macro hw 12

A necessary condition for successful economic development is democracy. A. True B. False

false

According to the rule of 72, a 12% annual increase in real GDP would lead to a doubling of real GDP in 8 years. A. True B. False

false

For economic growth to take place, we must consume more and save less. A. True B. False

false

If real GDP grows at 3% and population grows at 1.2%, then real GDP per capita grows by 4.2%. A. True B. False

false

Population growth is always a source of economic growth, regardless of other circumstances. A. True B. False

false

Economic growth is best measured by the increase in A.nominal GDP. B.potential output. C.disposable personal income in current dollars. D.disposable personal income in real dollars.

potential output.

What is the opportunity cost of allocating more and more resources to the production of capital goods? A.a decrease in real income B.the amount of consumption goods that could have been produced C.the increase in pollution D.the environmental goods foregone

the amount of consumption goods that could have been produced

Which of the following is prerequisite of successful market economies? A.the existence and enforcement of property rights B.a tax system that redistributes income from the rich to the poor C.the ability of the government to appropriate economic profits beyond a certain amount to ensure equality in income distribution D.a military presence to ensure political freedom

the existence and enforcement of property rights

The theory of economic growth focuses on the A.growth of real income equality in the long run; not on the growth of real income in the short run. B.growth of resources in the long run, not on the efficiency of resource use in the short run. C.growth of potential output over the long run, not on fluctuations in the level of economic activity in the short run. D.advancements in technology over the long run, not on short-run increases in real GDP.

growth of potential output over the long run, not on fluctuations in the level of economic activity in the short run.

Over the past century, the average household income in the United States A.has increased in nominal terms but has decreased in real terms. B.has increased in nominal terms but has remained constant in real terms. C.has increased in real terms. D.has increased only marginally both in real and nominal terms.

has increased in real terms.

A change in the supply of labor will shift the long-run aggregate supply curve. A. True B. False

true

Increases in human capital will promote economic growth. A. True B. False

true

If the rate of growth of output is 10% and the rate of growth of per capita real GDP is 6%, what is the rate of growth of population? A.2 B.4 C.6 D.8

4

Which of the following occurs in the long run neoclassical growth model without technological change? A.Capital deepening ceases. B.Real wages stop growing. C.The return to capital is constant. D.Real interest rates are constant. E.All of the above.

All of the above.

Which of the following statements concerning saving is true? A.A country's saving rate is unrelated to its growth rate. B.A country's growth rate is unrelated to its national income. C.An increase in the rate of saving will lead to a reduction in consumption in the short run and in the long run. D.An increase in the rate of saving decreases gross domestic income by reducing current consumption but increases current and future gross domestic income through investment in capital goods.

An increase in the rate of saving decreases gross domestic income by reducing current consumption but increases current and future gross domestic income through investment in capital goods.

What is the difference between economic growth and economic development? A.Economic growth examines qualitative changes in the processes by which potential output increases over time, whereas economic development examines how a country moves from one point on its production possibility curve to another point on the curve. B.Economic growth implies qualitative changes in productive processes whereas economic development requires quantitative change in virtually every aspect of life. C.Economic growth implies quantitative changes in productive processes whereas economic development requires widespread structural changes in the way people live. D.There is no difference between the two terms.

Economic growth implies quantitative changes in productive processes whereas economic development requires widespread structural changes in the way people live.

Which of the following is a flaw in Malthus' population theory? A.His belief that growth in real GDP cannot exceed population growth real GDP despite technological advancements. B.His belief that any increase in income would boost population growth failed to take into account the fact that higher incomes increase this opportunity cost and therefore reduces the number of children people want. C.Rising incomes makes it more affordable for families to have more children and to educate their children so that they become productive members of society. D.He failed to take into account that over time, as countries develop, the agricultural shrinks, reducing the need for people to have large families to help out in the family farm.

His belief that any increase in income would boost population growth failed to take into account the fact that higher incomes increase this opportunity cost and therefore reduces the number of children people want.

In the long run, economic growth will lead to the opportunity to produce more consumer goods. the opportunity to produce more capital goods. a higher material standard of living. a more equitable distribution of income. A.III and IV only B.I, II, and III only C.I, III, and IV only D.I, II, III, and IV

I, II, and III only

Which of the following is most important in increasing the rate of economic growth? A.A highly progressive tax structure. B.High interest rates on time deposits. C.Increasing the percentage of GDP used for investment. D.A constant supply of funds available to investors. E.Reducing inequality of income and wealth.

Increasing the percentage of GDP used for investment.

Economic growth is an exponential process. What does this mean? A.It means that the returns to huge capital investments made today will diminish at an increasing rate over time. B.It means that small differences in sustained growth rates have significant effects on a nation's real income over long periods of time. C.It means that countries must allocate increasing amounts of resources to capital goods to see constant increases in the growth rate of potential output. D.It means that if a country allocates a fixed amount of resources to capital goods, its potential output will increase at an increasing rate over long periods of time.

It means that small differences in sustained growth rates have significant effects on a nation's real income over long periods of time.

Suppose real GDPs in Hauck and Meran are identical at $10 trillion in 2000. Suppose Hauck's economic growth rate is 2% and Meran's is 4% and the rates remain constant over time. Calculate the percentage difference in their levels of potential output in 2036. A.There will be no difference in their levels of potential output. B.Meran's potential output will be 50% higher than that of Hauck's. C.Hauck's potential output will be 100% higher than that of Meran's. D.Meran's potential output will be 100% higher than that of Hauck's.

Meran's potential output will be 100% higher than that of Hauck's.

What is the fundamental argument in Malthus' An Essay on the Principle of Population? A.Ultimately, population growth rate would outpace growth in real GDP leading to declining standards of living. B.Population growth tends to undermine global stability which is a stimulus for future wars and conflicts. C.Population would increase at a geometric rate and the food supply at an arithmetic rate and that this disharmony would lead to forced return to subsistence-level conditions. D.Population growth is the root cause of hunger, poverty, environmental destruction, disease, and social unrest.

Population would increase at a geometric rate and the food supply at an arithmetic rate and that this disharmony would lead to forced return to subsistence-level conditions.

A country's rate of real GDP growth is 3% per year. Its population is growing 4% per year. At what rate is its real GDP per capita changing? A.Real GDP per capita is increasing by 0.75%. B.Real GDP per capita is increasing by 7%. C.Real GDP per capita is decreasing by 1.33%. D.Real GDP per capita is decreasing by 1%.

Real GDP per capita is decreasing by 1%.

During the industrial revolution, the United States saw increases in the demand for labor and increases in the supply of labor. The increase in real wages rose during this period is consistent with which of the following statements? A.The rightward shift in the labor demand curve was greater than the rightward shift of the labor supply curve. B.The rightward shift in the labor supply curve was greater than the rightward shift of the labor demand curve. C.The rightward shift in the labor demand curve was greater than the leftward shift of the labor supply curve. D.The leftward shift in the labor supply curve was greater than the rightward shift of the labor demand curve.

The rightward shift in the labor demand curve was greater than the rightward shift of the labor supply curve.

In 1798, An Essay on the Principle of Population was written by A.Adam Smith. B.Thomas Malthus. C.Karl Marx. D.David Ricardo.

Thomas Malthus

Economic growth occurs when A.nominal GDP increases. B.GDP per capita in the short run increases. C.a nation's capacity to produce increases. D.there is a movement along the production possibility curve resulting in increased personal consumption expenditures.

a nation's capacity to produce increases.

When calculating the factors which have led to economic growth over the last century, technological change is calculated as: A.the rate of change of the capital-output ratio. B.the increased productivity of capital. C.a residual, inferred as the leftover growth after accounting for the contributions of other factors. D.the ratio of the marginal products of capital and labor. E.the rate of growth of the output to land ratio.

a residual, inferred as the leftover growth after accounting for the contributions of other factors.

All of the following contributes to economic development except A.high saving and investment rates. B.low population growth rate. C.the existence of a market economy. D.abundant exportable natural resources.

abundant exportable natural resources.

Which of the following factors contribute to economic growth? A.growth in physical capital B.an increase in the availability of natural resources C.an increase in the productivity of labor D.all of the above

all of the above

A curve that relates an economy's total output to the total amount of labor employed, holding all other determinants of output constant, is called A.an input-output matrix. B.an average output function. C.a marginal product function. D.an aggregate production function.

an aggregate production function.

All of the following are sources of economic growth except A.increases in human capital. B.an increase in the savings rate. C.an increase in consumption spending to stimulate production. D.increases in physical capital.

an increase in consumption spending to stimulate production.

Economic growth can be achieved through A.a decrease in the supply of labor. B.a decrease in the labor force participation rate.. C.an increase in the production of capital goods. D.a reduction in expenditures on research and development.

an increase in the production of capital goods.

All else constant, if a nation's potential output doubles in 36 years, its average annual growth rate is A.approximately 1% B.approximately 2% C.approximately 3% D.approximately 4%

approximately 2%

The skills, training, and education possessed by workers contribute to economic growth A.by increasing saving. B.by increasing the quality of labor. C.by increasing the quantity of labor. D.by increasing real wages.

by increasing the quality of labor.

Diminishing marginal returns occurs when A.each additional unit of a variable factor adds less to total output than the previous unit, given constant quantities of other factors. B.each additional unit of a variable factor adds more to total output than the previous unit, given constant quantities of other factors. C.each additional unit of a variable factor diminishes total output, given constant quantities of other factors. D.each additional unit of a variable factor adds a constant amount to total output than the previous unit, given diminishing quantities of other factors.

each additional unit of a variable factor adds less to total output than the previous unit, given constant quantities of other factors.

Which of the following is an example of an investment in human capital? A.enrolling in a course to improve your computer skills B.purchasing a computer to increase the productivity of your workers C.installing a new piece of software on your computer which enables you to read documents online D.accepting a job in the computer industry

enrolling in a course to improve your computer skills

The determinants of economic growth include all of the following except A.technological improvement. B.growth in physical capital. C.growth in human capital. D.growth in money supply.

growth in money supply.

Which of the following will not increase labor's productivity? A.education B.technology C.new capital D.growth in output

growth in output

An increase in saving A.decreases the amount of resources available for investment. B.increases the amount of resources that can be devoted to the purchase of capital goods. C.reduces real GDP by decreasing consumption. D.increases a country's present standard of living.

increases the amount of resources that can be devoted to the purchase of capital goods.

Roads, telephone lines, power facilities, and schools are examples of a nation's A.technostructure. B.infrastructure. C.physiostructur D.sociostructure.

infrastructure.

The aggregate production function relates total national output to: A.inputs and outputs. B.inputs and technology. C.employment and growth. D.the production possibilities frontier. E.inflation and economic growth.

inputs and technology

Investment in human capital A.shifts the aggregate production function downward. B.shifts the LRAS to the left. C.shifts the aggregate production function upward. D.decreases the aggregate demand for labor.

shifts the aggregate production function upward.

The present discounted value of $100 payable 1 year from now, assuming a market rate of interest of 10 percent, is: A.$100. B.$10. C.$90. D.slightly less than $90. E.slightly more than $90.

slightly more than $90

A factor critical to economic growth is A.increased saving rates. B.increases in human consumption. C.reduced dependence on imports. D.technological change that increases labor productivity.

technological change that increases labor productivity.

All of the following are indicators of a nation's standard of living except A.infant mortality rate. B.life expectancy. C.literacy rate. D.the inflation rate measured by CPI.

the inflation rate measured by CPI.

Holding all else constant, a country's standard of living will rise if its A.nominal GDP grows at a faster rate than real GDP. B.nominal GDP grows at a slower rate than real GDP. C.the rate of population growth exceeds the rate of growth of real GDP. D.the rate of population growth is less than the rate of growth of real GDP.

the rate of population growth is less than the rate of growth of real GDP.

Which of the following is a cost of economic growth? A.the sacrifice of current consumption B.inflation in consumption goods C.the sacrifice of future consumption D.excessive depletion of a nation's natural resources

the sacrifice of current consumption

All other things unchanged, higher saving rates contribute to higher rates of capital formation. A. True B. False

true

In his An Essay on Population Growth, Thomas Malthus argued that population would increase at a geometric rate and the food supply at an arithmetic rate and that this disharmony would lead to forced return to subsistence-level conditions. A. True B. False

true

Market economies with legal systems that provide for the reliable protection of property rights and enforcement of contracts tend to promote economic growth. A. True B. False

true

Real GDP tends to fluctuate around potential output. A. True B. False

true

The "new growth theory" focuses on the sources of technological change. A. True B. False

true

Towards the end of the twentieth century, some of the world's more affluent countries experience robust growth while others experienced growth slowdown or even stagnation. Which of the following is not a reason for the divergent growth trend? A.disparities in the rate of accumulation of human capital B.unwillingness to enforce property rights C.disparities in the employment rate D.differences in macroeconomic policymaking that allow producers to take a long-term view

unwillingness to enforce property rights

An increase in the capital stock would shift the production function _______ and the long-run aggregate supply curve to the _______. A.upward; right B.upward; left C.downward; left D.to the right; right

upward; right

The Malthusian population theory A.was eventually dismissed for its pessimism and failure to take into account technological advances in agriculture and food production. B.failed because contrary to Malthus' argument, agricultural production is not subject to diminishing returns. C.was not borne out in low-income countries because "population checks" (war, famine, etc.) kept population growth down while real GDP growth increased. D.states that the root cause of underdevelopment is unchecked population growth.

was eventually dismissed for its pessimism and failure to take into account technological advances in agriculture and food production.

Data from most industrialized countries show that countries with high investment rates (as a percentage of GDP) tend to be countries A.with the highest rates of inflation. B.with the most unequal income distribution. C.with high rates of economic growth. D.with the lowest rate of national saving.

with high rates of economic growth.