Economics - Chapter 27

Why did so many Chinese farmers and workers starve under "The Great Leap Forward"? A. A long, severe drought drastically decreased agricultural production. B. The incentive to work hard was low since the rewards were so minimal. C. The Chinese people did not know how to farm in certain geographic areas. D. The number of workers on communes was reduced.

B. The incentive to work hard was low since the rewards were so minimal.

Which scenario has the greatest potential for free riding? A. an unstable political system B. a system in which work effort and pay are not connected C. a dishonest government that promotes corruption D. secure property rights

B. a system in which work effort and pay are not connected

Which of the following is (are) NOT an institution of economic growth? A. property rights B. labor unions C. honest government D. competitive and open markets

B. labor unions

Which is NOT an example of an institution that creates incentives aligning self-interest with the interest of society? A. competitive markets B. low inflation C. political stability D. well-defined property rights

B. low inflation

Property rights are important institutions for encouraging investment because: A. they tend to support industrial sectors more than agricultural sectors. B. people won't invest if they feel their property is at risk and that they may not realize a return on their investment. C. they eliminate corruption. D. they increase the average return to investing, thus increasing the overall level of investment in the economy.

B. people won't invest if they feel their property is at risk and that they may not realize a return on their investment.

Which is considered an immediate cause of economic growth? A. the extent of government support in free markets B. physical capital C. good luck D. good incentives

B. physical capital

If U.S. per capita GDP is $50,000 and grows at 2% per year, what will U.S. per capita GDP be in 70 years? A. $100,000 B. $800,000 C. $200,000 D. $400,000

C. $200,000

If a country's real GDP per capita in 1950 was $10,000, and it grew to $20,000 by year 2000, then the country's annual growth rate during this period would have been approximately: A. 1.8%. B. 2.2%. C. 1.4%. D. 2%.

C. 1.4%.

Suppose a country's real GDP per capita was $9,000 in 1990, and it grew to $18,000 by 2000. What is the annual growth rate of the country's real GDP per capita during this period? A. 20% B. 10% C. 7% D. 25%

C. 7%

Which of the following would be most effective in reducing "free riding" in a communal farming system? A. increasing supervision of workers B. increasing physical capital C. assigning property rights D. increasing penalties for low production

C. assigning property rights

The most promising idea for creating a growth miracle in a country is: A. building more schools in the country. B. opening the country to more foreign investment. C. changing the institutions in the country. D. allowing more foreign aid in the country.

C. changing the institutions in the country.

Which is NOT likely an ultimate cause of economic growth around the world? A. geographical locations B. historical differences C. communal resources D. luck

C. communal resources

For most of recorded human history, real GDP per capita has: A. decreased at a modest rate. B. increased at a modest rate. C. remained about the same. D. increased at a rapid rate.

C. remained about the same.

When an economic system changes from using a collective property rights system to something closer to private property rights, the immediate effect is: A. less efficient organization of resources. B. to increase regulation, resulting in less market activities. C. to increase investment, work effort, and productivity. D. to decrease investment, work effort, and productivity.

C. to increase investment, work effort, and productivity.

Suppose a country's annual growth rate of real GDP per capita is approximately 2%. By which year would the country double its real GDP per capita from $10,000 in 1950 to $20,000? A. 1970 B. 2000 C. 2005 D. 1985

D. 1985

Decreases in the level of political stability in a country tend to: A. increase per capita GDP. B. have no impact on per capita GDP. C. increase per capita GDP at lower levels of stability, but decrease per capita GDP at higher levels of stability. D. decrease per capita GDP.

D. decrease per capita GDP.

Countries that have high per capita GDP tend to have: A. high levels of physical capital per worker. B. high levels of technology per worker. C. high levels of human capital per worker. D. high levels of all three factors of production.

D. high levels of all three factors of production.

Which is NOT an example of physical capital? A. computers B. tractors C. cell phones D. money

D. money

Around the world, about one _____ people have incomes of less than $2 per day. A. billion B. million C. thousand D. trillion

A. billion

Which would be most effective in ensuring sustained long-term economic growth? A. increasing technological knowledge B. increasing government control of land use C. increasing physical capital D. increasing human capital

A. increasing technological knowledge

A developing country could buy (or be given) _____ and _____ more easily than _____. A. technological knowledge; physical capital; human capital B. human capital; technological knowledge; physical capital C. human capital; work experience; technological knowledge D. physical capital; human capital; technological knowledge

A. technological knowledge; physical capital; human capital

The key reason for China's growth miracle beginning in the late 1970s was: A. the assignment of private property rights. B. the enforcement of communal property. C. pure luck. D. increases in foreign investment from developed countries.

A. the assignment of private property rights.

Institutions and incentives are _____ causes, and factors of productions are _____ causes of the wealth of nations. A. ultimate; immediate B. immediate; direct C. immediate; ultimate D. ultimate; indirect

A. ultimate; immediate

History has shown that when collective property rights are converted to private property rights: A. work effort, investment, and productivity all increase. B. work effort increases. C. productivity increases. D. investment in physical capital increases.

A. work effort, investment, and productivity all increase.

If U.S. per capita GDP is $50,000 and grows at 5% per year, what will U.S. per capita GDP be in 70 years? A. $800,000 B. $1.6 million C. $400,000 D. $1.2 million

B. $1.6 million

If you received a constant annual rate of return of 7% on an investment of $10,000, how many years will it take before you have $20,000? A. 35 years B. 10 years C. 7 years D. 2.86 years

B. 10 years

If the average annual growth rate of a country increases from 2% to 3%, how much faster will its GDP double? A. 25 years faster B. 11 2/3 years faster C. 10 years faster D. 17 years faster

B. 11 2/3 years faster

If real GDP per capita in the United States is currently $50,000 and grows at 2.5% per year, it will take approximately how many years to reach $200,000? A. 28 years B. 56 years C. 112 years D. 84 years

B. 56 years

Which of the following is an ultimate cause of economic growth among countries around the world? A. geography B. History, culture, and geography are all ultimate causes of growth. C. history D. culture

B. History, culture, and geography are all ultimate causes of growth.

If U.S. per capita GDP is $50,000 and grows at 3% per year, what will U.S. per capita GDP be in 70 years? A. $400,000 B. $800,000 C. $100,000 D. $200,000

A. $400,000

Suppose economies A and B have the same initial level of GDP per capita at $15,000, and each economy begins with a constant growth rate of 1% per year. (Neither country has good institutions for economic growth at first.) Then Country A enters an era of political stability, establishes property rights, and installs incentives for entrepreneurship. Country A's economic growth rate consequently improves to 5%. Assuming population growth rates remain unaffected, how much longer will it take Country B to double its per capita GDP level compared to Country A? A. 56 years B. 14 years C. 28 years D. 70 years

A. 56 years

Which statement is TRUE about economic growth? A. A country can grow and become wealthy, never grow, or grow and then begin to stagnate. B. All countries eventually grow rich. C. Growth is a random process; in some years a country grows and in other years it doesn't. D. Once a country starts to grow, it will continue to grow.

A. A country can grow and become wealthy, never grow, or grow and then begin to stagnate.

If the GDP of country X is 4 times the GDP of country Y and if the GDP of country X remains constant while GDP of country Y grows at a rate of 7% per year, which of the following statements is true? A. Country Y's GDP will be equal to country X's GDP in 20 years. B. Country Y's GDP will be equal to country X's GDP in 10 years. C. Country Y's GDP will be equal to country X's GDP in 40 years. D. Country Y's GDP will never catch up with country X's GDP.

A. Country Y's GDP will be equal to country X's GDP in 20 years.

High-income economies generally have _____ that incentivize individuals' self-interest by using _____. A. institutions; profit-seeking motives B. institutions; legal penalties C. government mandates; legal penalties D. central planners; profit-seeking motives

A. institutions; profit-seeking motives

Property rights encourage: A. saving and investment in both physical and human capital. B. investment in physical capital. C. investment in human capital. D. saving.

A. saving and investment in both physical and human capital.

Which statement best describes the economic growth patterns in the world since World War II? A. Most countries in the world except the United States experienced no growth at all. B. Japan and South Korea experienced rapid growth while Argentina and Nigeria experienced slow growth. C. Most countries in the world experienced rapid growth. D. Japan and South Korea experienced slow growth while Argentina and Nigeria experienced rapid growth.

B. Japan and South Korea experienced rapid growth while Argentina and Nigeria experienced slow growth.

Roughly what percent of the world's population live in countries with per capita GDP lower than the average world per capita GDP? A. 50% B. 10% C. 80% D. 25%

C. 80%

A country that has enforceable property rights, a noncorrupt political system, abundant factors of production, and a change in leadership and form of government every few years should suspect that economic growth will be _____ because _____. A. high; most of the institutions needed for growth are in place B. slow; of a lack of a dependable legal system C. high; once a group comes to power all the institutions needed for growth exist D. slow; of uncertainty due to an unstable political system

D. slow; of uncertainty due to an unstable political system

Which is NOT an important institution for growth? A. a dependable legal system B. free markets C. a low level of corruption D. strong regulation of religious belief

D. strong regulation of religious belief

Which are immediate causes of the wealth of nations? A. customs, practices, and social norms B. property rights and honest government C. institutions and incentives D. technical knowledge and human capital

D. technical knowledge and human capital