Chapter 20 Macroeconomics

A country will roughly double its GDP in five years if its annual growth rate is:

14%

A country will roughly double its GDP in twenty years if its annual growth rate is:

3.5%

Which of the following will not increase the rate of growth in an economy?

A reduction in the rate of savings

Name a country that has a relative abundance of natural resources

Canada

Increases in the quality and quantity of an economy's resources have little effect on its potential output in the long run.

False

Name a country that is lacking an abundance of natural resources?

Japan

Which of the following did not result in economic growth? • Installing a network of irrigation ditches and pumping stations in order to grow fruits and vegetables in parts of southern California • Cyrus McCormack inventing a threshing machine for harvesting grains • After World War II, the U.S. instituting the GI bill, which provided education subsidies to soldiers being released from service duty • Many citizens emigrating from a nation when a politically repressive regime takes office

Many citizens emigrating from a nation when a politically repressive regime takes office

One of the most important determinants of accelerated economic growth is:

a high level of savings

Given a constant rate of growth of real GDP, what would lead to an increasing real GDP per capita?

a rate of population growth that is less than the rate of growth of real GDP

Which one of the following will not cause the production possibilities curve to shift outward? • improvements in the stock of land • increased educational opportunities • a very low birth rate • increased entrepreneurial activity

a very low birth rate

In countries with low levels of income: • the opportunity cost of an education is higher than in high-income countries. • illiteracy rates are higher than in high-income countries • economies are primarily agricultural-based

all of the above

Technology can enable producers to economize on: • Labor • capital • land

all of the above

When observing economic growth and literacy rates, it is clear that: • economic growth causes higher literacy rates. • economic growth may be a consequence of improved education. • improved levels of education may be the result of increasing economic growth.

all of the above

Which one of the following will cause the production possibilities curve to shift outward? • improved public education • improved health care systems • larger budgets for research, development, and exploration • all of the above

all of the above

Which one of the following will determine the size of the production possibilities curve? • amount of labor • amount of capital • entrepreneurship • all of the above

all of the above

A negative growth rate will cause

an inward shift of an economy's production possibilities curve

Growth in a production possibilities curve diagram is shown as

an outward shift on the curve

The rule of 70 which predicts the time required for the economy of a nation to double, is based on the mechanism of

compound interest

If people began to retire at a later age and there was an increase in the capital stock, real GDP growth would ____ and real GDP growth per capita would ____.

decrease: increase

Over the last several decades, the amount of government investment in U.S. infrastructure in real terms has:

decreased

An increase in the quantity of labor inputs always leads to economic growth.

false

As economic growth rises, literacy rates tend to fall.

false

Brazil has a relatively low income per capita because it has relatively few natural resources.

false

Economists generally define economic growth as an increase in the nominal income of the population.

false

Generally, there is an inverse relationship between the level of savings and the level of long-term economic growth

false

Higher rates of real economic growth can allow a less-developed, low per capita income country to attain the same standard of living as a more developed, high per capita income country in a few years.

false

If the educational attainment of a nation's population increases, the economy's production possibilities curve shifts inward

false

In developing countries, the opportunity cost of an education is relatively low compared to the cost in a highly developed country

false

It is impossible to have economic growth unless a country or a region has abundant natural resources to sustain the growth

false

If real GDP per capita is decreasing, real output is:

growing less rapidly than the population.

In the long run, the most important source of increase in a nation's standard of living is a:

high rate of economic growth

If there was both an increase in technology and an increase in labor force participation, real GDP growth would ____ and real GDP growth per capita would ____.

increase; increase

Which of the following will not contribute to increasing the stock of physical or human capital of a nation?

lack of enforcement of property rights

Which of the following statements is not correct? • Economic growth is best measured by the annual percentage change in nominal GDP per capita. • An economy producing along the production possibilities curve is operating at its potential output. • Economic growth is a crucial determinant of people's well-being. • If the quality of labor improves, an economy's production possibilities curve will shift outward.

o Economic growth is best measured by the annual percentage change in nominal GDP per capita

To achieve a high standard of living, a nation should:

promote economic growth

The measure most commonly used by economists to gauge the standard of living of a nation is:

real GDP per capita

The prosperity of a nation today is typically measured by its:

real output per capita

Output per capita will tend to increase if the labor force participation rate in a country ____ or if workers put in ____ hours.

rises; longer

The ____ shows roughly how long it will take a nation to double its output at various growth rates.

rule of 70

For a low-income country to develop into a high-income country, ____ is (are) needed.

sustained economic growth

The faster the rate of technological progress:

the greater the rate of economic growth

How much a country's economy will produce at its potential output is also called:

the natural rate of output

The slower the rate of capital formation

the slower the rate of economic growth

A technological advance may come in either the form of a product or a process innovation.

true

As savings grow in an economy, economic growth rises

true

Capital formation is a key component of economic growth.

true

Economies of large-scale production may exist in some forms of production, so larger markets associated with greater populations can lead to more efficiently sized production units.

true

Foreign direct investment-capital injections from abroad-can promote economic growth

true

Free trade can promote greater output because of the principle of comparative advantage

true

Hong Kong and Japan have achieved relatively high incomes per capita despite lacking an abundance of natural resources.

true

The higher opportunity cost of obtaining an education in developing countries is one of the reasons that school enrollments are lower

true

Thomas Malthus believed that in the long run, the growth rates of real GDP would not exceed population growth

true

Thomas Malthus's predictions did not come to pass because he implicitly assumed that there would be no technological advances and did not foresee that agricultural land was not completely fixed in quantity or quality.

true

Ultimately, productivity growth is the major determinant of a country's standard of living

true

Education would be considered investments in

• Human capital

Rapid population growth can threaten sustained economic growth if it:

• Leads to diminishing marginal returns in production

Enforcement of property rights is likely to result in:

• More incentives to invest

When measuring economic growth, economists typically focus on per capita real GDP in order to account for variations in the:

• Size of population • Price level

New growth theorists believe that increased economic growth is primarily driven by:

• Technological innovations and ideas

When an economy experiences significant economic growth

• a direct relationship exists between output per capita and adult literacy rates.

Given a constant rate of growth of real GDP, what would cause a fall in real GDP per capita?

• a rate of population growth that is greater than the rate of growth of real GDP

Economic growth is measured by the

• annual percentage change in per capita real output of goods and services

An increase in the stock of capital:

• causes an economy's production possibilities curve to shift outward over time.

Higher levels of savings will result in all of following except:

• greater economic growth. • higher capital formation. • more consumption in the future. • lower rates of investment.

If real GDP per capita is increasing, real output is:

• growing more rapidly than the population

What best describes the relationship between economic growth and literacy?

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

Real output per capita

• is measured by real GDP per capita. • is total real output ( real GDP) divided by the number of persons among whom it will be distributed. • is one measure of the average level of economic well being in a country.

Improvements in and greater stocks of land, labor, capital, and entrepreneurial activity will shift the production possibilities curve:

• outward, such that more goods and services can be produced.

If real GDP is increasing more rapidly than the population, then:

• per capita real GDP will be increasing.

In any country, the population will generally be better off as long as the ____ over time and population ____.

• quantity and quality of output increases; does not increase faster than real output

If productivity of an economy increases, then:

• the amount of goods and services produced by a worker per hour increases

Which of the following affects the rate of economic growth?

• the quality of available resources. • the quantity of available resources. • technological change All of the above