Chapter 9: Long-Run Economic Growth
The best available measure of the standard of living in a country is: 1.) real GDP per capita 2.) the growth rate of productivity 3.) nominal GDP per capita 4.) the unemployment rate
1.) real GDP per capita
If an economy doubles its growth rate in per capita GDP over 14 years, then the growth rate in per capita GDP averaged 5% per year. 1.) True 2.) False
1.) True
More than 50% of the world's population lives in countries whose population is poorer than the United States population was a century ago. 1.) True 2.) False
1.) True
Which country had the lowest growth rate of real GDP per capita between 1980 and 2010? 1.) Zimbabwe 2.) Argentina 3.) Ireland 4.) France
1.) Zimbabwe
Long-run growth is sustainable if: 1.) it can continue in the face of limited natural resources and the impact of growth in the environment 2.) energy prices are low 3.) people continue to buy enough goods and services 4.) environment concerns are ignored during global recessions
1.) it can continue in the face of limited natural resources and the impact of growth in the environment
Based on historical economic growth, economists have noted that the estimated aggregate production function: 1.) shows that when holding the amount of human capital and the state of technology fixed, successive increases in the amount of physical capital per worker lead to smaller increases in productivity. 2.) depends primarily on physical capital and technology advances 3.) exhibits constant returns to physical capital 4.) shows the negative relationship between physical capital and productivity
1.) shows that when holding the amount of human capital and the state of technology fixed, successive increases in the amount of physical capital per worker lead to smaller increases in productivity.
In the 1960s, Japan was the fastest-growing major economy and it also: 1.) spent a larger share of its GDP on investment goods than did other major economies 2.) spent more of its GDP on national defense than any other country except for China 3.) spent a smaller share of its GDP on investment goods than did other major economies 4.) was the first Asian country to join the European Union
1.) spent a larger share of its GDP on investment goods than did other major economies
India is growing at a rate of 9% per year, and its real GDP per capita is about $3,500, while the United States is growing at a rate of 3% per year, and its real GDP per capita is about $47,000. Look at the scenario Growth Rates in Two Countries. About how much will U.S. real GDP per capita be in 14 years? 1.) $224,000 2.) $71,000 3.) $112,000 4.) $28,000
2.) $71,000
Look at the table Kenya's Economy in 2010. Aggregate output per capita at the beginning of 2010 was: 1.) $5,000 2.) $775 3.) $10,000 4.) $7,750
2.) $775
Which of the following will NOT increase the productivity of labor? 1.) technological improvements 2.) an increase in the size of the labor force 3.) an increase in the capital stock 4.) improvements in education
2.) an increase in the size of the labor force
One of the most important types of infrastructure that a government can provide is: 1.) more intervention in the market mechanism 2.) basic health measures such as clean water and disease control 3.) the kind that private companies would provide if they were allowed to 4.) a good tax system
2.) basic health measures such as clean water and disease control
From the standpoint of economic growth, banks are important to: 1.) fight inflation 2.) channel savings into investment 3.) keep interest rates low 4.) channel investment into savings
2.) channel savings into investment
The idea the relatively poor nations should have higher rates of growth of real GDP per capita than relatively rich nations is known as the: 1.) East Asian miracle 2.) convergence hypothesis 3.) Industrial Revolution 4.) sustainable development hypothesis
2.) convergence hypothesis
Among the public goods important for economic growth is (are): 1.) public regulation of businesses 2.) political stability 3.) publicly held companies like Ford 4.) low taxes
2.) political stability
Natural resources: 1.) are the only factor the consistently shows a positive effect on productivity for wealthy countries 2.) are still the most important factor in determining the productivity of human or physical capital for all countries 3.) are a less significant source of productivity growth in most countries today than in earlier times 4.) can be used to explain the differences in productivity growth among countries
3.) are a less significant source of productivity growth in most countries today than in earlier times
Economists believe that the best way to stimulate investment in physical capital is to encourage: 1.) the conservation of natural resources 2.) higher rates of investment in human capital 3.) higher rates of national saving 4.) more spending on infrastructure
3.) higher rates of national saving
In the long run, an increase in saving will generally: 1.) leave the rate of economic growth unchanged 2.) reduce the rate of economic growth 3.) increase the rate of economic growth 4.) increase consumption simultaneously
3.) increase the rate of economic growth
The biggest global environment issue is: 1.) how to determine who has the property rights to wind power 2.) how to extract oil from Canadian tar sands 3.) the availability of coal 4.) the impact of fossil-fuel consumption on the world's climate
4.) the impact of fossil-fuel consumption on the world's climate
A typical family in the United States in 1900 had a purchasing power equal to _________ of the real U.S. GDP per capita in 2010. 1.) 13% 2.) 1% 3.) 70% 4.) 136%
1.) 13%
Suppose that real GDP per capita of the United States is $32,000 and its growth rate is 2% per year. Real GDP per capita of China is $4,000, and its annual growth rate is 7%. Look at the scenario Growth Rates. According to the rule of 70, how large will China's real GDP per capita be in 20 years? 1.) $16,000 2.) $8,000 3.) $5,6000 4.) $28,000
1.) $16,000
Holding the human capital per worker and technology unchanged, the estimated aggregate production function in Jamaica is Y / L = 50 x K / L, where Y = real output, L = number of workers, and K = quantity of physical capital. Look at the scenario The Aggregate Production Function. If real GDP per worker equals $3,200, physical capital per worker equals: 1.) $64 2.) $49 3.) $100 4.) $81
1.) $64
If output is growing at 5% annually, how many years will it take for output to quadruple? 1.) 28 years 2.) 10 years 3.) 20 years 4.) 14 years
1.) 28 years
Suppose a panel of economists predicts that a nation's real GDP per capita will double in approximately 20 years. According to the rule of 70, what must be the predicted annual growth rate of real GDP per capita? 1.) 3.5% 2.) 14% 3.) 140% 5.) 2.85%
1.) 3.5%
Real GDP per capita in the United States increased almost ________ times between 1900 and 2010. 1.) 8 2.) 2 3.) 3 4.) 10
1.) 8
Look at the figure Technological Progress and Productivity Growth. Which of the following changes in real GDP is most likely to have resulted from the deterioration of the nation's infrastructure over time? 1.) B to A 2.) C to B 3.) B to C 4.) A to B
1.) B to A
According to estimates of the aggregate production function, each 1% increase in physical capital, holding human capital and technology constant, raises labor productivity by 0.33% 1.) True 2.) False
1.) True
In the book The Limits to Growth, The Club of Rome argued that: 1.) limited supplies of natural resources made long-run growth unsustainable 2.) free trade could make world growth sustainable 3.) the convergence hypothesis was invalid 4.) the World Bank needed to establish a global currency
1.) limited supplies of natural resources made long-run growth unsustainable
An increase in the amount of physical capital per worker _________, while technological progress ________. 1.) moves up the economy along the aggregate production function; shifts up the aggregate production function 2.) shifts up the aggregate production function; moves the economy along the aggregate production function 3.) makes the aggregate production function steeper; makes the aggregate production function flatter 4.) makes the aggregate production function steeper; changes the slope of the aggregate production function
1.) moves up the economy along the aggregate production function; shifts up the aggregate production function
The convergence hypothesis: 1.) seems to hold only when other things such as education and infrastructure are held equal 2.) suggests that relatively poor countries will continue to be poor regardless of their level of saving 3.) apparently applies only to wealth countries 4.) states that countries' growth depends upon the amount of government intervention in the marketplace.
1.) seems to hold only when other things such as education and infrastructure are held equal
In general, the growth in real GDP per capita: 1.) was greater than the growth of per capita oil consumption after 1973 2. fluctuated above and below the growth of per capita oil consumption before 1973 3.) was smaller than the growth of per capita oil consumption before 1973 4.) was smaller than the growth of per capita oil consumption after oil prices began to increase in 2004
1.) was greater than the growth of per capita oil consumption after 1973
If real GDP doubles in 35 years, its average annual growth rate is approximately: 1.) 1% 2.) 2% 3.) 4% 4.) 3%
2.) 2%
Convergence is most likely between: 1.) Brazil and the United Kingdom 2.) France and Germany 3.) Mexico and Ghana 4.) Mexico and Ghana or Brazil and the United Kingdom
2.) France and Germany
Ireland's recent economy growth and improving living standard are due primarily to its investment in all of the following types of physical and human infrastructure EXCEPT: 1.) airports 2.) a more open election process 3.) telecommunications 4.) a good education system
2.) a more open election process
According to the rule of 70, if real GDP per capita is growing at 2% a year, in 100 years it will have increased by: 1.) almost 60 times 2.) about 7 times 3.) about 4 times 4.) almost 30 times
2.) about 7 times
The term human capital describes improvement: 1.) in the technology available to the work force 2.) in a worker's skills made possible by education, training, and knowledge 3.) made possible by better machines and equipment 4.) in the robotics technology that can substitute for a human worker
2.) in a worker's skills made possible by education, training, and knowledge
Because of diminishing returns to capital, doubling the amount of physical capital available for one worker to use will _______ output by _______ a factor of two. 1.) increase; exactly 2.) increase; less than 3.) increase; more than 4.) decrease; less than
2.) increase; less than
The main source of Kuwait's wealth is ________, while the main source of Germany's wealth is _________. 1.) manufacturing; oil 2.) oil; manufacturing 3.) tourism; manufacturing 4.) information technology; tourism
2.) oil; manufacturing
Workers today are more productive than workers in the past because: 1.) they are paid more 2.) they now have more physical capital embodying better technology 3.) they now are physically stronger on average 4.) more of them use the same number of machines as in the past
2.) they now have more physical capital embodying better technology
In 2010, the median U.S. household income was approximately: 1.) $25,000 2.) $16,000 3.) $50,000 4.) $8,000
3.) $50,000
There are two countries on a peninsula. The first has a per capita annual growth rate of 2%, and its neighbor to the south has an annual growth rate of 5%. How much sooner will the country in the south double its GDP per capita than its neighbor in the north? 1.) 10 years 2.) 15 years 3.) 21 years 4.) 5 years
3.) 21 years
From 2010 to 2011 nation A's real GDP increased from $100 billion to $106 billion and its population grew from 50 million to 51 million. Its annual growth rate in real GDP per capita was approximately: 1.) -3% 2.) 6% 3.) 4% 4.) 1%
3.) 4%
Look at the table Kenya's Economy in 2010. The population at the end of 2010 was about: 1.) 14 million 2.) 401 million 3.) 41 million 4.) 400 million
3.) 41 million
Look at the figure Technological Progress and Productivity Growth. If there is an increase in physical capital per worker (all other factors remaining unchanged), it is best indicated by a move from: 1.) B to A 2.) C to B 3.) A to B 4.) B to C
3.) A to B
Look at the figure Technological Progress and Productivity Growth. Which of the following changes in real GDP is most likely to have resulted from an increase in the quality (as well as quantity) of public health measures? 1.) A to B 2.) C to B 3.) B to C 4.) B to A
3.) B to C
The convergence hypothesis fits the data only when the factors that affect growth are held equal across countries. These factors include all of the following EXCEPT: 1.) infrastructure 2.) favorable policies and institutions 3.) GDP per capita 4.) education
3.) GDP per capita
It took India more than 40 years to exhibit high economic growth after it gained independence from British rule in 1947. This faster rate of growth resulted from: 1.) a more stable government 2.) better infrastructure 3.) a reduction in the burden of corruption 4.) higher investment in human capital
3.) a reduction in the burden of corruption
Which of the following contributes to economic development? 1.) a command socialist economic system 2.) low saving and investment rates 3.) investment in infrastructure 4.) complete absence of government involvement
3.) investment in infrastructure
A negative externality: 1.) is an unavoidable consequence of budget deficits 2.) is not as costly as a positive externality 3.) is a cost that individuals or firms impose on others without having to offer compensation 4.) is immune to economic incentives
3.) is a cost that individuals or firms impose on others without having to offer compensation
Education's effect on productivity: 1.) depends on the wealth of the country 2.) is believed to be less important than the amount of physical capital a worker has available 3.) is even more important than increases in physical capital 4.) has fallen in the past century in the United States
3.) is even more important than increases in physical capital
Government spending is like investment in each of the following cases EXCEPT when: 1.) it is used for public health measures 2.) it goes to help pay for education 3.) it is used for a personal income tax rebate 4.) it helps provide infrastructure for the economy
3.) it is used for a personal income tax rebate
The key factor explaining the poor growth performance in Africa is probably: 1.) the prevalence of military conflicts among neighboring countries 2.) lack of natural resources 3.) lack of domestic political stability 4.) overpopulation
3.) lack of domestic political stability
In 1820, Mexico had a higher real GDP per capita than Japan. Yet now Japan is one of the richest countries in the world and Mexico is poor. Japan's high rate of economic growth can be explained by all of the following EXCEPT a high: 1.) investment in human capital 2.) investment in physical capital 3.) level of government interference 4.) investment in technological progress
3.) level of government interference
Which sector is responsible for most of the growth in the United States during the 1990s? 1.) manufacturing 2.) mining 3.) retail 4.) service
3.) retail
The fundamental argument in the Essay on the Principle of Population was that improvements in technology or increases in physical capital would lead to only temporary improvements in productivity because they would always be offset by: 1.) rising human capital demands 2.) falling birthrates 3.) the pressure of rising population and more workers on the supply of land 4.) falling land values
3.) the pressure of rising population and more workers on the supply of land
Investment in human capital shifts the aggregate production function: 1.) rightward 2.) leftward 3.) upward 4.) downward
3.) upward
If technology advances: 1.) physical capital is less productive 2.) GDP per capita declines 3.) workers can produce more with fixed amounts of physical and human capital 4.) human capital is less useful
3.) workers can produce more with fixed amounts of physical and human capital
According to the rule of 70, if a country's real GDP per capita grows at an annual rate of 2% instead of 3%, it will take _________ additional years for that country to double its level of real GDP per capita. 1.) 23.3 2.) 35 3.) 30 4.) 11.67
4.) 11.67
Look at the table Kenya's Economy in 2010. During 2010, assuming no changes in the price level, aggregate output per capita in Kenya grew at a rate of: 1.) 7.8% 2.) 5.2% 3.) 0.6% 4.) 2.6%
4.) 2.6%
Suppose that real GDP per capita of the United States is $32,000 and its growth rate is 2% per year. Real GDP per capita of China is $4,000, and its annual growth rate is 7%. Look at the scenario Growth Rates. How long will it take real GDP per capita of the United States to double? 1.) 50 years 2.) 2.25 years 3.) 14 years 4.) 35 years
4.) 35 years
Sweden has real GDP per capita of $50,000, while Chile has real GDP per capita of $25,000. If real GDP per capita in Sweden grows at 2% and Chile's real GDP per capita grows at 4%, how long will it take for real GDP per capita in the two nations to converge? 1.) 20 years 2.) 25 years 3.) 10 years 4.) 35 years
4.) 35 years
Suppose that real GDP per capita of the United States is $32,000 and its growth rate is 2% per year. Real GDP per capita of China is $4,000, and its annual growth rate is 7%. Look at the scenario Growth Rates. How many years will it take for China's real GDP per capita to be larger than real GDP per capita in the United States? 1.) 15 to 20 years 2.) 5 to 10 years 3.) 70 to 75 years 4.) 40 to 45 years
4.) 40 to 45 years
If real GDP grows at an annual rate of 1%, it will double in approximately _______ years. 1.) 23 2.) 11 3.) 35 4.) 70
4.) 70
Which of the following are sources of funds for investment spending? I. domestic savings II. foreign savings III. consumption 1.) I only 2.) I, II, and III 3.) II only 4.) I and II
4.) I and II
Which of the following factors have contributed to the lack of economic growth in Latin America? I. low rates of savings and investment II. low value on education III. political instability 1.) II only 2.) I only 3.) III only 4.) I, II, and III
4.) I, II, and III
Written in 1972, the book that argued that long-run economic growth was not sustainable because of limited supplies of natural resources was called: 1.) An Essay on the Principle of Population 2.) The Wealth of Nations 3.) Aftershock: the Next Economy and America's Future 4.) The Limits to Growth
4.) The Limits to Growth
Diminishing returns to physical capital implies that when the human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to _______ productivity. 1.) a larger increase in 2.) negative 3.) a decrease in 4.) a smaller increase in
4.) a smaller increase in
An example of physical capital is: 1.) a truck a company purchases for work, a worker who physically learns to work on a truck his company buys, or a truck a worker buys for personal use 2.) a truck a worker buys for personal use 3.) a worker who physically learns to work on a truck his company buys 4.) a truck a company purchases for deliveries
4.) a truck a company purchases for deliveries
Economists use real GDP per capita to measure economic growth: 1.) because poor nations have a large population and the population of richer nations is declining 2.) because it ignores the effect of price changes 3.) even though nominal GDP per capita is a far superior measure of economic growth 4.) because it is the inflation-adjusted value of a country's production of goods and services corrected for the change in a country's population
4.) because it is the inflation-adjusted value of a country's production of goods and services corrected for the change in a country's population
Look at the figure Technological Progress and Productivity Growth. Which of the following changes in real GDP is most likely to have resulted from an increase in foreign investment spending? 1.) A to B 2.) B to C 3.) B to A 4.) both A to B and B to C
4.) both A to B and B to C
Which of the following is a government policy to promote economic growth? 1.) implementing a monetary policy that increases inflation 2.) implementing a fiscal policy that increases inflation 3.) increasing the interest rate charged on student loans 4.) building infrastructure and providing public goods
4.) building infrastructure and providing public goods
Between 1980 and 1994, real per capita GDP in sub-Saharan Africa: 1.) increased by 7% per year 2.) fell by 50% 3.) increased by 10% 4.) fell by 13%
4.) fell by 13%
Large technological gains often result: 1.) only if the innovation is broad and monumental 2.) in immediate growth of an economy 3.) from deliberate attempts at specific types of innovation 4.) from modest as well as large innovations
4.) from modest as well as large innovations
Rising high school graduation rates are an example of an increase in: 1.) fertility rates 2.) technological progress 3.) population stock 4.) human capital
4.) human capital
Which of the following is one reason for Latin America's lack of economic growth since 1920? 1.) overspending on education 2.) inability to compete with imported products 3.) very poor natural resources 4.) low savings and investment spending because government policies led to inflation bank failures, and other disruptions
4.) low savings and investment spending because government policies led to inflation bank failures, and other disruptions
According to the convergence hypothesis, differencesin GDP per capita among countries tends to narrow over time because countries that start with a ________ real GDP per capita tend to have _________ growth rates 1.) lower; lower 2.) higher; higher 3.) higher; negative 4.) lower; higher
4.) lower; higher
The formula for the rule of 70, where n is number of years and r is growth rate, is expressed as: 1.) n / r = 70 2.) r / n = 70 3.) n x 70 = r 4.) n x r = 70
4.) n x r = 70
The convergence hypothesis is: 1.) wrong, because Latin American and African countries have not been able to grow. 2.) not wrong, but because poorer nations are involved in so many destabilizing incidents like wars, disease, and famines, they will never be able to catch up with the rest of the world. 3.) wrong, because poorer nations' income seems to get worse over time and the richer nations' income get better 4.) not wrong, but education, infrastructure, and the rule of law are not equal among nations
4.) not wrong, but education, infrastructure, and the rule of law are not equal among nations
A key input for measuring economic growth is: 1.) the size of the government's budget 2.) the Dow Jones stock market index 3.) life expectancy 4.) real GDP per capita
4.) real GDP per capita
Technological progress is advanced through: 1.) consumption 2.) infrastructure 3.) government regulation 4.) research and development
4.) research and development
All else equal, a nation that has a high rate of ________ will have a high rate of _______ an therefore a high growth rate of ________ capital. 1.) investment; savings; human 2.) savings; consumption; physical 3.) savings; investment; natural 4.) savings; investment; physical
4.) savings; investment; physical