer hours

Calculate labor productivity in 2006 and 2007, and enter the values in the previous table. (Note: Enter your answer to the nearest penny.) Hint: Labor productivity is equal to real GDP divided by the number of hours worked, so the unit of measurement is dollars per hour. Based on your calculations, the growth rate of labor productivity between 2006 and 2007 is

1% .

Productivity, or output per unit of labor input, is determined by four primary factors:

1.Human capital per worker 2.Natural resources per worker 3.Physical capital per worker 4.Technological knowledge

Since the 1870s, the decade with the slowest average annual percent growth rate in labor productivity was the _____.

1930s

8.

3

Suppose you're in charge of establishing economic policy for this small island country. Which of the following policies would lead to increased productivity in the fishing industry? Check all that apply. 1.- Imposing restrictions on foreign ownership of domestic capital 2.- Imposing a tax on fishing poles 3.- Offering free public education to every worker in the country 4.- Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement accounts

3 and 4

Which of the following would be consistent with a decline in labor productivity?

A decrease in the production of manufactured goods.

Which of the following is most likely to cause a faster rate of future economic growth?

An increase in the production of capital goods and a reduction in the production of consumer goods.

___ seeks to answer particular questions or to apply scientific discoveries to new product development.

Applied research

Identify a statement that is true of an industrial policy.

Individual states engage in their own industrial policy, which can involve states competing with one another by offering special inducements to attract industry and jobs.

____expand the production possibilities frontier and promote economic growth

Improved patent laws

Complete the table by calculating physical capital per worker as well as labor productivity. Hint: Recall that productivity is defined as the amount of goods and services a worker can produce per hour. In this problem, measure productivity as the quantity of goods per hour of labor.

Physical Capital per Worker 2 3 Labor Productivity 6 9

Which of the following statements is true?

The unemployment rate in the United States in the late 1990s was lower than that in the 1970s.

Which of the following countries has the highest output per capita?

U.S.A

Surgeons earn more than janitors as a result of higher qualifications. This implies that:

accumulation of human capital improves productivity.

The per-worker production function curve slopes upward from left to right:

because capital deepening helps each worker to produce more output.

An advantage of clustering is that new entrants can

benefit from local knowledge about industrial trends.

Assuming that real GDP per person is a good measure of living standards, between 2006 and 2007, living standards ___ for which of the following reasons? Population growth outpaced productivity growth. Productivity growth outpaced population growth. The number of hours worked remained the same.

declined Population growth outpaced productivity growth.