ECO11 CH7

2. According to the course's textbook, over the past century in the United States, real GDP per person has grown by about a. 1 percent per year. b. 2 percent per year. c. 3 percent per year. d. 4 percent per year.

b. 2 percent per year.

11. The consequences of diminishing returns to physical capital include which of the following? (Indicate all correct answers—there are more than one.) a. In the long run, a higher rate of saving leads to a higher level of productivity and income but not to higher growth of productivity and income. b. In the long run, a higher rate of saving leads to higher growth of productivity and income. c. All other factors being the same, real GDP per person grows at a faster rate in countries that start off relatively poor than in countries that start off relatively rich. (Catch-up effect) d. All other factors being the same, real GDP per person grows at a slower rate in countries that start off relatively poor than in countries that start off relatively rich. (Catch-up effect)

a. In the long run, a higher rate of saving leads to a higher level of productivity and income but not to higher growth of productivity and income. c. All other factors being the same, real GDP per person grows at a faster rate in countries that start off relatively poor than in countries that start off relatively rich. (Catch-up effect)

20. Which of the following is true? a. Michael Kremer, a contemporary economist, has argued that with greater population, society would generate more ideas so that growth of real GDP per person could continue. Thomas Malthus, a nineteenth-century economist, had argued that increasing population would outstrip agricultural production. b. Kremer argued that increases in population would reduce the amount of human and physical capital per worker so that eventually the standard of living would decline. Malthus argued that increases in technology would allow increased output growth so that even with population growth, society would enjoy a higher standard of living. c. Malthus argued that with greater population, society would generate more ideas so that growth of real GDP per person could continue. Kremer argued that increasing population would outstrip agricultural production. d. Malthus argued that increases in population would reduce the amount of human and physical capital per worker so that eventually the standard of living would decline. Kremer argued that increases in technology would allow increased output growth so that even with population growth, society would enjoy a higher standard of living.

a. Michael Kremer, a contemporary economist, has argued that with greater population, society would generate more ideas so that growth of real GDP per person could continue. Thomas Malthus, a nineteenth-century economist, had argued that increasing population would outstrip agricultural production.

5. A nation's standard of living is determined by a. its productivity. b. its gross domestic product. c. its national income. d. how much wealth it has relative to other countries.

a. its productivity.

8. The equipment and structures available to produce goods and services are called a. physical capital. b. human capital. c. the production function. d. technology.

a. physical capital.

14. After adjusting for inflation, the prices of most natural resources have been a. steady or falling, meaning that our ability to conserve them is growing more rapidly than their supplies are dwindling. b. steady or falling, meaning that their supplies are dwindling more rapidly than our ability to conserve them is growing. c. rising, meaning that our ability to conserve them is growing more rapidly than their supplies are dwindling. d. rising, meaning that their supplies are dwindling more rapidly than our ability to conserve them is growing.

a. steady or falling, meaning that our ability to conserve them is growing more rapidly than their supplies are dwindling.

4. Last year real GDP per person in Olympus was 4,500. The year before it was 4,250. What was the growth rate of real GDP per person? a. 5.6 percent b. 5.9 percent c. 6.5 percent d. None of the above are correct to the nearest tenth.

b. 5.9 percent

19. Which of the following countries achieved higher economic growth, in part by mandating a reduction in population growth? a. Australia b. China c. France d. Great Britain

b. China

15. Technological knowledge refers to a. human capital. b. available information on how to produce things. c. resources expended transmitting society's understanding to the labor force. d. All of the above are technological knowledge.

b. available information on how to produce things.

6. Which of the following is a correct way to measure productivity? a. divide the number of hours worked by output b. divide output by the number of hours worked c. compute output growth d. divide the change in output by the change in number of hours worked

b. divide output by the number of hours worked

10. The traditional view of the production process is that physical capital is subject to diminishing returns. That is: a. as the stock of physical capital increases, output per worker decreases. b. as an economy's stock of physical capital increases, businesses become less profitable c. as the stock of physical capital increases, the extra output produced from an additional unit of physical capital decreases d. All of the above are correct

c. as the stock of physical capital increases, the extra output produced from an additional unit of physical capital decreases

12. A leading environmental group recently published a report contending that humans are running a "resource deficit" because we are using natural resources faster than they can be regenerated. The group claims that this means that economic growth will eventually stop and may even be reversed. An economist would a. agree with the report, and would point to rising natural resource prices as evidence. b. agree with the report, but wouldn't consider it important because growth would not slow down for several centuries. c. disagree with the report, in part because it ignores technological progress, which may enable us to do more with any remaining resources. d. disagree with the report because labor and capital are the primary determinants of growth, and since they are plentiful, growth would not slow down.

c. disagree with the report, in part because it ignores technological progress, which may enable us to do more with any remaining resources.

18. Suppose a country reduces trade restrictions. This country would be pursuing an a. inward policy, which most economists believe has beneficial effects on the economy. b. inward policy, which most economists believe has adverse effects on the economy. c. outward policy, which most economists believe has beneficial effects on the economy. d. outward policy, which most economists believe has adverse effects on the economy.

c. outward policy, which most economists believe has beneficial effects on the economy.

17. Patents turn new ideas into a. public assets, and increase the incentive to engage in research. b. public assets, but decrease the incentive to engage in research. c. private assets, and increase the incentive to engage in research. d. private assets, but decrease the incentive to engage in research

c. private assets, and increase the incentive to engage in research.

13. Which of the following best states economists' understanding of the facts concerning the relationship between natural resources and economic growth? a. A country with no or few domestic natural resources is destined to be poor. b. Cross-country differences in the availability of natural resources have virtually no role in explaining differences in standards of living. c. Some countries can be rich mostly because of their natural resources. Countries without natural resources need not be poor, but they can never have very high standards of living. d. Abundant domestic natural resources may help make a country rich, but even countries with few natural resources can have high standards of living.

d. Abundant domestic natural resources may help make a country rich, but even countries with few natural resources can have high standards of living.

9. Which of the following is considered human capital? a. knowledge acquired from early childhood education programs b. knowledge acquired from grade school c. knowledge acquired from on-the-job training d. All of the above are correct

d. All of the above are correct

16. Regarding the protection of property rights, which of the following is correct? a. The protection of property rights assures people that they would be able to enjoy the fruits of their hard work and/or their good luck. b. Property rights give people the ability to use the resources they own as they wish. c. An absence of well-established and well-enforced property rights tends to be associated with a low standard of living. d. All of the above are correct.

d. All of the above are correct.

7. Which of the following is a determinant of productivity? a. human capital per worker b. physical capital per worker c. natural resources per worker d. All of the above are correct.

d. All of the above are correct.

3. In the length of one generation, which of the following countries has gone from being among the poorest countries in the world to being among the richest? a. Chad b. Ethiopia c. India d. South Korea

d. South Korea

1. If one wants to know how the material well-being of the average person has been changing over time in a given country, one should look at the a. level of nominal GDP. b. level of real GDP. c. growth rate of nominal GDP. d. growth rate of real GDP. e. growth rate of real GDP per person.

e. growth rate of real GDP per person.