MyEconLab Ch. 10 and 11
Over the last half−century, which of the following countries has had the highest growth rate of output per capita? A. United Kingdom. B. Japan. C. United States. D. France.
B. Japan.
For about 1,000 years after the fall of the Roman Empire, there was essentially no growth in output per person in Europe—any increase in output led to a proportional increase in population. This type of phenomenon is referred to as the __________. A. liquidity trap. B. Malthusian trap. C. Ricardo outcome. D. Keynes effect.
B. Malthusian trap.
What do we know about convergence among OECD countries over the last 60 years? A. The opposite is happening among OECD countries, with countries moving farther apart. B. There has been observable convergence over the last 60 years. C. There has been no observable convergence over the last 60 years.
B. There has been observable convergence over the last 60 years.
The graph on the right shows the relationship between GDP per person in 1950 and the annual growth rate of GDP per person from 1950 until today in countries A, B, C, and D. Which two points when taken together help illustrate that convergence is occurring? A. A and D. B. A and C. C. B and C. D. B and D.
A. A and D.
Suppose an economy experience a 4% increase in each of the following variables: N, K, and H (human capital). Given this information, we know with certainty that: A. Y will increase by less than 4% B. Y will increase by less than 12% but by more than 4% C. Y will increase by exactly 4% D. Y will increase by more than 4% E. none of the above
B. Y will increase by less than 12% but by more than 4%
For this question, assume that a country experiences a permanent reduction in its saving rate. Which of the following will occur as a result of this reduction in the saving rate? A. a permanently slower growth rate of output B. a permanently lower level of output per worker C. no permanent effect on the level of output per capita D. both A and B
B. a permanently lower level of output per worker
The United States has one of the largest incomes per capita in the world. As other world economies experience economic growth, they should begin to converge with the United States. Economists see this type of convergence occurring in __________. A. none of the economies of the world. B. a small percentage of the economies of the world. C. all of the economies of the world. D. a large percentage of the economies of the world.
B. a small percentage of the economies of the world.
Research by Richard Layard indicates that happiness: A. decreases as output per capita increases B. appears to depend on people's relative incomes C. does not change as output per capita changes D. increases as output per capita increases
B. appears to depend on people's relative incomes
Suppose there is an increase in the saving rate. This increase in the saving rate must cause an increase in consumption per capita in the long run when: A. there is no technological progress. B. capital per worker approaches the golden−rule level of capital per worker. C. the rate of saving exceeds the rate of depreciation. D. the saving is used for education rather than physical capital. E. technological progress depends on human capital.
B. capital per worker approaches the golden−rule level of capital per worker.
For this question, assume that there are decreasing returns to capital, decreasing returns to labor, and constant returns to scale. Now suppose that both capital and labor decrease by 5%. Given this information, we know that output (Y) will A. not change. B. decrease by 5%. C. the reduction in Y will be more than 5% but less than 10% D. decrease by less than 5%. E. none of the above
B. decrease by 5%.
When steady state capital per worker is above the golden−rule level, we know with certainty that an increase in the saving rate will A. increase consumption in the short run, and decrease it in the long run. B. decrease consumption in both the short run and the long run. C. increase consumption in both the short run and the long run. D. decrease consumption in the short run, and increase it in the long run. E. none of the above.
B. decrease consumption in both the short run and the long run.
Suppose individuals wish to obtain the most accurate comparison of living standards between the Canada and Saudi Arabia. To do so, one would convert Saudi Arabian output into dollars using A. the current nominal exchange rate. B. purchasing power parity methods. C. an average of the last five years' exchange rates. D. the prior year's real exchange rate. E. the current real exchange rate.
B. purchasing power parity methods.
When an economy is operating at the steady state, we know that A. steady state saving equals consumption. B. steady state saving is equal to depreciation per worker. C. steady state saving is less than total consumption. D. steady state saving exceeds depreciation each year by a constant amount. E. none of the above.
B. steady state saving is equal to depreciation per worker.
An increase in the saving rate will NOT affect which of the following variables in the long run? A. the amount of capital in the economy B. the growth rate of output per worker C. capital per worker D. output per worker E. none of the above
B. the growth rate of output per worker
Suppose there are two countries that are identical in every way with the following exception: Country A has a higher stock of human capital than country B. Given this information, we know with certainty that: A. output per worker will be the same in the two countries B. the growth rate will be the same in the two countries C. K/N will be higher in B D. the growth rate will be higher in A than in B
B. the growth rate will be the same in the two countries
"Convergence" has been occurring among the OECD countries because A. the richer countries have had higher growth rates than the poorer ones. B. the poorer countries have had higher growth rates than the richer ones. C. the procedures for measuring output per capita have been changing. D. the poorer countries have had positive growth rates, while the richer ones have had negative growth rates. E. the richer countries give away more of their output than the poorer ones.
B. the poorer countries have had higher growth rates than the richer ones.
The Social Security system in the United States was introduced in which year? A. 1915 B. 1945 C. 1935 D. 1955 E. none of the above
C. 1935
Which of the following countries had the highest rate of growth of output per capita between 1950 and 2017? A. United States B. France C. Japan D. United Kingdom
C. Japan
For this question, assume that there are decreasing returns to capital, decreasing returns to labor, and constant returns to scale. A reduction in the capital stock will cause which of the following? A. increase the capital−labor ratio. B. an increase in output per capita. C. a reduction in output. D. no change in output. E. none of the above.
C. a reduction in output.
Assume that employment increases by 3%. Holding all other factors constant, we know with certainty that which of the following will occur? A. output per capita will increase by 3% B. output will increase by 3% C. output will increase by less than 3% D. the capital labor ratio will increase E. none of the above
C. output will increase by less than 3%
In the absence of technological progress, we know that the level of output per worker in the steady state will: A. increase over time. B. increase or decrease, depending on the rate of depreciation. C. remain constant. D. increase or decrease, depending on the rate of saving. E. decrease as a result of decreasing returns to scale.
C. remain constant.
Economic growth theory shows that the two main factors for an economy to grow are __________. A. population and big government. B. government regulation and growth of the money supply. C. technological advancement and capital accumulation. D. government spending and wealth redistribution.
C. technological advancement and capital accumulation
Of the following, the most often used measure of changing living standards is A. the growth rate of real GDP. B. unemployment per capita. C. the growth rate of real GDP per capita. D. the growth rate of nominal GDP per capita. E. the growth rate of nominal GDP.
C. the growth rate of real GDP per capita.
Between 1950 and 2017, standards of living in the OECD countries A. did not change at all. B. decreased, but at different rates. C. were converging. D. decreased at the same rate. E. all increased at the same rate.
C. were converging.
Suppose there are two countries that are identical with the following exception. The saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run: A. the capital−labor ratio (K/N) will be the same in the two countries B. economic growth will be higher in A than in B C. the capital−labor ratio (K/N) will be greater in B than in A D. the capital−labor ratio (K/N) will be greater in A than in B
D. the capital−labor ratio (K/N) will be greater in A than in B
Suppose there are two countries that are identical with the following exception. The saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run: A. the growth rate of output per capita will be greater in B than in A B. the capital−labor ratios (K/N) will be the same in both countries C. the growth rate of output per capita will be greater in A than in B D. the growth rate of output per capita will be the same in both countries
D. the growth rate of output per capita will be the same in both countries
The aggregate production function shows the relationship between output and _________. A. consumption. B. capital. C. government spending. D. the inputs in production.
D. the inputs in production.
When switching from the "current exchange rate" method to the "purchasing power parity" method, India's standard of living in dollars A. decreases. B. rises almost to the level of the U.S. C. remains essentially the same. D. rises, but still remains far below that of the U.S. E. leapfrogs over that of the U.S.
D. rises, but still remains far below that of the U.S.
Given the broadest interpretation of technology, technology will include which of the following? A. how well firms are run B. the political environment C. the organization and sophistication of markets D. the list of blueprints defining the types of products and the techniques available to produce them E. all of the above
E. all of the above
Which of the following statements is always true? A. investment equals depreciation. B. the capital stock is equal to investment minus depreciation. C. investment equals the capital stock minus depreciation. D. the increase in investment is equal to the capital stock minus depreciation. E. any change in the capital stock is equal to investment minus depreciation.
E. any change in the capital stock is equal to investment minus depreciation.
For this question, assume that a country experiences a permanent increase in its saving rate. Which of the following will occur as a result of this increase in the saving rate? A. a permanently faster growth rate of output. B. a permanently higher level of output per capita. C. a permanently higher level of capital per worker. D. all of the above. E. both B and C.
E. both B and C.
The capital−labor ratio will tend to decrease over time when A. output per worker exceeds capital per worker. B. saving per worker equals depreciation per worker. C. investment per worker equals saving per worker. D. investment per worker exceeds depreciation per worker. E. investment per worker is less than saving per worker.
E. investment per worker is less than saving per worker.
Suppose two countries are identical in every way with the following exception. Economy A has a higher saving rate than economy B. Given this information, we know with certainty that: A. steady state consumption in A is lower than in B B. steady state consumption in A is higher than in B C. steady state growth of output per worker is higher in A than in B D. steady state consumption in A and in B are equal E. none of the above
E. none of the above
As an economy adjusts to an increase in the saving rate, we would expect output per worker: A. to decrease at a permanently higher rate. B. to increase at a constant rate and continue increasing at that rate in the steady state. C. to increase at a permanently higher rate. D. to return to its original level. E. none of the above.
E. none of the above.
For this question assume that technological progress does not occur. The rate of saving in Canada has generally been greater than the saving rate in the U.S. Given this information, we know that in the long run: A. capital per worker in Canada will be no different than U.S. capital per worker. B. Canada's growth rate will be greater than the U.S. growth rate. C. investment per worker in Canada will be no different than U.S. investment per worker. D. all of the above. E. none of the above.
E. none of the above.
Our model of long−run economic growth suggests that A. saving in the U.S. has exceeded the golden−rule level. B. the U.S. growth slowdown since 1950 has been caused largely by low saving in the U.S. C. a higher rate of saving in the U.S. cannot do much to increase the U.S. growth rate over the next two decades. D. all of the above. E. none of the above.
E. none of the above.
Over the last hundred years, A. output has decreased in as many years as it has increased. B. U.S. output has approximately doubled. C. movements in output due to recessions and recoveries dominate the movement caused by long−run growth. D. all of the above. E. none of the above.
E. none of the above.
Which of the following is not among the four tigers? A. Hong Kong B. Singapore C. Taiwan D. China
D. China
In order to write the production function in the form below, according to the textbook, what two key assumptions must we make? YtN = f KtN A. There is ever expanding technological progress and unemployment is constant. B. Employment is constant and there is no private saving. C. Employment increases at a decreasing rate and there is no private saving. D. Employment is constant and there is no technological progress in the economy.
D. Employment is constant and there is no technological progress in the economy.
Which of the following countries experienced the lowest level of output per capita in 2017? A. United States B. France C. Japan D. United Kingdom
D. United Kingdom
Decreasing returns to capital (K) implies that a 4% increase in K will cause: A. Y to increase by exactly 4% B. a reduction in output per worker (Y/N) C. no change in Y/N D. Y to increase by less than 4% E. a reduction in K/N
D. Y to increase by less than 4%
Which of the following will NOT cause an increase in aggregate output (Y) in the long run? A. an increase in K B. an increase in technology C. an increase in N D. a reduction in the saving rate E. none of the above
D. a reduction in the saving rate
If the saving rate is 1 (i.e., s = 1), we know that: A. C/N = 0 B. K/N will be at its highest level C. Y/N will be at its highest level D. all of the above
D. all of the above
In the absence of technological progress, which of the following remains constant in the steady state equilibrium? A. output per worker B. saving per worker C. investment per worker D. all of the above E. only A and B
D. all of the above
Suppose the saving rate is initially less than the golden rule saving rate. We know with certainty that a reduction in the saving rate will cause: A. a reduction in the capital labor ratio B. a reduction in consumption per worker C. a reduction in output per worker D. all of the above E. none of the above
D. all of the above
Which of the following will cause a reduction in output per worker (Y/N)? A. a reduction in the capital stock (K) B. a reduction in the saving rate C. a reduction in K/N D. all of the above
D. all of the above
Evidence suggests that richer countries tend to have higher levels of happiness compared to poorer countries. When rich people are compared to richer people, the level of happiness __________. A. not only increases with income but increases by a very large percentage. B. increases as income rises. C. decreases as income increases. D. does not significantly differ.
D. does not significantly differ.
Which of the following best characterizes the economic growth for OECD countries since the mid−1970s? A. growth has not changed since the 1950s and 1960s. B. growth has come to a complete halt. C. growth has increased dramatically. D. growth has slowed down. E. growth has increased slightly.
D. growth has slowed down.
In the OECD countries, there is a negative relationship between output per capita in 1950 and A. distance from the equator. B. output per capita in the 1990s. C. population. D. growth since 1950. E. none of the above.
D. growth since 1950.
Research by Richard Layard indicates that an increase in a country's level of output per capita will: A. always increase happiness in that country B. generally have no effect on happiness in that country C. always decrease happiness in that country D. increase happiness in that country if output per capita is relatively low
D. increase happiness in that country if output per capita is relatively low
In the absence of technological progress, an increase in the saving rate will cause which of the following? A. have an ambiguous effect on the growth of output per worker. B. increase the steady state growth of output per worker. C. decrease the steady state growth of output per worker. D. increase temporarily the growth of output per worker. E. decrease temporarily the growth of output per worker.
D. increase temporarily the growth of output per worker
Which of the following represents the change in the capital stock? A. consumption minus depreciation B. output minus depreciation C. investment minus saving D. investment minus depreciation
D. investment minus depreciation
Given the narrow interpretation of technology, technology will include which of the following? A. how well firms are run B. the organization and sophistication of markets C. the political environment D. none of the above
D. none of the above
Suppose the stock of capital increases by 2% and employment increases by 2%. Given this information, we know that: A. output per capita will increase by less than 4% and more than 2% B. output per capita will increase by 6% C. output will increase by 4% D. none of the above
D. none of the above
Suppose there are two countries that are identical with the following exception. The saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run: A. economic growth will be higher in A than in B B. output per capita will be greater in B than in A C. more information is needed to answer this question D. output per capita will be greater in A than in B
D. output per capita will be greater in A than in B
Economists do not only look at current growth trends, they also look at past growth patterns and what may have caused them. For example, growth rates from the end of the Roman Empire until 1500 were flat with no growth, while the growth rates from 1500 to 1700 were small but positive. During the Malthusian era, __________. A. output per person grew quickly. B. overall output was constant. C. overall output was falling. D. output per person stayed constant.
D. output per person stayed constant.
Suppose the following situation exists for an economy: Kt+1/N > Kt/N. Given this information, we know that: A. saving per worker is less than depreciation per worker in period t B. saving per worker equals depreciation per worker in period t C. the saving rate fell in period t D. saving per worker is greater than depreciation per worker in period t E. none of the above
D. saving per worker is greater than depreciation per worker in period t
Suppose two countries are identical in every way with the following exception. Economy A has a greater quantity of human capital than economy B. Given this information, we know with certainty that: A. steady state consumption in A is lower than in B B. steady state growth of output per worker is higher in A than in B C. steady state consumption in A and in B are equal D. steady state consumption in A is higher than in B
D. steady state consumption in A is higher than in B
Suppose two countries are identical in every way with the following exception. Economy A has a higher rate of depreciation (δ) than economy B. Given this information, we know with certainty that: A. steady state growth of output per worker is higher in A than in B B. steady state consumption in A is higher than in B C. steady state consumption in A and in B are equal D. steady state consumption in A is lower than in B E. none of the above
D. steady state consumption in A is lower than in B
In the absence of technological progress, we know with certainty that an increase in the saving rate will cause which of the following? A. increase steady state consumption only if the increase in saving exceeds the increase in depreciation. B. increase steady state consumption only if the increase in saving is less than the increase in depreciation. C. increase steady state consumption. D. have no effect on steady state consumption. E. decrease steady state consumption.
B. increase steady state consumption only if the increase in saving is less than the increase in depreciation.
1.On a logarithmic scale, a variable that increases at 5% per year will move along an upward-sloping line with a slope of 0.05. 2.The price of food is higher in poor countries than it is in rich countries. 3.Evidence suggests that happiness in rich countries increases with output per person. 4.In virtually all the countries of the world, output per person is converging to the level of output per person in the United States. 5.For about 1,000 years after the fall of the Roman Empire, there was essentially no growth in output per person in Europe because any increase in output led to a proportional increase in population. 6.Capital accumulation does not affect the level of output in the long run, only technological progress does. 7.The aggregate production function is a relation between output on one hand and labor and capital on the other.
1.true 2.false 3.false 4.false 5.true 6.false 7.true
Education increases human capital and thus output. Give a possible reason why the government should subsidize education. A. Because education, at least higher levels, incurs an opportunity cost of lost wages, people may not be willing to invest in additional amounts of human capital. B. Increased human capital will increase the steady-state growth rate. C. Some of education spending can be considered consumption expenditures. D. Human capital has less depreciation than physical capital, so human capital does not need to be replaced as often.
A. Because education, at least higher levels, incurs an opportunity cost of lost wages, people may not be willing to invest in additional amounts of human capital.
Which of the following countries had the lowest level of output per capita in 1950? A. Japan B. United Kingdom C. France D. United States
A. Japan
By 2017, which of the following countries had the highest level of real output per capita? A. United States B. France C. Japan D. United Kingdom
A. United States
Which of the following countries had the highest level of output per capita in 1950? A. United States B. United Kingdom C. France D. Japan
A. United States
Suppose, due to the effects of a military conflict that has ended, that a country experiences a large reduction in its capital stock. Assume no other effects of this event on the economy. Which of the following will tend to occur as the economy adjusts to this situation? A. a relative high growth rate for some time. B. zero growth for some time, followed by a gradually increasing growth rate. C. a relatively low growth rate for some time. D. positive growth, followed by negative growth, and then zero growth. E. none of the above.
A. a relative high growth rate for some time.
Which of the following will cause a reduction in output per worker in the long run run? A. an increase in the number of workers. B. capital accumulation or technological progress. C. capital accumulation. D. expansionary monetary policy. E. none of the above.
A. an increase in the number of workers.
The countries with the lowest output per capita A. are poor in both human and physical capital. B. are rich with physical capital, but have little human capital. C. are rich with human capital, but have little physical capital. D. may or may not be poor in human capital, depending on whether the exchange rate or purchasing power parity method is used for comparison. E. have low living standards in spite of relatively high levels of both human and physical capital.
A. are poor in both human and physical capital.
A higher rate of female participation in the labor market (but constant population). This would ________ the level of output per worker, leading to a ________ level of output per person. A. have no effect on; higher B. decrease; higher C. increase; lower D. increase; higher
A. have no effect on; higher
Between 1950 and 1973, France, Germany, and Japan all experienced growth rates that were at least two percentage points higher than those in the United States. Yet the most important technological advances of that period were made in the United States. This can best be explained because the other countries __________. A. imported the technology advancements from the United States. B. exported more output than they imported. C. had a lower standard of living. D. none of the above.
A. imported the technology advancements from the United States.
When the economy is in the steady state, we know with certainty that: A. investment per worker is equal to depreciation per worker B. consumption per worker is maximized C. output per worker is maximized D. the growth rate is maximized E. all of the above
A. investment per worker is equal to depreciation per worker
When using a logarithmic scale to plot output per capita over time, an upward−sloping curve that becomes increasingly steep indicates A. output per capita is growing by an increasing percentage each year. B. output per capita is growing by a constant amount each year. C. output per capita is not defined. D. output per capita is growing by a constant percentage each year. E. output per capita is not changing.
A. output per capita is growing by an increasing percentage each year.
Which of the following must occur to sustain economic growth in the long run? A. technological progress. B. capital accumulation. C. a higher saving rate. D. all of the above
A. technological progress.
In the absence of technological progress, which of the following is true when the economy is operating at the steady state? A. the growth of output per worker is zero. B. the growth of output per worker is equal to the rate of depreciation. C. the growth of output per worker is equal to the saving rate. D. the growth of output per worker is equal to the rate of investment. E. none of the above.
A. the growth of output per worker is zero.
Is the United States likely to fall into a Malthusian trap the same way that England did during the 18th century? A. No, the U.S economy is more diversified and can internalize technological advances better than England could. B. No, because the U.S. population grows at the same rate as output every year. C. Yes, the United States has recently experienced higher than average output growth and a higher than average mortality rate. D. Yes, the United States has recently experienced slow population growth and high output levels, which causes the Malthusian trap.
A. No, the U.S economy is more diversified and can internalize technological advances better than England could.
Discuss how the level of output per person in the long run would likely be affected by each of the following changes: The right to exclude saving from income when paying income taxes. This would ________ the saving rate, leading to ________ output per worker and output per person in the long run. A. increase; higher B. decrease; lower C. increase; lower D. decrease; higher
A. increase; higher
As countries become richer in output per person, people are able to spend __________ resources on food consumption, so the real cost of food __________. A. less; decreases B. less; increases C. more; increases D. more; decreases
A. less; decreases
The saving rate is always equal to the investment rate. A higher investment rate can sustain higher growth of output forever. If capital never depreciated, growth could go on forever. The higher the saving rate, the higher consumption in steady state. We should transform Social Security from a pay-as-you-go system to a fully funded system. This would increase consumption both now and in the future. The U.S. capital stock is far below the golden-rule level. The government should give tax breaks for saving because the U.S. capital stock is far below the Education increases human capital and thus output. It follows that governments should subsidize education.
true false true uncertain uncertain uncertain false
