ECON 102: Chapter 6

A

1) According to the Economic Times (09/2012), Standard & Poor's forecast for India's GDP growth rate was cut by 1 percentage point to 5.5 percent as the entire Asia Pacific region feels the pressure of ongoing economic uncertainty. India has averaged 7 percent growth in GDP since 1997. Which of the following is TRUE? A) India's PPF has been shifting rightward since 1997. B) India has been moving from a point within its PPF to points beyond its PPF. C) India's PPF has been shifting leftward since 1997. D) India's PPF has not shifted since 1997.

A

10) During 2013, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2012, real GDP was 105 billion and the population was 0.85 billion. Economia's growth rate of real GDP per person is A) 3.4 percent. B) 9.5 percent. C) 5.9 percent. D) 5 percent.

B

11) In 2011, Armenia had a real GDP of approximately $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. Armenia's real GDP per person in 2012 was A) $380. B) $1,545. C) $132. D) $1,413.

A

12) During 2014, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2013, real GDP was 105 billion and the population was 0.85 billion. In 2014, real GDP per person was A) $128. B) $124. C) $135. D) $117.

B

13) Suppose a nation's population grows by 2 percent and, at the same time, its GDP grows by 5 percent. Approximately how fast will real GDP per person increase? A) 2 percent per year B) 3 percent per year C) 5 percent per year D) 10 percent per year

B

14) If a nation's population grows, then A) there can be no economic growth. B) growth in real GDP per person will be less than the growth of real GDP. C) growth in real GDP per person will be greater than the growth of real GDP. D) there must be an increase in real GDP per person.

A

28) A decrease in population shifts the A) labor supply curve leftward. B) labor demand curve leftward. C) labor supply curve rightward. D) labor demand curve rightward.

D

29) Moving along the aggregate production function shows the relationship between ________, holding all else constant. A) labor input, capital input and real GDP B) technology and real GDP C) capital input and real GDP D) labor input and real GDP

A

3) The best definition for economic growth is A) a sustained expansion of production possibilities measured as the increase in potential GDP over a given period. B) a sustained expansion of consumption goods over a given period. C) a sustained expansion of production possibilities measured as the increase in nominal GDP over a given period. D) a sustained expansion of production goods over a given period.

B

30) The quantity of labor demanded depends on the A) money wage rate AND the real wage rate. B) real wage rate not the money wage rate. C) price of output not the money wage rate nor the real wage rate. D) money wage rate not the real wage rate.

D

31) The real wage rate equals A) (money wage) + (number of hours worked)/(price level). B) (money wage rate) × (price level). C) (price level)/(money wage rate). D) (money wage rate)/(price level).

C

32) A movement along the aggregate production function is the result of a change in A) technology. B) capital. C) the quantity of labor. D) interest rates.

B

33) If the price level increases and workers' money wage rates remain constant,which of the following will occur? I. The quantity of labor supplied will decrease. II. The real wage rate will decrease. III. The labor supply curve will shift rightward. A) I only B) I and II C) II and III D) I, II and III

C

34) Which of the following statements regarding human capital is INCORRECT? A) Writing and mathematics, the most basic of human skills, are crucial elements in economic progress. B) The accumulation of human capital is the source of both increased productivity and technological advance. C) Education is the only vehicle for the creation of human capital because training simply reinforces what has already been learned. D) Human capital is the accumulated skill and knowledge of human beings.

A

35) The country of Kemper is on its aggregate production function at point W in the above figure. The government of Kemper passes a law that makes 4 years of college mandatory for all citizens. After all citizens have their education, the economy will A) move to point such as Z. B) move to point such as Y. C) remain at point W. D) move to point such as X.

A

36) Factors that influence labor productivity include ________. A) physical capital, human capital, and technology B) the labor demand curve C) the inflation rate, the real wage rate, and the exchange rate D) physical capital, the real wage rate, and technology

C

37) The country of Kemper is on its aggregate production function at point W in the above figure. If the population increases with no change in capital or technology, the economy will A) move to point such as Y. B) remain at point W. C) move to point such as X. D) move to point such as Z

B

38) The tables above show the labor market and the production function schedule for the country of Pickett. Potential GDP is ________. A) $40 trillion B) $14 trillion C) $9 trillion D) $25 trillion

C

39) Labor productivity increases with A) increases in depreciation. B) increases in consumption expenditure. C) increases in capital. D) All of the above answers are correct.

D

4) Slowdonia's current growth rate of real GDP per person is 1 percent a year. Approximately how long will it take to double real GDP per person? A) 10 years B) 35 years C) 100 years D) 70 years

A

40) Technological change A) increases potential GDP. B) lowers the real wage rate. C) decreases labor productivity. D) has no effect on employment.

A

41) If capital per hour of labor decreases, real GDP per hour of labor A) decreases for a given level of technology. B) increases for a given level of technology. C) increases because the level of technology increases. D) decreases because the level of technology decreases.

D

42) Saving and investment that increase a nation's capital lead to A) a decrease in labor productivity as capital is used to replace labor. B) slower growth because there is a lack of consumption. C) a decrease in the amount of capital per worker. D) an increase in labor productivity.

D

43) The tables above show the labor market and the production function schedule for the country of Pickett. An increase in population changes the labor supply by 20 billion hours at each real wage rate. Potential GDP ________. A) does not change B) decreases to $3 trillion C) increases to $50 trillion D) increases to $18 trillion

D

44) If capital per worker rises A) firms respond by raising their prices. B) labor productivity decreases. C) no technological progress occurs. D) labor productivity increases.

C

45) Neoclassical growth theory predicts that A) growth in real GDP can continue indefinitely. B) advances in technology are a result of discoveries motivated by the pursuit of profits. C) advances in technology increase the productivity of capital, which leads to an increase in investment and rising real GDP per person. D) growth in real GDP can increase without any increase in investment.

C

46) Classical growth theory proposes that real GDP growth is ________ and that real GDP per person will ________ the subsistence level. A) temporary; be above and below B) permanent; temporarily be above C) temporary; temporarily be above D) permanent; always be above

D

47) Which of the following ideas apply to the neoclassical growth theory? I. The rate of technological change influences the rate of economic growth. II. Technological change promotes saving and investment. III. Convergence of economic growth rates across countries A) I only B) III only C) I and II D) I, II and III

C

48) The view that population growth occurs when real GDP per person exceeds the amount necessary to sustain life is part of the ________. A) new growth theory B) modern theory of population growth C) classical growth theory D) neoclassical growth theory

A

49) Which of the following statements is CORRECT? I. Higher savings rates can stimulate economic growth. II. Limiting international trade can stimulate economic growth. A) I only B) II only C) both I and II D) neither I nor II

C

5) Real GDP per person in the country of Flip is $10,000, and the growth rate is 10 percent a year. Real GDP per person in the country of Flap is $20,000 and the growth rate is 5 percent a year. When will real GDP per person be greater in Flip than in Flap? A) in 10 years B) never C) in 15 years D) in 2 years

A

50) A higher saving rate leads to faster growth because A) more saving produces greater additions to capital per hour of labor, raising real GDP per person. B) people could consume more of an economy's output. C) capital would wear out faster. D) population growth would accelerate.

D

6) Slowdonia's current growth rate of real GDP per person is 2 percent a year. How long will it take to double real GDP per person? A) 28.6 years B) half a year C) approximately 10 years D) 35 years

D

7) We are interested in long-term growth primarily because it brings A) higher price levels. B) lower price levels. C) trade wars with our trading partners. D) higher standards of living.

B

8) According to the Economic Times (09/2012), Standard & Poor's forecast for India's GDP growth rate was cut by 1 percentage point to 5.5 percent as the entire Asia Pacific region feels the pressure of ongoing economic uncertainty. India has averaged 7 percent growth in GDP since 1997. Based on this story, it is most likely that the slowdown reflects a A) change to India's long-term economic growth rate. B) temporary business cycle slowdown. C) temporary business cycle expansion. D) shrinkage of India's economy.

A

9) Using the Rule of 70, if the country of Huttodom's current growth rate of real GDP per person was 10 percent a year, how long would it take the country's real GDP per person to double? A) 7 years B) 0.7 years C) 20 years D) 10 years

B

15) If a rich country grows at a faster rate than a poor one, then A) the difference in their living standards will not change over time. B) the gap in their standard of living will widen over time. C) whether or not the living standards gap widens or closes over time depends on the absolute size of the relative growth rates. D) the gap in their standard of living will close over time.

D

16) In 2011, Armenia had a real GDP of $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. What was Armenia's economic growth rate from 2011 to 2012? A) 0.38 percent B) 3.8 percent C) 8.3 percent D) 9.0 percent

A

17) Suppose real GDP for a country is $13 trillion in 2015, $14 trillion in 2016, $15 trillion in 2017, and $16 trillion in 2018. Over this time period, the real GDP growth rate is A) decreasing. B) jncreasing. C) constant. D) negative.

A

18) Suppose that in 2015 a country has a population of 1 million and real GDP of $1 billion. In 2016, the population is 1.1 million and the real GDP is $1.1 billion. The real GDP per person growth rate is A) zero. B) positive. C) negative. D) $1000.

B

19) Which of the following is used to calculate the standard of living? A) ((real GDP in the current year - real GDP in previous year)/real GDP in previous year) × 100 B) real GDP/population C) the one-third rule D) real GDP/aggregate hours

C

2) If real GDP per person is growing at 4 percent per year, approximately how many years will it take to double? A) 4 B) 25 C) 17.5 D) 8

C

20) Which of the following statements regarding U.S. economic growth is NOT correct? A) The average annual growth rate of real GDP per person in the United States was rapid during World War II. B) In the 1930s, real GDP fell well below its trend. C) The growth rate of real GDP per person accelerated between 1973 to 1984. D) Over the past 100 years, on the average real GDP per person grew 2 percent a year.

D

21) During the last 50 years, which of the following had the lowest level of real GDP per person? A) Central and South America B) Central Europe C) United States D) Africa

A

22) The gaps between the United States and the Asian countries of Honk Kong, Singapore, Korea and China have been A) decreasing B) remaining fairly constant C) there are no gaps between these Asian countries and the United States D) increasing

B

23) The decreasing slope of a production function reflects A) increasing aggregate demand. B) diminishing returns. C) decreasing costs. D) rising unemployment.

B

24) According to the law of diminishing returns, an additional unit of A) labor produces more output than the previous unit. B) labor produces less output than the previous unit. C) labor decreases output. D) capital produces more output than an additional unit of labor.

D

25) Labor productivity is defined as A) total real GDP. B) total output attributable to labor. C) the growth rate of the labor force. D) real GDP per hour of labor.

A

26) If workers' money wage rates increase by 5 percent and the price level remains constant, workers' A) quantity of labor supplied will increase. B) quantity of labor supplied will not change. C) demand for jobs will decrease. D) quantity of labor supplied will decrease.

C

27) An increase in labor productivity relates to A) producing the same output with more labor hours. B) working longer over time. C) producing the same output with fewer labor hours. D) working harder over time.