CHAPTER 7

Countries that currently have low real GDPs per capita are destined to always have lower living standards than countries that currently have high real GDPs per capita. True False

False

Economic growth is usually measured by the annual percent change in the nominal output of goods and services per capita. True False

False

Human welfare is greatly influenced by long-term changes in a nation's capacity to produce goods and services. True False

True

Which of the following is correct? a. Increased education adds to the stock of human capital. b. An increase in the quantity of labor always leads to economic growth. c. Third World countries are rich in human capital. d. A decrease in the productivity of labor leads to economic growth.

a. Increased education adds to the stock of human capital.

Which of the government policies below is most unlikely to encourage per capita economic growth? a. high taxes on companies that spend a lot on capital formation b. promotion of education and training programs for workers c. the use of tax revenues for investment and capital formation d. special subsidies for capital-intensive forms of production

a. high taxes on companies that spend a lot on capital formation

Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that ___ is typically the most important contributor to U.S. economic growth. a. technology b. human capital c. a market orientation d. physical capital

a. technology

Which of the following did not result in economic growth? a. The invention of a threshing machine for harvesting grains. b. Many citizens emigrating from Zimbabwe when a politically repressive regime took office. c. Installing a network of irrigation ditches and pumping stations in order to grow fruits and vegetables in parts of southern California. d. Increased government funding of post-secondary education.

b. Many citizens emigrating from Zimbabwe when a politically repressive regime took office.

The difference in economic growth in North and South Korea is likely explained by differences in a. population b. institutions c. resource availability d. technological challenges

b. institutions

Over the long run, ___ per hour is the most important determinant of the average wage level in any economy. a. supply b. productivity c. dollars d. demand

b. productivity

Which of the following best describes the relationship between economic growth and literacy? a. As the economy grows, literacy declines because it becomes less and less useful in a developed economy. b. Increased literacy initially stimulates economic growth by raising labor productivity, but as the economy grows and the opportunity cost of education rises, literacy declines. c. Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education. d. There is no correlation between economic growth and literacy.

c. Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.

Which of the following is most likely to contribute to economic growth as measured by GDP per capita? a. the imposition of tariffs and quotas on imported goods b. rapid population growth c. increased capital formation d. an increase in marginal tax rates

c. increased capital formation

Which of the following is unlikely to affect the rate of economic growth? a. technological change b. the quantity of available resources c. the level of government spending d. the quality of available resources

c. the level of government spending

The prosperity of an economy is typically measured in terms of: a. GDP b. economic output c. GNP d. GDP per capita

d. GDP per capita

Which of the following factors contribute to economic growth? a. a decrease in the productivity of labor b. an increase in the standard of living c. an increase in the average wage rate paid to workers d. an increase in the proportion of the population that is college educated

d. an increase in the proportion of the population that is college educated