ECON 2203 FINAL

The introduction of robotics is an example of A) a labor-saving innovation. B) a capital-saving innovation. C) an external economy of scale. D) an external diseconomy of scale.

A) a labor-saving innovation

The price of one country's currency in terms of another country's currency is the A) balance of trade. B) exchange rate. C) terms of trade. D) currency valuation.

B) exchange rate

The aggregate production function is Y = 3KL. If there are 30 units of capital and 40 units of labor, aggregate output is A) 3,600 units. B) 2,500 units. C) 2,100 units. D) 400 units.

A) 3,600 units

The aggregate production function is Y = 2K0.5L0.5. If there are 225 units of capital and 196 units of labor, aggregate output is A) 420 units. B) 508 units. C) 700 units. D) 842 units.

A) 420 unties

Which of the following is an example of an external economy of scale? A) As more firms hired computer programmers, more schools began training computer programmers and firms were able to spend less money on training employees to be computer programmers. B) A moving company buys computers for its office staff and as a result can reduce its office staff by 10%. C) As a shirt manufacturer buys more cotton cloth, the cloth supplier reduces the price per yard of cloth. D) The U.S. government eliminates restrictions on hiring non-U.S. citizens.

A) As more firms hired computer programmers, more schools began training computer programmers and firms were able to spend less money on training employees to be computer programmers.

Which of the following countries had the highest average growth rate per year from 1999-2007? A) China B) the United States C) Zimbabwe D) Japan

A) China

A researcher discovered the adhesive that allows a piece of paper to be attached to a surface temporarily and then removed and reattached many times. It was many years before a use was found for this adhesive. Which of the following is TRUE? A) The discovery represents an invention and the finding of a use for the adhesive represents an innovation. B) The discovery represents an innovation and the finding of a use for the adhesive represents an invention. C) This is an example of an invention only. D) This is an example of an innovation only.

A) The discovery represents an invention and the finding of a use for the adhesive represents an innovation.

An accounting firm purchased two computers and found that two workers using the computers could do the same work it used to take four workers to do. This introduction of computers is an example of A) a labor-saving innovation. B) a capital-saving innovation. C) both capital and labor saving innovation. D) neither a capital nor a labor saving innovation.

A) a labor-saving innovation

Which of the following was NOT one of the likely causes of the productivity problem in the 1970s? A) a reduction in government regulation B) reduced research and development spending C) a slowdown in investment spending D) low saving rates

A) a reduction in government regulation

Which of the following is an example of an industrial policy? A) a subsidy to agricultural producers that makes it easier for them to export their products B) an increase in the age at which people are eligible for full Social Security retirement benefits C) an investment tax credit that is available to all firms D) an across the board increase in the tax on imported goods

A) a subsidy to agricultural producers that makes it easier for them to export their products

Which of the following will result in increased productivity? A) advances in managerial knowledge B) government regulations C) taxation D) population increases

A) advances in managerial knowledge

The strict definition of economic growth that serves to increase living standards is A) an increase in real GDP per capita. B) an increase in nominal GDP per capita. C) an increase in capital accumulation per capita. D) an increase in investment per capita.

A) an increase in real GDP per capita

An important source of increasing productivity is A) an increase in the ratio of capital to labor. B) an increase in the ratio of labor to capital. C) a decrease in the ratio of capital to labor. D) faster growth in the labor force than in the capital stock.

A) an increase in the ratio of capital to labor

A firm used to produce a product using three units of labor and one unit of capital. The firm discovers that it can produce more output at a lower cost if it combines two units of labor with two units of capital. This is an example of A) an innovation. B) an invention. C) increasing returns. D) economic growth.

A) an innovation

Thinking up a new idea is an example of A) an invention. B) an innovation. C) human capital accumulation. D) social overhead capital.

A) an invention

Those who favor industrial policy argue that A) because other countries follow this practice, the United States must also use industrial policy so as not to lose out in international competition. B) the government should help finance investment in the private sector because it has such easy access to funds. C) it is an effective way to reduce the government deficit. D) the government is the best judge of how risky investments are because it has more information than firms.

A) because other countries follow this practice, the United States must also use industrial policy so as not to lose out in international competition

An increase in the capital stock A) can increase output, even if it is not accompanied by an increase in the labor force. B) provides valuable services directly, but not indirectly. C) can increase output, but only if it is accompanied by an increase in the labor force. D) cannot increase output, even if it is accompanied by an increase in the labor force.

A) can increase output, even it it is not accompanied by an increase in the labor force

The U.S. economy experienced the weakest economic growth A) during the 1930s. B) during the 1940s. C) during the 1960s. D) during the 1970s.

A) during the 1930s.

In Vidalia, real GDP increased by 6% and the population increased by 9% in 2008. In 2008, Vidalia experienced A) economic growth, but not an increase in living standards. B) economic growth and an increase in living standards. C) no economic growth, but an increase in living standards. D) an economic decline.

A) economic growth, but not an increase in living standards.

Thomas Malthus and David Ricardo believed that to increase agricultural output, people would be forced to A) farm land more intensively, in which case the returns to successive increases in population would diminish. B) farm land less intensively, in which case the returns to successive increases in population would increase. C) farm land more intensively, in which case the returns to successive increases in population would increase. D) farm land less intensively, in which case the returns to successive increases in population would diminish.

A) farm land more intensively, in which case the returns to successive increases in population would diminish

Any investment made in a country by residents outside that country is A) foreign direct investment. B) foreign exchange. C) gross private domestic investment. D) net exports.

A) foreign direct investment

According to Edward Denison, the largest source of growth in the U.S. economy during the period 1973-1979 was A) increase in inputs. B) increase in economies of scale. C) increase in productivity. D) increase in pollution abatement techniques.

A) increase in inputs

An increase in the supply of dollars and an increase in the demand for Japanese yen A) increases the dollar price of yen. B) decreases the dollar price of yen. C) increases the yen price of dollars. D) does not change the exchange rate between dollars and yen.

A) increases the dollar price of yen

An increase in human capital A) increases the productivity of labor. B) decreases the productivity of labor. C) increases the productivity of labor only if there is a corresponding technological change. D) increases the capital-labor ratio.

A) increases the productivity of labor

A decrease in the supply of dollars and a decrease in the demand for Japanese yen A) increases the value of the dollar. B) increases the value of the yen. C) increases the yen price of dollars. D) does not change the exchange rate between dollars and yen.

A) increases the value of the dollar

A company uses 100 workers and 30 units of capital to produce 500 units of output. If this company increases its capital to 50 units and, as a result, its output increases by 300 units, the productivity of labor ________ to ________ units per worker. A) increases; 8 B) increases; 1 C) increases; 3 D) decreases; 4

A) increases; 8

Economic growth allows a society to consume A) more goods per person. B) more than it should. C) more than is sustainable. D) exactly what it needs.

A) more good per person

Convergence theory suggests that gaps in ________ tend to close over time. A) national income B) population levels C) unemployment rates D) inflation rates

A) national income

According to Edward Denison, about ________ of the U.S. growth in output over the entire period from 1929 to 1982 has come from increases in factors of production and about ________ has come from increases in productivity. A) one-half; one-half B) one-third; two-thirds C) two-thirds; one-third D) one-fourth; three-fourths

A) one-half; one-half

The relation between growth, as measured in ________, is an inverted U. A) per capita income and pollution B) income and expenditure C) saving and investment D) human capital and physical capital

A) per capita income and pollution

Since 1978, growth in China has been A) quite rapid despite a relatively weak set of property rights protections. B) quite rapid because of a relatively strong set of property rights protections. C) relatively slow because of a relatively weak set of property rights protections. D) relatively slow despite a relatively strong set of property rights protections.

A) quite rapid despite a relatively weak set of property rights protections

Between 1950 and 1990, A) real GDP increased at a faster rate than population, so real GDP per capita increased. B) real GDP increased, but population increased at a faster rate, so real GDP per capita fell. C) real GDP fell and population increased, so real per capita GDP fell. D) real GDP fell at a faster rate than the decrease in the population, so real GDP per capita increased.

A) real GDP increased at a faster rate than population, so real GDP per capita increased

As growth progresses and countries become richer, pollution A) tends to fall. B) rises exponentially. C) rarely changes. D) levels double.

A) tends to fall

Those who argue that research and development spending, especially on basic research, should be subsidized by the public sector believe that A) the benefits from research and development cannot be adequately captured by those undertaking the research. B) private spending on research and development is too high. C) the social returns from research and development are high compared with the social returns from other public investment projects. D) the rate of return on investments in research and development is very high.

A) the benefits from research and development cannot be adequately captured by those undertaking the research.

Suppose that growth in output that can be attributed to growth in labor and capital is 6%. If output grows at a rate of 6%, it must be the case that A) the economy is not experiencing technological progress. B) growth in labor force exceeds growth in capital. C) growth in capital exceeds growth in labor. D) the economy is experiencing technological progress.

A) the economy is not experiencing technological progress

Thomas Malthus and David Ricardo believed that returns to successive increase in population would decline because to increase agricultural output, people would be forced A) to farm the land more intensively and to farm less productive land. B) to farm the land less intensively and to farm more productive land. C) to farm the land more intensively and to farm more productive land. D) to farm farm land less intensively and to farm less productive land.

A) to farm the land more intensively and to farm less productive land

In the early part of the twentieth century, nearly all currencies A) were backed by gold. B) were held together by a system of fixed exchange rates in which the value of those currencies was set in relation to the British pound. C) were held together by a system of fixed exchange rates in which the value of those currencies was set in relation to the U.S. dollar. D) were held together by a system of flexible exchange rates in which the value of those currencies fluctuated in response to the relative supply of and demand for them.

A) were backed by gold

If labor productivity in a steel mine is 3.5 tons per worker, then 400 steel workers with a fixed amount of capital produce A) 87.5 tons. B) 1,400 tons. C) 1,750 tons. D) 4,000 tons.

B) 1,400 tons

The U.S. economy experienced the strongest economic growth during the A) 1930s. B) 1940s. C) 1960s. D) 1990s.

B) 1940s.

A company uses 200 workers and 50 units of capital to produce 1,000 units of output. Its average labor productivity is A) 4. B) 5. C) 20. D) 25.

B) 5

Much of the growth in ________ is due to export-manufacturing, and ________ have based their growth on resource extraction. A) Sub-Saharan Africa; most Central American nations B) Southeast Asia; many African nations C) Western Europe; the former Soviet-bloc countries D) South America; North American countries

B) Southeast Asia; many African nations

Labor productivity increases when A) labor and output increase proportionately. B) capital increases and labor remains constant. C) output decreases and labor increases. D) capital/labor ratio decreases.

B) capital increases and labor remains constant

Many economists believe that the U.S. growth since the mid-1990s with little inflationary pressure is due to A) expansionary fiscal and monetary policies. B) continuous increases in the productivity of labor. C) continuous reductions in aggregate supply. D) increases in the aggregate demand that exceeded increases in the aggregate supply.

B) continuous increases in the productivity of labor

In Polynomia, real GDP increased by 8% and the population increased by 3% in 2008. In 2008, Polynomia experienced A) economic growth, but not an increase in living standards. B) economic growth and an increase in living standards. C) no economic growth, but an increase in living standards. D) an economic decline.

B) economic growth and an increase in living standards

Thomas Malthus and David Ricardo believed that to increase agricultural output, people would be forced to A) farm more-productive land, in which case the returns to successive increases in population would increase. B) farm less-productive land, in which case the returns to successive increases in population would diminish. C) farm less-productive land, in which case the returns to successive increases in population would increase. D) farm more-productive land, in which case the returns to successive increases in population would diminish.

B) farm less-productive land, in which case the returns to successive increases in population would diminish

Which of the following was NOT one of the likely causes of the productivity problem in the 1970s? A) the increase in energy prices in the 1970s B) high saving rates C) an increase in government regulation D) a slowdown in investment spending

B) high saving rates

Which of the following policies should the government NOT adopt if its goal is to enhance economic growth? A) improve the quality of education B) impose more regulation on producers C) enact policies to increase the saving rate D) enact policies to encourage research and development

B) impose more regulation on producers

Government involvement in the allocation of capital across manufacturing sectors is A) supply management. B) industrial policy. C) regulatory policy. D) balanced growth policy

B) industrial policy.

A weakness in the Club of Rome's study entitled The Limits to Growth is that A) it assumed the rate of population growth would slow. B) it did not account for technological change. C) it assumed a constant demand for products. D) it assumed a declining investment rate.

B) it did not account for technological change

The aggregate production function is the mathematical representation of the technological relationship between A) national output and fiscal policy. B) national output and inputs. C) fiscal and monetary policy changes and national output. D) the rate of capital accumulation and national output.

B) national output and inputs

Public subsidization of research and development has been justified on the grounds that A) there are no private returns to research and development. B) social returns to research and development exceed the private returns. C) only large corporations have the financial resources to undertake research and development. D) basic research cannot be undertaken by private firms.

B) social returns to research and development exceed the private returns

Both Malthus and Ricardo failed to account for the effect of ________ on agricultural production. A) diminishing returns B) technological change C) capital depreciation D) increasing returns

B) technological change

According to predictions made by the Club of Rome in 1972, the collapse of the world economy will occur because of A) the world's limited capacity to produce food. B) the depletion of nonrenewable resources. C) the ever-increasing birthrate in developed countries. D) low saving rates and, therefore, low rates of capital accumulation.

B) the depletion of nonrenewable resources

Which of the following factors would NOT contribute to an increase in measured factor productivity? A) an advance in managerial knowledge B) the imposition of additional environmental regulations C) an increase in expenditures on research and development D) the introduction of robotics

B) the imposition of additional environmental regulations

If the capital stock remains fixed while the supply of labor increases, it is likely that A) the productivity of labor will rise. B) the productivity of labor will fall. C) the productivity of labor will not change. D) output per capita will rise.

B) the productivity of labor will fall

External economies of scale are cost savings achieved when A) firms become more efficient. B) the size of industries become larger. C) capital/labor ratio becomes smaller. D) there are capital-saving innovations.

B) the size of industries become larger

Which of the following policies has NOT been suggested as a means of increasing the rate of economic growth in the United States? A) increasing research and development spending B) reducing government regulation C) lowering the savings rate D) enactment of an industrial policy

C) lowering the savings rate

The aggregate production function is Y = 5K0.5L0.5. If there are 49 units of capital and 16 units of labor, aggregate output is A) 60 units B) 70 units. C) 140 units. D) 325 units.

C) 140 units

According to Edward Denison, the least amount of growth in the U.S. attributed to increases in productivity was during the A) 1920s. B) 1940s. C) 1970s. D) 1990s.

C) 1970s

In 2000, the United Nations unanimously adopted the ________, a set of quantifiable, time-based targets for developing countries to meet. A) 21st Century Equity Initiative B) Global Warming Reduction Act C) Millennium Development Goals D) Carbon Footprint Eradication Measure

C) Millennium Development Goals

Higher energy prices in the 1970s reduced labor productivity because A) energy and capital are substitute inputs. B) the rise in energy prices tended to push firms away from labor-intensive measures and toward more capital-intensive techniques. C) a great deal of investment went into transforming the existing capital stock into more energy-efficient forms. D) labor productivity has been lower when used with more capital-intensive techniques.

C) a great deal of investment went into transforming the existing capital stock into more energy-efficient forms

The mathematical representation of the technological relationship between inputs and national output is known as the A) aggregate supply function. B) production possibilities frontier. C) aggregate production function. D) input-output table.

C) aggregate production function

Which of the following increases the price of the dollar relative to the Mexican peso? A) an increase in the supply of dollars B) an increase in the demand for pesos C) an increase in the demand for dollars D) a decrease in the supply of pesos.

C) an increase in the demand for dollars

Improved production management doubles the number of air conditioners that can be produced. This managerial innovation is A) capital saving. B) labor saving. C) both capital saving and labor saving. D) an external economy of scale.

C) both capital saving and labor saving

In all economies experiencing modern economic growth, A) labor expands at a more rapid pace than capital. B) capital and labor expand at a constant rate. C) capital expands at a more rapid pace than labor. D) capital expands, but labor remains constant.

C) capital expands at a more rapid pace than labor

Increased investments in infrastructure or public capital would most likely A) cause a decrease in the growth rate, because they would require a reduction in private investment. B) have no impact on growth, because they do not affect the private sector. C) increase growth. D) reduce growth in a developing country.

C) increase growth

Which of the following statements is TRUE? A) Investment in private capital is a source of economic growth, but investment in public capital is not. B) Investment in public capital is a source of economic growth, but investment in private capital is not. C) Investment in both private and public capital is conducive to economic growth and higher productivity. D)Neither investment in private nor public capital has any effect on economic growth and productivity.

C) investment is both private and public capital is conducive to economic growth and higher productivity

Which of the following was one of the likely causes of the productivity problem of the 1970s? A) rapid growth in investment spending B) a reduction in government regulation C) low saving rates D) an increase in research and development spending

C) low saving rates

The agreements that were reached at the Bretton Woods conference in 1944 established a system A) in which the values of currencies were fixed in terms of a specific number of ounces of gold, which in turn determined their values in international trading. B) of floating exchange rates determined by the supply and demand of one nation's currency relative to the currency of other nations. C) of essentially fixed exchange rates under which each country agreed to intervene in the foreign exchange market when necessary to maintain the agreed-upon value of its currency. D) that prohibited governments from intervening in the foreign exchange markets.

C) of essentially fixed exchange rates under which each country agreed to intervene in the foreign exchange market when necessary to maintain the agreed-upon value of its currency.

The average productivity of labor measures A) total output produced by workers. B) the additional output produced by an additional worker. C) output per worker. D) capital per worker.

C) output per worker

Economic growth is A) an increase in labor force. B) a one-year increase in investment. C) sustained increase in output over a long period of time. D) sustained increase in workers' productivity.

C) sustained increase in output over a long period of time

Some economists claim that the Social Security system in the United States is biased against saving. Their argument is that A) the Social Security system discourages people from making risky, but profitable, investments. B) private pension plans are better managed than the Social Security funds and are used for more productive investments. C) the Social Security system reduces the incentive for people to save by providing guaranteed retirement incomes. D) Social Security taxes are used to finance only investments in public infrastructure and are not available for business investment.

C) the Social Security system reduces the incentive for people to save by providing guaranteed retirement incomes

Which of the following is an investment in infrastructure? A) Southstar Steel has two office buildings separated by one-half mile. The company lays a fiber optic cable between the buildings to take advantage of new technology. B) The federal government makes it easier for college students to obtain loans and this increases the number of students attending college. C) The city of Robesonia builds a new sewage treatment plant. D) Residents of a suburban housing development hire a private security force because they have been concerned about crime.

C) the city of Robesonia builds a new sewage treatment plant

Suppose that growth in output that can be attributed to growth in labor and capital is 2%. If output grows at a rate of 5%, it must be the case that A) growth in labor exceeds growth in capital. B) growth in capital exceeds growth in labor. C) the economy is experiencing technological progress. D) the economy is not spending enough on acquiring human capital.

C) the economy is experiencing technological progress

Critics of industrial policy argue that the government should not be involved in the allocation of capital across manufacturing sectors because A) the Japanese government is already practicing industrial policy, and because of its experience, it is much better at it than the United States would be. B) the United States is losing out in international competition. C) the government does not have enough information on the profitability and riskiness of industrial investments to make the correct decisions. D) investments are always risky, and the U.S. government cannot afford to bear the risk.

C) the government does not have enough information on the profitability and riskiness of industrial investments to make the correct decisions.

For economic growth to increase living standards, A) society must discover ways of using available resources more efficiently. B) the choices available to consumers must increase. C) the rate of growth must exceed the rate of population increase. D) society must acquire more resources.

C) the rate of growth must exceed the rate of population increase

If there are constant returns to scale, a 3% increase in inputs should increase output by 3%. But if as a result of increasing inputs by 3% output increased by 5%, then A) all 5% of the increase in output resulted from the increase in inputs. B) all 5% of the increase in output must have resulted from an increase in factor productivity. C) 2% of the increase in output resulted from the increase in inputs, and 3% of the increase in output resulted from an increase in factor productivity. D) 3% of the increase in output resulted from the increase in inputs, and 2% of the increase in output resulted from an increase in factor productivity.

D) 3% of the increase in output resulted from the increase in inputs, and 2% of the increase in output resulted from an increase in factor productivity.

With a fixed amount of capital, 300 workers produce 9,000 cars. The average labor productivity is A) 0.03. B) 3. C) 27. D) 30.

D) 30

The most remarkable growth performance since 1982 has taken place in A) Japan. B) France. C) the United States. D) Asia excluding Japan.

D) Asia excluding Japan

Which part of the world experienced the strongest economic growth during the periods of the 1980s and 1990s? A) European countries B) North America excluding Mexico C) Africa D) Asia excluding Japan

D) Asia excluding Japan

Which of the following indicators is used more often to measure economic growth? A) Real GDP B) Nominal GDP C) Population D) Per capita real GDP

D) Per capita real GDP

An increase in capital stock A) enhances labor productivity. B) provides valuable services directly. C) causes economic growth. D) all of the above

D) all of the above

Economic growth allows a society to consume A) more goods per person. B) a higher quality of goods. C) a wider variety of goods. D) all of the above

D) all of the above

Economic growth is the process of A) producing more consumer products. B) increasing real output. C) expanding the production possibilities frontier. D) all of the above

D) all of the above

The Millennium Development Goals adopted by the United Nations included targets for which of the following? A) education B) income growth C) environmental protection D) all of the above

D) all of the above

The relationship Y = f(L,K) is A) a production function. B) a technological relationship between inputs and total output. C) a technological relationship between inputs and GDP. D) all of the above

D) all of the above

Which of the following caused the productivity problem of the 1970s in the U.S.? A) low saving rate B) increased governmental regulations C) low spending on research and development D) all of the above

D) all of the above

Which of the following decreases the price of the dollar relative to the British pound? A) a decrease in the supply of dollars B) a decrease in the demand for pounds C) an increase in the demand for dollars D) an increase in the supply of dollars.

D) an increase in the supply of dollars

Diminishing returns to a factor implies that with capital fixed, A) as labor increases output always increases. B) as output increases, labor increases. C) as labor increases, output decreases. D) as labor increases, labor productivity eventually decreases.

D) as labor increases, labor productivity eventually decreases

Which of the following is a source of economic growth? A) more resources B) active economic policies C) technology D) both A and C

D) both A and C

Relaxed trucking regulations increase the maximum weight a tractor-trailer combination can haul, from 40 tons to 60 tons. This change in regulations reduces the transportation costs per ton and is A) capital saving only. B) labor saving only. C) an external diseconomy of scale. D) both capital saving and labor saving

D) both capital saving and labor saving

Increased environmental regulation is likely to A) increase measured productivity, but decrease output. B) increase measured productivity and increase output. C) have no effect on either productivity or output. D) decrease measured productivity and decrease output.

D) decrease measured productivity and decrease output

An explanation for the "inverted U" is that increased industrialization and growth initially ________ the environment, and in the long run, environmental quality ________. A) degrades; continues to get worse B) improves; improves even more C) improves; gets worse D) degrades; improves

D) degrades; improves

In 1971, most countries, including the United States, A) returned to the gold standard. B) adopted a new system of fixed exchange rates. C) adopted a single, internationally accepted currency whose use is limited to international transactions. D)gave up trying to fix exchange rates formally and began allowing them to be determined essentially by supply and demand.

D) gave up tying to fix exchange rates formally and began allowing them to be determined essentially by supply and demand.

The public policy of "targeting" industries for special and rapid investment is A) international trade policy. B) growth policy. C) fiscal policy. D) industrial policy.

D) industrial policy.

The period of rapid and sustained increase in real output per capita that began in the Western World with the Industrial Revolution is known as the period of A) social progress. B) technological change. C) creative destruction. D) modern economic growth

D) modern economic growth

According to Edward Denison, increases in inputs in the U.S. during the 1970s was responsible for ________ of the growth rate in output. A) less than 50% B) more than 50% but less than 60% C) only 20% D)over 90%

D) over 90%

Economic growth is defined as an increase in A) nominal GDP. B) investment. C) household consumption. D) real output.

D) real output

Which of the following is NOT an investment in human capital? A) local governments begin providing free hepatitis vaccinations to any resident who wants one B) the Precision Tool Company teaches all its workers how to repair all the machines in the factory C) older workers return to school to update their skills D) the Ferris Advertising Agency replaces its secretaries' typewriters with personal computers

D) the Ferris Advertising Agency replaces its secretaries' typewriters with personal computers

Which of the following is NOT an investment in human capital? A) an individual decides to enroll in a vocational training program B) a firm engages in on-the-job training C) the government expands its programs to improve health care D) the government increases the level of unemployment benefits

D) the government increases the level of unemployment benefits