ECON Test #2 Practice Questions

The aggregate production function Y = f(L, H, K) shows that economic growth can occur if: (i) human capital increases. (ii) labor productivity falls. (iii) the capital stock in the country depreciates. (iv) the depreciation rate increases. A. (i) only B. (i) and (iv) C. (i), (ii), (iii), and (iv) D. (iii) only

A. (i) only

Diminishing returns to physical capital imply that, with human capital per worker and technology held fixed, each successive increase in physical capital leads to _____ productivity (or real GDP per worker). A. a smaller increase in B. a larger increase in C. a decrease in D. negative

A. a smaller increase in

The government changes the minimum working age to 21. Which inputs into the production function changed? A.Labor B.human capital C.physical capital

A. labor

Technological progress is advanced through: A. research and development. B. government regulation. C. consumption. D. infrastructure.

A. research and development.

Infant Mortality Rate and GDP question

As real GDP per person rises, maternal and fetal health increase due to better health care, education, sanitation, and nutrition

The government provides a tax-free period for firms to purchase computers and tablets for employees. Which inputs into the production function changed? A. Labor B. human capital C. physical capital

C. physical capital

Which graph shows technological advancements?

Graph B

Aggregate production function:

Y = f(L, H, K)

If C = $1,000, I = $500, G = $800, X = $400, and M = $600, what is the value of GDP? a.$2,100 b.$2,300 c.$3,300 d.$2,500

a. $2,100

What was total spending?

a. $20.58 trillion

If Greenville's GDP doubled over 5 years, what was the approximate annual growth rate (using the rule of 70)? a.14% b.9% c.20% d.5%

a.14%

In 2004, Canada's GDP was approximately $1.13 trillion, and its population was about 32 million. What was Canada's approximate GDP per person in 2004? a.$43,500 b.$35,290 c.$3,530 $36,160

b. $35,290

19. Refer to the table below that shows data for Panama. What was Panama's economic growth rate between 2000 and 2001? a. 2.26% b. -1.36% c. -0.29% d. 5.23%

b. -1.36%

Physical capital includes: a. worker's education and knowledge b. machine tools c. money d. shares of stock

b. machine tools

A constant returns to scale production is one where increasing all inputs by a certain proportion leads to output rising by: a. exactly double the proportion b. the same proportion c. a smaller proportion d. a larger proportion

b. the same proportion

Refer to the diagram of the circular flow of income. The key lessons from this diagram are that:(i) all flows of resources are matched by flows of money.(ii) the market value of total output must be equal to total spending.(iii) total spending must equal total income.(iv) all inputs are provided by businesses. a. (i) and (iv) b. (ii) and (iii) c. (i), (ii), and (iii) d. (i), (ii), (iii), and (iv)

c. (i), (ii), and (iii)

Human capital refers to improvements in: a. production processes, made possible by better machines and equipment. b. technology made available to the workforce. c. a worker's skills, made possible by education, training, and knowledge. d. robotics technology that can substitute for human workers

c. a worker's skills, made possible by education, training, and knowledge.

You just bought two used textbooks for $25 each. How much does GDP change because of your purchase? a. GDP rises by $50 b. GDP falls by $50 c. GDP rises by $25 d. GDP does not change

d. GDP does not change

GDP is defined as the:

market value of all final goods and services produced within a country in a given year

The U.S. government provides a research and development tax credit. How can this policy encourage economic growth? A. Firms get tax credits for sourcing inputs locally, and this encourages local economic growth. B. It encourages firms to engage in innovation and creative practices, which lead to technological advances that spur economic growth. C. It supports firms in their efforts to produce environmentally friendly products and services. D. Firms are encouraged to reuse existing capital, and this leads to a more efficient use of existing capital.

B. It encourages firms to engage in innovation and creative practices, which lead to technological advances that spur economic growth.

The government mandates that community college education be tuition free. Which inputs into the production function changed? A. Labor B. human capital C. physical capital

B. human capital

Which of the following explains the shape of the aggregate production function? A.the profit maximization rule B.the law of diminishing returns C.the development of human capital D.the impact of technological change

B.the law of diminishing returns

The moral of the story of the Solow growth model is that: A. human capital growth does not lead to economic growth. B. capital accumulation is the key to sustained economic growth. C. technological advance cannot sustain continuous economic growth. D. capital accumulation alone cannot lead to sustainable economic growth.

D. capital accumulation alone cannot lead to sustainable economic growth.

During 2000 and 2001, nominal GDP in the U.S. grew by 3.2%, and the rate of inflation was 2.2%. What was the growth rate of real GDP between the two years? a. 1% b. 2.2% c. 4.4% d. 5.4%

a. 1%

Growth rate of the quantity of barrels of oil sold between the two years rounded to the neatest percent? a. 4% b. 5% c. 9% d. 11%

a. 4%

Rapid growth in poorer countries leads to: a. convergence in real GDP per person between poorer countries and richer countries b. divergence in real GDP per person between poorer countries and richer countries c. inadequate enforcement of property rights d. higher dependency ratios

a. convergence in real GDP per person between poorer

If China's economy maintains a 7% annual growth rate over the next 20 years, about how large will its economy be in 20 years if its current GDP is $12 trillion? Use the Rule of 70 to answer this question. a.$48 trillion b.$36 trillion c.$29 trillion d.$24 trillion

a.$48 trillion

Which of the following can be classified as a technological progress? a. baby boom b the invention of the light bulb c. an increase in the retirement age of a population d. a rise in the labor force participation rate

b the invention of the light bulb

In the market for outputs: a. households sell goods and services. b. households buy goods and services. c. firms buy resources. d. firms supply resources.

b. households buy goods and services.

Which of the following would represent the fastest annual growth of GDP per capita? a.An increase in real GDP of 6% and population growth of 4%. b.An increase in real GDP of 2% and population decline of 1%. c.An increase in real GDP of 5% and population growth of 1%. d.An increase in real GDP per capita of 3%.

c.An increase in real GDP of 5% and population growth of 1%.

Why does a small difference in economic growth result in a large difference in wealth over time? a. Over time, small growth rates end up turning negative, preventing further growth. b. Governments are more likely to support big countries than small countries. c. Over time, small growth rates turn into large growth rates. d. The effect of compounding allows growth to build upon previous growth.

d. The effect of compounding allows growth to build upon previous growth.

What does the Rule of 70 tell you?

how long it will take something to double if you divide 70 by its annual growth rate