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Macro Midterm 1

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Suppose the Nominal GDP of the (fictional) country of Boermaland is $110 billion a year and its GDP deflator is 220. What is its real GDP? (a) $50 billion (b) $200 billion (c) $100 billion (d) $25 billion

(a) $50 billion

Suppose the real GDP growth rate of the USA was 2.6% and the population growth rate was 1.8% in 2014. Approximately what was the growth in real GDP per capita in the US in 2014? (a) 1.0 % (b) 1.2 % (c) 0.8 % (d) 0.6 %

(a) 1.0 %

Real GDP per capita in 2011 in the United States was $50,000, and $53,000 in 2013. What is the average annual growth rate between 2011 and 2013? (a) 3% (b) 6% (c) 1.5% (d) 0%

(a) 3%

Suppose you are a citizen of the Guinea in West Africa where the GDP per capita is $500 per year and the country begins pursuing an aggressive economic growth policy and will experience 7% growth per capita from now on. Approximately how long will it take for the GDP per capita Guinea to be equal to that of South Korea which has a GDP per capita of $32,000? (a) 60 years (b) 70 years (c) 80 years (d) 90 years

(a) 60 years

Assume an economy consumes 55 percent of its output, and saves the rest. If capital depreciates at 5 percent per year, and output is produced according to Y =√K, what is steady state output in the Solow model? (a) 9 (b) 11 (c) 12 (d) 5

(a) 9

Which of the following is not a binding price control (a) A price ceiling above the equilibrium price (b) A price ceiling below the equilibrium price (c) A price floor above the equilibrium price (d) None of the above

(a) A price ceiling above the equilibrium price

Which is the following is true about economic growth? (a) A small difference in the growth rate can result at large difference due to long run growth (b) Somebody used to be richer than others (c) The world is now under the process of unconditional convergence (d) Growth rate in Nigeria increases dramatically recently

(a) A small difference in the growth rate can result at large difference due to long run growth

In the Solow Model, suppose our investment is greater than our depreciation. What will happen to capital and output? (a) Capital increases, output increases (b) Capital increases, output decreases (c) Capital decreases, output increases (d) Capital decreases, output decreases

(a) Capital increases, output increases

Which statement best explains why growth in China has been so rapid recently? (a) China began with very little capital, so its marginal product of capital was very high (b) China began with very little capital, so its marginal product of capital was very low (c) China began with very high capital, so its marginal product of capital was very high (d) China began with very high capital, so its marginal product of capital was very low

(a) China began with very little capital, so its marginal product of capital was very high

According to the spending approach, which of the following is the biggest part of GDP? (a) Consumption (b) Investment (c) Government expenditure (d) Net export

(a) Consumption

Applying the National Spending approach, what normally accounts for the largest share of GDP? (a) Consumption (b) Investment (c) Government spending (d) Net Exports

(a) Consumption

What is the correct formula for the GDP Deflator in terms of real GDP (RGDP) and nominal GDP (NGDP)? (a) GDP Deflator = (NGDP/RGDP) × 100 (b) GDP Deflator = (RGDP/NGDP) × 100 (c) GDP Deflator = NGDP × RGDP × 100 (d) GDP Deflator = (NGDP ×RGDP)/100

(a) GDP Deflator = (NGDP/RGDP) × 100

The market value of all final goods and services produced by a country's permanent residents, wherever located, in a year is the definition of: (a) GNP (b) GDP (c) BEA (d) GDP per capita

(a) GNP

An increase in demand results in: (a) Higher equilibrium quantity. (b) Lower equilibrium quantity. (c) Lower equilibrium price. (d) No change in equilibrium price

(a) Higher equilibrium quantity.

Suppose that Frank is an accountant who performs tax audits, and he regularly uses a computer to do his job. Frank takes a course in Excel, and as a result he is able to perform 3 times as many audits as he could before. The increase in Frank's output is the result of an increase in what factor of production? (a) Human capital (b) Physical capital (c) Technological knowldedge (d) Organization

(a) Human capital

Which of the following is true? (a) If a country's economy grows steadily at 3.5% per year, it takes it 20 years to double in size. (b) If a country's economy grows steadily at 7% per year, it takes it 12 years to double in size. (c) If a country's economy grows steadily at 1.75% per year, it takes it 30 years to double in size. (d) If a country's economy grows steadily at 14% per year, it takes it 10 years to double in size.

(a) If a country's economy grows steadily at 3.5% per year, it takes it 20 years to double in size.

In the context of the Solow model what is conditional convergence? (a) If countries have similar steady state levels of output, poorer countries grow faster than richer countries (b) If countries have similar steady state levels of output, richer countries grow faster than poorer countries (c) If countries have similar steady state levels of output, they will grow at the same rate (d) All countries regardless of their steady states will converge to similar levels of GDP

(a) If countries have similar steady state levels of output, poorer countries grow faster than richer countries

Which of the following is NOT an institution of economic growth? (a) Income equality (b) Honest government (c) Dependable legal systems (d) Property rights

(a) Income equality

In the context of the Solow model what is the effect of an increase in the investment rate on output and consumption? (a) Increases level of output, the effect on the level of consumption is ambiguous (b) Increases level of output, level of consumption increases (c) Increases level of output, level of consumption decreases (d) Decreases output, level of consumption increases

(a) Increases level of output, the effect on the level of consumption is ambiguous

What is the effect of an increase in the savings rate on output and consumption? (a) Increases output, the effect on consumption is ambiguous (b) Increases output, consumption increases (c) Increases output, consumption decreases (d) Decreases output, consumption increases

(a) Increases output, the effect on consumption is ambiguous

You are a dictator of a country and your real GDP is expected to grow 4% per year for the next ten years. Suppose you wanted to keep real GDP growth per capita to be 4% per year as well. What could you do to achieve this goal? (a) Introduce population controls to completely stop population growth (b) Introduce new businesses taxes to provide income to the population (c) Stop all trade with other countries and have more people work (d) Introduce a new immigration policy to increase migrant children

(a) Introduce population controls to completely stop population growth

Suppose prices decreased in Econland from 2000 to 2010. What is true about 2010 GDP deflator in which the base year is 2000? (a) It will be smaller than 100 (b) It will be greater than 100 (c) It will be 100 (d) Not enough information

(a) It will be smaller than 100

Recently, a presidential candidate claimed that under his policy real GDP per capita growth in the United States will be 6% per year. After taking Economics 1102, you look at the 6% per year and think: (a) It's far too high for a cutting edge economy like the United States (b) It's far too low for a cutting edge economy like the United States (c) It's far too high for a catch up economy like the United States (d) It's far too low for a catch up economy like the United States

(a) It's far too high for a cutting edge economy like the United States

Ideas are not rivalrous, meaning that: (a) Many people can benefit from an idea at the same time (b) Only one person can benefit from an idea at a time (c) Most ideas are generated by the government (d) No one can benefit from an idea

(a) Many people can benefit from an idea at the same time

The _______ is the increase in output caused by the addition of one more unit of capital: (a) Marginal product of capital (b) Average product of capital (c) Marginal product of labor (d) Average product of labor

(a) Marginal product of capital

At the market equilibrium quantity and price, gains from trade are? (a) Maximized (b) Minimized (c) Set to zero (d) Not enough information

(a) Maximized

Suppose that Nigeria and France have identical steady state levels of output. What growth pattern do you expect to observe over the next decades? (a) Nigeria's growth rate is greater than France's, France's GDP per capita is greater than Nigeria's (b) France's growth rate is greater than Nigeria's, France's GDP per capita is smaller than Nigeria's (c) Nigeria's growth rate is lower than France's, France's GDP per capita is greater than Nigeria's (d) France's growth rate is lower than Nigeria's, France's GDP per capita is smaller than Nigeria's

(a) Nigeria's growth rate is greater than France's, France's GDP per capita is greater than Nigeria's

The United States equilibrium price for wheat is $17 per bushel. Suppose that the United States government imposes a price floor of $15 per bushel. What happens in the market for wheat? (a) Nothing changes, the price floor is not binding (b) Producer surplus increases, consumer surplus increases, government surplus decreases (c) Producer surplus decreases, consumer surplus increases, government surplus increases (d) Producer surplus increases, consumer surplus decreases, government surplus decreases

(a) Nothing changes, the price floor is not binding

If the population growth rate increases, while the growth rate of real GDP remains the same, which of the following is TRUE? (a) Per capita GDP growth declined (b) Per capita GDP growth increased (c) Per capita GDP growth stayed the same (d) Not enough information

(a) Per capita GDP growth declined

The correlation between economic growth and the honesty of the government is: (a) Positive (b) Negative (c) Uncorrelated (d) Ambiguous

(a) Positive

Fill in the blanks: Rent controls are an example of a ______________. In the long-run, they will cause the quality of available aparments to ____________. (a) Price ceiling, fall (b) Price floor, fall (c) Price ceiling, rise (d) Price floor, rise

(a) Price ceiling, fall

Consumption can be defined as (a) Private spending on final goods and services (b) Private spending on tools, plant, and equipment used to produce future output (c) Spending by all levels of government on final goods and services (d) All of the above

(a) Private spending on final goods and services

What is the difference between Nominal and Real GDP? (a) Real GDP adjusts for changes in prices (b) Nominal GDP adjusts for changes in prices (c) There is no difference (d) None of the above

(a) Real GDP adjusts for changes in prices

What's an assumption of the "rule of 70", about economic growth. (a) Real GDP growth happens at a constant rate. (b) Nominal GDP growth happens a constant rate. (c) Real GDP growth happens at an increasing rate over time. (d) All of the above.

(a) Real GDP growth happens at a constant rate.

Which of the following is an example of a price ceiling? (a) Rent control (b) Minimum wage (c) Both (a) and (b) (d) Neither (a) nor (b)

(a) Rent control

In 2014, the United State's Net Export (NX) component of GDP was? (a) Small (< 5%) and negative (b) Small (< 5%) and positive (c) Large (> 5%) and negative (d) Large (> 5%) and positive

(a) Small (< 5%) and negative

The marginal production of capital (MPk) is (a) The additional output resulting from using an additional unit of capital (b) The total output resulting from using an additional unit of capital (c) The average output to capital ratio (d) The average capital to output ratio

(a) The additional output resulting from using an additional unit of capital

The iron logic of diminishing returns is (a) The additional output resulting from using an additional unit of capital gets smaller as more capital is accumulated (b) The additional output resulting from using an additional unit of capital gets greater as more capital is accumulated (c) The additional output resulting from using an additional unit of capital is constant (d) None of the above

(a) The additional output resulting from using an additional unit of capital gets smaller as more capital is accumulated

What is the meaning of steady-state? (a) The capital stock and output are constant over time (b) The growth rate of the capital is constant over time (c) The capital stock is increasing at a constant growth rate (d) The capital stock grow and output next period is bigger

(a) The capital stock and output are constant over time

The production possibilities frontier shows: (a) The combinations of outputs a country can produce given its resources and productivity (b) The combinations of inputs that a country has given its outputs and productivity (c) The combinations of outputs and resources that a country possesses given its productivity (d) The maximum level of a country's productivity given its resources and outputs

(a) The combinations of outputs a country can produce given its resources and productivity

Which fact about growth on the cutting edge is emphasized? (a) The larger the market, the greater the incentive to research and develop new ideas. (b) The rate at which new ideas occur must eventually slow down. (c) Rates of economic growth have been decreasing over the last 10,000 years. (d) Growth on the cutting edge will be primarily the result of increases in physical capital.

(a) The larger the market, the greater the incentive to research and develop new ideas.

If half of the economy's capital got destroyed due to a disaster, then (Provided the underlying structure of the economy remains unchanged e.g investment, deprecation rates and production function): (a) The short run economic growth rate is higher (b) The short run economic growth rate is lower (c) The short run economic growth rate remains the same (d) The short run economic growth rate is undetermined

(a) The short run economic growth rate is higher

When the United States signed the North American Free Trade Agreement (NAFTA), Canada producers of lumber entered the U.S. market. How did the supply curve for lumber change? (a) The supply curve shifted to the right (b) The supply curve shifted to the left (c) The supply curve remained the same (d) The supply curve had a downward slope

(a) The supply curve shifted to the right

Approximately what is the GDP of China? (a) $16 billion (b) $16 trillion (c) $16 million (d) $160,000

(b) $16 trillion

In the country of Simonetopia, the nominal GDP was $500 billion and the GDP deflator was 250. What was the real GDP of Simonetopia? (a) $100 billion (b) $200 billion (c) $2 billion (d) $20 billion

(b) $200 billion

Suppose Econland starts to grow from now on at 7 percent per year. How long does it take for Econland to achieve four times its current GDP? (a) 10 years (b) 20 years (c) 30 years (d) 40 years

(b) 20 years

In the Solow model discussed in class, suppose Y =√K where the steady-state level of capital K=16. If depreciation is 10% what is the the steady state rate of savings? (a) 15% (b) 40 % (c) 5% (d) 10%

(b) 40 %

If Y = 3√K and γ =1/3, δ =1/20 then the steady state output is? (a) 20 (b) 60 (c) 100 (d) 400

(b) 60

In the above problem, what is the steady state level of capital? (a) 121 (b) 81 (c) 25 (d) 3

(b) 81

Which of the following is included in the GNP of the US in 2016 (a) Computer chips sold to Dell in 2016 (b) A Honda produced by the U.S. workers in Japan in 2016 (c) A Toyota produced and sold in the US in 2015 (d) A Macbook Pro produced in China by Chinese workers in 2016

(b) A Honda produced by the U.S. workers in Japan in 2016

Argetina's experience in the late 19th century is an example of: (a) A growth disaster (b) A growth miracle (c) An economic union (d) A cyclical recession

(b) A growth miracle

The law of demand says: (a) When there's supply, there's always demand (b) As the price of a good or service increases, consumer demand for the good or service will decrease (c) As the price of a good or service increases, consumer demand for the good or service will increase (d) None of the above

(b) As the price of a good or service increases, consumer demand for the good or service will decrease

Which of the following DOES NOT shift the demand curve? (a) Increase in population (b) Change in the price of inputs (c) Expectations (d) Price of substitutes

(b) Change in the price of inputs

Assume an economy is in its steady state and the rate of depreciation increases. What will happen to the amount of investment in the new steady state compared to the old one? (a) Increase (b) Decrease (c) No change (d) Not enough information.

(b) Decrease

Equilibrium occurs when the quantity demanded is the quantity supplied. (a) Less than (b) Equal to (c) The opposite of (d) Greater than

(b) Equal to

In the base year, the real GDP is? (a) Smaller then the nominal GDP (b) Equal to the nominal GDP (c) Larger then the nominal GDP (d) Ambiguous

(b) Equal to the nominal GDP

What is the consequence of failing to take into account the underground economy into GDP? (a) Makes no difference (b) Exaggerate the difference across countries (c) Understate the difference across countries (d) Ambiguous

(b) Exaggerate the difference across countries

If a country has an abundance of physical and human capital which of the following is a reason growth may NOT be achieved? (a) Secure property rights (b) Frequent change in political leaders (c) A strong higher education system (d) Well defined rule of law

(b) Frequent change in political leaders

Which of the following best characterizes the relationship between corruption and economic growth? (a) Higher corruption is associated with more economic growth (b) Higher corruption is associated with lower economic growth (c) Lower corruption is associated with lower economic growth (d) Corruption and economic growth are unrelated

(b) Higher corruption is associated with lower economic growth

Countries with higher investment rates don't have: (a) Higher steady state levels of capital (b) Higher economic growth rate in the long run (c) Higher steady state consumption (d) Higher capital depreciation

(b) Higher economic growth rate in the long run

Which of the following determines how fast an economy grows in the short run in the context of the Solow model? (a) How rich or poor a country is. (b) How far the country is from its steady state. (c) The amount of capital that the country has. (d) The level of the countrys technological knowledge.

(b) How far the country is from its steady state.

Services as a share of U.S. GDP have experienced which of the following trends over the last fifty years? (a) Have had a non changing share of GDP (b) Increased as a share of GDP (c) Decreased as a share of GDP (d) Services are not included in GDP

(b) Increased as a share of GDP

Which of the following countries is experiencing catch-up growth? (a) USA (b) India (c) Canada (d) Italy

(b) India

Which of the following is true about real GDP: (a) Is a fully reliable measure of living standards. (b) Is a worse measure of living standards than GDP per capita. (c) Can be biased by a change in price level. (d) None of the above.

(b) Is a worse measure of living standards than GDP per capita.

Which one is NOT a shortcoming of using real GDP per capita when measuring living standards? (a) It doesn't capture the underground economy. (b) It doesn't take inflation into account. (c) It doesn't capture the value of leisure. (d) It doesn't count bads (e.g. pollution).

(b) It doesn't take inflation into account.

The difference between nominal GDP and real GDP is that nominal GDP: (a) Measures the total value of only final goods and services, whereas real GDP measures the value of all goods and services, both intermediate and final. (b) Measures a country's production of final goods and services at current market prices, whereas real GDP measures a country's production of final goods and services at the same prices in all years. (c) Is measured in dollar terms, whereas real GDP is measured in terms of numbers of goods and services produced. (d) Measures a country's production of final goods and services at fixed prices, whereas real GDP measures a country's production of all final goods and services at current market prices.

(b) Measures a country's production of final goods and services at current market prices, whereas real GDP measures a country's production of final goods and services at the same prices in all years.

Which of the following actions by the Federal government is NOT counted in real GDP? (a) Building a new road (b) Paying unemployment benefits (c) Purchasing a new airplane for the military (d) Purchasing new computers for Pentagon staf

(b) Paying unemployment benefits

What of the following will likely lead to a decrease in investment? (a) Transparent government (b) Political instability (c) A dependable legal system (d) A competitive and open market

(b) Political instability

The minimum wage is an example of a _______? (a) Price ceiling (b) Price floor (c) Quota on labor (d) Tariff on labor

(b) Price floor

Minimum wages are an example of? (a) Price ceilings (b) Price floors (c) Quote on labor (d) Government spending

(b) Price floors

If firms discover a new technology that reduces the cost of producing donuts, which of the following would we expect to happen to the market for donuts. (a) Supply curve shifts to the left (b) Supply curve shifts to the right (c) Demand curve shifts to the left (d) Demand curve shifts to the right

(b) Supply curve shifts to the right

Which of the following best describes the steady state level of capital? (a) The level of capital such that the economy is growing at 5 percent (b) The level of capital such that investment equals depreciation (c) The level of capital such that the economy begins to shrink (d) None of the above

(b) The level of capital such that investment equals depreciation

A good is non-rivalrous if: (a) No one can be excluded from consuming it once it is produced (b) Two or more people can consume it at the same time (c) It is not scarce (d) There is little demand for it.

(b) Two or more people can consume it at the same time

A dealer bought a second hand car for $4,000 in January 2016, the dealer sold the car for $6,000 in February 2016. What statement accurately describes the effect of these actions on the United States' National Accounts in 2016? (a) There is no effect on United States GDP because this is a second hand car (b) United States GDP increases by $2,000 (c) United States GDP increases by $4,000 (d) United States GDP increases by $6,000

(b) United States GDP increases by $2,000

In the base year, the real GDP is? (a) smaller then the nominal GDP (b) equal to the nominal GDP (c) larger then the nominal GDP (d) ambiguous

(b) equal to the nominal GDP

Fill in the blanks: The law of diminishing returns implies that as the physical capital ____________ the marginal product of capital _______________. (a) increases, increases (b) increases, decreases (c) increases, remains the same (d) decreases, decreases

(b) increases, decreases

In terms of international trade, comparative advantage can best be defined as (a) the ability of a country to produce a good using fewer inputs than another country. (b) the ability of a country to produce a good at lower opportunity cost than another country (c) the ability of a country to produce all goods using fewer inputs than another country (d) the ability of a country to produce all goods at lower opportunity cost than another country

(b) the ability of a country to produce a good at lower opportunity cost than another country

Suppose Econoland produces 2 final goods: beer and pizza. In 2015, the prices and quantities of these two goods were given by Econoland Market Data Good 2015 Price 2015 Quantity Pizza $10 50 Beer $5 100 What was GDP in Econoland in 2015 (a) $15 (b) $500 (c) $1000 (d) $1500

If the GDP growth rate in 2013 was 5% and the GDP in 2012 was 200 billion, which of the following is the GDP in 2013? (a) $190 billion (b) $194 billion (c) $210 billion (d) $220 billion

Suppose in Econland GDP grew by 1 percent last year while GDP per capita grew by 2 percent. By how much percent did the population grow? (a) 1 (b) 3 (c) -1 (d) 0

US population grew at 0.7 percent in 2013. During the same year GDP grew at 2.2 percent. What was the growth rate of GDP per capita for the United States in 2013? (a) -2.9 percent (b) -1.5 percent (c) 1.5 percent (d) 2.9 percent

Suppose real GDP per capita grows at a rate of 2% while population growth at a rate of 5%, how many years it takes for the real GDP to double? (a) 35 (b) 14 (c) 10 (d) 2.5

If the real GDP growth rate of a country is 5%, how many years will it take for this country to double their real GDP? (a) 20 (b) 5 (c) 14 (d) 18

Suppose that the growth rate of US real GDP between 2009 and 2010 was 4% and the growth rate of the US population over the same period was 1%. What was the growth rate of US real GDP per capita over this period? (a) 5% (b) 4% (c) 3% (d) 2%

Which of the following is counted in the GDP of the US in 2016? (a) A Ford truck produced in Mexico in 2016 (b) A Toyota Corolla produced in the US in 2015 (c) A Honda Civic produced in the US in 2016 (d) A 2015 Chevrolet truck sold in Mexico in 2016

An increase in the rate of depreciation in human capital leads to: (a) An increase in output and a decrease in human capital (b) A decrease in output and an increase in human capital (c) A decrease in output and a decrease in human capital (d) An increase in output and an increase in human capital

In economics, the normal good is defined as? (a) A good we normally consume (b) A good we usually consume (c) A good for which demand increases if income increases (d) A good for which demand decreases if income increases

According to NBER, which of the following is NOT a defining characteristic of a recession? (a) A significant decline in real GDP for more than a few months (b) High unemployment (c) A sharp fluctuation in real income for 2 weeks (d) All of the above

The source of cutting-edge growth is: (a) Investment in physical capital (b) Education and training to build human capital (c) Advances in technological knowledge (d) Foreign investment

The source of cutting-edge growth is: (a) Investment in physical capital. (b) Education and training to build human capital. (c) Advances in technological knowledge. (d) Foreign investment.

The difference between a final good and an intermediate good is that: (a) Final goods are not counted as part of GDP (b) Intermediate goods are of lower quality than final goods (c) An intermediate good is sold for use as a component in a final good (d) A final good is sold for use as a component of an intermediate good

According to the Solow growth model, what happens to a country's capital stock when it is far below its steady state level? (a) Output decreases slowly at first and faster later on (b) Capital stock decreases quickly at first, and then slower later on (c) Capital stock increases quickly at first, and then slower later on (d) Capital stock increases slowly at first, and then faster later on

When two countries have similar steady-state level of output, and the poorer of the two countries grows faster than the richer country, we say there is a (a) Recession (b) Income Divergence (c) Conditional convergence (d) Short-run business cycle fluctuation

Which of these variables is found in the National Spending approach to calculate GDP? (a) Rent (b) Wages (c) Consumption (d) All of the above

Economic growth in the modern era is primarily due to: (a) Low taxes (b) Government working with the private sector (c) Creation of new knowledge (d) Trade across the globe

An increase in the depreciation rate has what effect in the Solow Growth model? (a) Increases steady state capital and output (b) Increases steady state capital only (c) Decreases steady state capital and output (d) Decreases steady state capital only

In the context of the Solow model which of the following is the best description of the depreciation rate? (a) Amount of capital that wears out each period (b) The rate at which capital is invested (c) Fraction of capital that wears out each period (d) None of the above

Argentina's experience since 1950s is an example of: (a) Growth miracle (b) Gold standard (c) Growth disaster (d) Cutting-edge growth

Which of the following is NOT true about human capital (a) It depreciates (b) It is accumulated through investment in education (c) It exhibits increasing returns (d) It is a factor of production

In the "Little Leap Forward" in China, collective farming was enacted. There is an incentive not to work and to free ride on the effort of others. This is primarily an example of: (a) Trade and specialization (b) Irresponsible government (c) Lack of property rights (d) Political upheaval

Which country is not an example of growth miracle since 1950? (a) South Korea (b) Japan (c) Nigeria (d) None of above

Which property of ideas that support spillovers? (a) Diffusion (b) Exclusivity (c) Non-rivalry (d) Abundance

In the context of the Solow model increases in productivity cause the: (a) Depreciation function to shift downward (b) Production function to shift downward (c) Production function to shift upward (d) Investment curve to shift downward

Which of the following does not contribute to increasing the wealth of a nation: (a) Honest government. (b) Stable political system. (c) Rapidly increasing price level. (d) Availability of natural resources

According to Solow model, long run economic growth is driven by: (a) Growth in capital stock (b) Increase in saving (c) Technical progress (d) Increase in investment

Which of the following is a factor of production that does NOT exhibit diminishing returns? (a) Physical Capital (b) Human Capital (c) Technological Knowledge or Ideas (d) Output

Which of the following is included in the GDP of the United States in 2015? (a) Adway, an Indian student studying in the U.S., buys a used car that was made in the U.S. (b) Rebecca, an American citizen working in Singapore, buys a new toaster oven in Singapore. (c) The U.S. government buys a new set of airplanes for the Air Force. (d) Chad buys newly issued stock of a U.S. corporation.

In the context of the Solow model, which statement is true about a country that has a larger capital stock than its steady state level? Assume there is no technological change. (a) The country will experience positive growth in the long run. (b) Investment is greater than depreciation. (c) The country will experience negative growth in the short run. (d) The growth rate is zero because there are diminishing returns to capital.

Which characteristic of the Solow model is a result of assuming the production function has diminishing returns? (a) The more capital, the more output (b) The higher the level of capital the higher marginal product of capital (c) The higher the level of capital the lower marginal product of capital (d) The lower the level of capital the lower the marginal product of capital

In the context of the Solow model If a disaster happens and as a consequence half of the economy's steady state capital is destroyed. Further this the economy experiences no further technology, investment or depreciation shocks then: (a) The long run economic growth rate is higher (b) The long run economic growth rate is lower (c) The long run economic growth rate remains the same (d) The long run economic growth rate is undetermined

Which of the following is not a consequence of a binding price control? (a) Surplus (b) Shortage (c) Total surplus maximized (d) Rations and waiting in lines

A good is non-rivalrous if: (a) It is not scarce. (b) No one can be excluded from consuming it once it is produced. (c) Two or more people can consume it at the same time. (d) There is little demand for it.

Suppose you bought a second hand car for $5,000 in January 2015. You improved the car this Summer and will sell the car for $8,000 in December 2015, further you will report this sale to the tax authorities. What statement accurately describes the effect of these actions on the United States' National Accounts in 2015? (a) There is no effect on United States GDP because this is a second hand car (b) United States GDP increases by $8,000 (c) United States GDP increases by $3,000 (d) United States GNP increases by $8,000

Which of the following is not a part of the national spending approach for calculating Gross Domestic Product? (a) Consumption (b) Investment (c) Wages (d) Net Exports

Which of the following best approximates the real GDP of Japan in 2016 in US dollars? (a) $450 million (b) $4.5 billion (c) $45 billion (d) $4.5 trillion

(d) $4.5 trillion

If real GDP per-capita decreases by 1 percent, prices increase by 3 percent and the population grows by 4 percent, then nominal GDP growth is: (a) 0 percent (b) 2 percent (c) 5 percent (d) 6 percent

(d) 6 percent

Approximately what share of GDP in the US is consumption? (a) 10% (b) 20% (c) -4% (d) 70%

(d) 70%

Which of the following is an example of a surplus? (a) Empty shelves in a grocery store before a hurricane (b) A bar running out of beer (c) A hotel running out of rooms (d) A warehouse filled with unsold cars due to their artificially high price

(d) A warehouse filled with unsold cars due to their artificially high price

Which of the following is the best definition of absolute advantage? (a) Ability of a country to a produce a good at lower opportunity cost than another country (b) Ability of a country to produce a good using more inputs than another country (c) Ability of a country to a produce a good at higher opportunity cost than another country (d) Ability of a country to produce a good using fewer inputs than another country

(d) Ability of a country to produce a good using fewer inputs than another country

According to the Solow growth model, what happens in steady state? (a) The amount of output invested is equal to the level of capital that depreciates (b) As long as there are no shocks, capital stock does not change between periods (c) The growth rate of the economy is zero (d) All of the above

(d) All of the above

Which of the following is TRUE about economic growth? (a) All countries used to be poor (b) GDP per capita varies among nations (c) Countries grow at different speeds (d) All of the above

(d) All of the above

Which statement is correct regarding the distribution of income across countries? (a) 95% of the world population lives in a country with an annual GDP per capita lower than the US (b) 80% of the world population lives in a country with an annual GDP per capital below average (c) GDP per capita in the United States is 3 times greater than the world average (d) All of the above

(d) All of the above

The countries Boermaland and Braxtonia produces Tulips and Chocolate. Boermaland can produce each good with 1 hour of labor. Braxtonia can produce Tulips with 3 hours of labor and chocolate with 2 hours of labor. Which of the following is correct? (a) Braxtonia has an absolute advantage in tulips (b) Braxtonia has an absolute advantage in chocolate (c) Braxtonia has a comparative advantage in tulips (d) Braxtonia has a comparative advantage in chocolates

(d) Braxtonia has a comparative advantage in chocolates

Suppose there is a binding price ceiling for housing rent and then there is an increase in supply of housing. What will happen to the rental prices? (a) Decrease (b) Increase (c) Has no effect (d) Cannot tell with the given information

(d) Cannot tell with the given information

If two nations are trading and each produces the goods for which it has the lowest opportunity cost, then the two nations are specializing according to: (a) The invisible hand. (b) Absolute advantage. (c) Marginal thinking. (d) Comparative advantage.

(d) Comparative advantage.

According to the National Spending approach of GDP, which of the following makes up a vast majority of US GDP spending? (a) Net Exports (b) Government (c) Investment (d) Consumption

(d) Consumption

The Solow growth model with fixed population, fixed human capital and fixed technology predicts that, in the long run, (a) Richer countries will have higher GDP growth rates (b) Richer countries will have lower GDP growth rates (c) All countries will have similar and positive GDP growth rates (d) GDP growth rate will be zero in all countries

(d) GDP growth rate will be zero in all countries

Technological knowledge is defined as: (a) The productive knowledge and skills that workers acquire through education, training, and experience (b) The stock of tools, including machines, structures, and equipment (c) The intellectual capital gained through years of education and on job training (d) Knowledge about how the world works that is used to produce goods and services

(d) Knowledge about how the world works that is used to produce goods and services

A non-binding price floor causes (a) Higher consumer surplus (b) Search costs induced by shortage (c) Overproduction (d) None of the above

(d) None of the above

In decomposing GDP using factor income approach, which category does Google stocks belong to? (a) Consumption (b) Investment (c) Government purchases (d) None of the above

(d) None of the above

In decomposing GDP using national spending approach, which category does Social Security transfers belong? (a) Consumption (b) Investment (c) Government purchases (d) None of the above

(d) None of the above

Real GDP per capita is a more appropriate measure than real GDP: (a) To understand how income is distributed among people within a country. (b) To understand how income grows over time, with the price level. (c) To rank countries according to the size of their total income. (d) None of the above.

(d) None of the above.

In 2016, aggregate consumption in Lichtenstein were $500bn, aggregate investment was $100bn, total wages were $200bn, total government spending was $100bn, Exports were $50bn and imports were also $50bn. According to the Factor Income approach, what was Lichtenstein's GDP that year? (a) $400 bn (b) $500 bn (c) $700 bn (d) Not enough information

(d) Not enough information

If nominal GDP grows at 7 percent in a given year and population grows at 2 percent, then real per capita GDP grows at: (a) 5 percent (b) More than 5 percent (c) Less than 5 percent (d) Not enough information.

(d) Not enough information.

Which information is more relevant in order to understand the standard of living of the average person in a country? (a) Nominal GDP (b) Real GDP (c) Nominal GDP per capita (d) Real GDP per capita

(d) Real GDP per capita

Suppose production technology for steel changes, under which scenario would the price of steel increase? (a) An increase in subsidies to steel producers (b) Income for steel consumers have declined (c) More suppliers enter the steel market (d) Technology has become worse

(d) Technology has become worse

Suppose the production technology for steel changes, under which scenario would the price of steel increase? (a) An increase in subsidies to steel producers (b) Income for steel consumers have declined (c) More suppliers enter the steel market (d) Technology has become worse

(d) Technology has become worse

Assume there is a binding price ceiling in the market for a normal good and incomes rise over time. What will happen? (a) The shortage will eventually disappear. (b) The surplus quantity will grow. (c) The surplus quantity will fall. (d) The shortage will get worse.

(d) The shortage will get worse.

Suppose a dealer bought a second hand car for $5,000 in January 2015, the dealer sold the car to You for $6,000 in February 2015. That is, the dealer earned $1,000. What statement accurately describes the effect of these actions on the United States' National Accounts in 2015? (a) There is no effect on United States GDP because this is a second hand car (b) United States GDP increases by $5,000 (c) United States GDP increases by $6,000 (d) United States GDP increases by $1,000

(d) United States GDP increases by $1,000

Fill in the blanks: Prior to the Industrial Revolution, there was ______________ differences in real GDP per capita across countries. By the end of the 20th century, these differences had __________________. (a) large, decreased (b) large, increased (c) small, decreased (d) small, increased

(d) small, increased

For most of recorded human history, long-run GDP per capita growth was: (a) much higher than it has been in recent decades. (b) the same as it is today. (c) the highest during the Dark Ages. (d) almost nonexistent.

?????

Which country is associated with being a growth disaster in the 20th century? (a) Japan in 1950 (b) South Korea in 1970 (c) Argentina after the Great Depression (d) United States during the twentieth century

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