Macroeconomics - Chapter 9: Long-Run Economic Growth

Indicate whether the statements are true or false. (a) Human and physical capital are only beneficial to an economy when there is an abundance of natural resources in the economy. (b) The key to prosperity in the 20th century is an economy rich in natural resources. (c) Over the past two hundred years, improvements in productivity have offset lost productivity reduction due to less land being available. (d) All else equal, countries with more natural resources have a higher GDP per capita than those with few natural resources.

(a) False (b) False (c) True (d) True

Indicate whether the given statements about climate change and economic growth are true or false. (a) Poorer countries have historically been responsible for the bulk of world carbon emissions because of poor technology and environmental regulations. (b) Tackling climate change issues is likely only to modestly dent long-term economic growth. (c) Air and water quality in developed countries is generally much better today than it was several decades ago. (d) Carbon emissions are negatively correlated with economic growth.

(a) False (b) True (c) True (d) False

Indicate whether the statements are true or false. (a) In the 19th century, countries with the highest per capita GDP were nearly always abundant in minerals and productive farming land. (b) In the modern economy, human and physical capital are generally less important in productivity than natural resources. (c) Finding alternatives to natural resources will be very important to long-term economic growth. (d) In the modern economy, countries that possess few domestic natural resources essentially have no chance to develop economically. (e) Long-run economic growth is unlikely to be sustainable because of finite natural resources.

(a) True (b) False (c) True (d) False (e) False

Suppose a hypothetical economy is currently operating at point A on the per worker production function (PWPF) labeled PF1 in the accompanying graph. (a) Which event could move the economy from point A to point B? [1] increase in the amount of capital [2] decrease in the amount of capital [3] technological advancement [4] increase in real GDP (b) Which event could shift the PWPF from PF1 to PF2, or from point A to point C? [1] decrease in the amount of capital [2] increase in real GDP [3] increase in the amount of capital [4] technological advancement

(a) [1] increase in the amount of capital (b) [4] technological advancement

(a) When considering economic growth, many policy makers focus on real gross domestic product (GDP) per capita since it takes into account the potentially distorting effects of [1] pollution. [2] unemployment. [3] population change. [4] capital flows. (b) Any large, sustainable increase in real GDP must be due to steadily increasing [1] levels of labor force participation. [2] birth rates. [3] levels of research and development. [4] labor productivity.

(a) [3] population change. (b) [4] labor productivity.

The average rate of growth for slow-growth countries is around 2% per year, and for fast-growth, greater than 5% per year. (a) Suppose the growth rate of the economy is 2%. The size of the economy roughly doubles every [1] 5 years. [2] 50 years or more. [3] 20 years. [4] 10 years. [5] 35 years. (b) If instead the growth rate is 7%, the doubling time for the economy is [1] 20 years. [2] 5 years. [3] 35 years. [4] 10 years. [5] 50 years or more. (c) Economic growth is important to understand because [1] understanding economic growth is key to getting a banking job after graduation. [2] income equality cannot exist without growth. [3] growth guarantees that the rich get richer and the poor get poorer. [4] it is closely tied to standard of living.

(a) [5] 35 years. (b) [4] 10 years. (c) [4] it is closely tied to standard of living.

Complete the sentences on the role of government in promoting economic growth. (a) The government's direct role in the production of physical capital is primarily focused on (b) The government's direct role in creating human capital is primarily focused on (c) Governments play an indirect role in private savings and investment through

(a) developing infrastructure (b) improving the education system (c) regulating the financial system

Classify each example as either relating to human capital, physical capital, or technology. (a) An increase in adult literacy affects (b) An increase in the number of company cars impacts (c) An increase in the number of college graduates impacts (d) New distribution techniques affect (e) An increase in the number of company computers affects (f) More people graduating from culinary school affects (g) A new cancer treatment affects (h) A doctor's knowledge about a new cancer treatment affects

(a) human capital (b) physical capital (c) human capital (d) technology (e) physical capital (f) human capital (g) technology (h) human capital

Indicate whether each of the following items is an input in the aggregate production function for GDP. (a) Contributions to Social Security (b) Bonds issued by an automaker (c) Profits of a large investment company (d) A significant amount of oil discovered in Texas (e) A recent graduate with an engineering degree (f) Unskilled migrant worker from Latin America (g) A decrease in property taxes (h) An upgrade of computers for Mikey's Motors

(a) is not an input (b) is not an input (c) is not an input (d) is an input (e) is an input (f) is an input (g) is not an input (h) is an input

[QUIZ] Use Figure: Technological Progress and Productivity Growth. Significant technological progress, with all other factors remaining unchanged, is BEST indicated by a move from: [1] B to C. A to B. B to A. C to B.

[1] B to C.

[QUIZ] Improvements in labor made possible by education and knowledge that is embodied in the workforce is known as _____ capital. [1] human [2] financial [3] real [4] physical

[1] human

[QUIZ] Which factor is the MOST widely accepted measure of economic growth over time? [1] increases in real GDP per capita [2] increases in the available labor supply [3] declines in real interest rates [4] inflation

[1] increases in real GDP per capita

[QUIZ] Productivity is declining when: [1] population growth exceeds real GDP growth. [2] real GDP growth exceeds population growth. [3] the number of hours worked exceeds the number of workers. [4] the ratio of adult civilians employed outside the home rises.

[1] population growth exceeds real GDP growth.

[QUIZ] A recent estimate put the cost of unmitigated climate change at _____% of world gross domestic product by 2100. [1] 10 [2] 20 [3] 30 [4] 40

[2] 20

[QUIZ] If real GDP grows at an annual rate of 1%, it will double in approximately _____ years. [1] 35 [2] 70 [3] 23 [4] 11

[2] 70

[QUIZ] Use Figure: Technological Progress and Productivity Growth. Which change in real GDP is MOST likely to have resulted from an increase in the quality (as well as quantity) of government spending on education? [1] A to B [2] B to C [3] C to B [4] B to A

[2] B to C

Which of the statements best describes the idea of economic convergence? [1] In a supply and demand diagram, the preferences of producers and consumers converge on the equilibrium point. [2] Lower GDP per capita countries will catch up with higher GDP per capita countries. [3] Wages for all workers worldwide will eventually converge to equal levels. [4] The salaries of men and women will one day be equal.

[2] Lower GDP per capita countries will catch up with higher GDP per capita countries.

[QUIZ] An example of human capital is a person's: [1] capital goods or machines. [2] stocks and bonds. [3] job skills. [4] money.

[3] job skills.

[QUIZ] Sub-Saharan Africa is poor mainly because: [1] of a "brain drain," whereby the most educated people tend to move to other countries. [2] diamond merchants have depleted the region of resources. [3] of political instability and civil wars. [4] settlers from Europe own much of the land.

[3] of political instability and civil wars.

[QUIZ] Output per capita in the United States in 2016 was about _____ as high as it was in 1900. [1] twice [2] 3.5 times [3] 10.5 times [4] 8.5 times

[4] 8.5 times

[QUIZ] _____ refers to spending to develop and implement new technologies. [1] Human capital [2] Physical capital [3] Natural resources [4] Research and development

[4] Research and development

The purpose of growth accounting is to [1] use the change in total factor productivity to estimate the growth rate of an economy. [2] estimate the growth rate of an economy. [3] estimate the extent to which growing costs are affecting the overall performance of an economy. [4] estimate the contribution each component of the aggregate production function makes to overall economic growth.

[4] estimate the contribution each component of the aggregate production function makes to overall economic growth.

[QUIZ] Labor productivity growth can be attributed to: [1] declining university attendance. [2] decreases in physical capital per worker. [3] increased population growth. [4] improved technology.

[4] improved technology.

[QUIZ] Which factor contributes to economic development? [1] a low saving and investment rate [2] the absence of any governmental involvement in the economy [3] a command economy [4] investment in infrastructure

[4] investment in infrastructure

Select the best definition of labor productivity [1] Output per worker and output per capita [2] Output per capita [3] Output per worker and capital per worker [4] Capital per worker [5] Output per worker

[5] Output per worker