Chapter 8 Macro

If Q is total real output, K is capital in use, L is labor employed, and the productivity of labor grows, other things constant, then

Q/L rises

T/F "The most important factor in determining a nation's standard of living in the long run is the productivity of its resources."

TRUE

T/F If on-the-job experience causes labor productivity to increase, that is the result of an improvement in human capital

TRUE

T/F The diminishing slope of the per-worker production function reflects the law of diminishing marginal returns.

TRUE

T/F Basic research has less immediate payoff to society but is likely to be more important than applied research in fostering long-term growth.

True

T/F Education makes workers aware of the latest production techniques and more receptive to new approaches and methods.

True

T/F One impediment to the convergence of world economies is the vast differences in human capital.

True

Which of the following would be likely to cause a decrease in the labor productivity growth rate?

a service sector that is growing as a percentage of GDP

The rules of the game include all of the following except one. Which is the exception?

a stable political environment

If a nation moves upward along its per-worker production function relating output per worker to capital per worker,

labor productivity rises

A decrease in the capital-labor ratio means

lower labor productivity because labor is working with relatively less capital

Which of the following does not contribute to an improved standard of living?

lower prices for the necessities of life

The reason why small changes in productivity growth rates have large long-term effects on economic growth over the long run is that

lower productivity growth effects on the economy are compounded over the years, leading to large cumulative effects

What is the definition of productivity?

output divided by quantity of input

Labor productivity measures

output per unit of labor

Which of the following is the best indicator of the standard of living?

real GDP per capita

An increase in the quantity of capital per worker would

result in movement along the current per-worker production function

Which of the following best defines basic research?

the search for knowledge without regard to how that knowledge will be used

Productivity growth is important because

it ultimately increases a nation's standard of living

Government policy that uses taxes, subsidies and regulation for the purpose of giving domestic industry an advantage, is known as

industrial policy

Basic research

is a search for general knowledge without a specific product or procedure in mind

T/F Labor productivity tends to fall as the capital-labor ratio rises.

FALSE

T/F Applied research is the search for knowledge without regard to how that knowledge will be used.

False

T/F Declining growth in productivity means that the standard of living has been falling over time

False

T/F If labor productivity growth slows, the standard of living must decrease.

False

T/F Over the long run, technological change increases both labor productivity and unemployment rates.

False

T/F The shape of the per-worker production function in Exhibit 8-1 illustrates the law of increasing marginal returns to capital(output/capital)

False

Which of the following would not slow down productivity growth?

Firms switch from providing services to producing goods.

Which of the following best describes the impact of technological change on labor?

It causes unemployment in the short run and higher incomes in the long run.

Suppose the growth rate of employment is positive but labor productivity remains unchanged. What will happen to real GDP?

It will increase

The resource whose productivity is most commonly measured is

Labor

The difference between basic and applied research is that

basic research has less immediate payoff to society than applied research typically does

Which is the resource whose quality is most often enhanced by technological change

capital

The slope of the per-worker production function diminishes as the amount of capital per worker increases. This is a reflection of the law of

diminishing marginal returns

If per capita GDP growth exceeds labor productivity growth,

employment must be growing faster than the population

Which of the following does not contribute to labor productivity growth?

growth of the labor force

Physical capital includes all of the following except

high school diploma or college degree

The difference between human capital and physical capital is that

human capital is not physical; an example of human capital is education

An increase in the amount of capital per worker will

increase labor productivity but not capital productivity

Which of the following is most likely to increase productivity growth, as measured using GDP statistics?

increased research and development

The law of diminishing marginal returns states that as the quantity of capital per worker increases, other things constant, output per worker

increases at a decreasing rate