Problem Set #4

When society has a higher level of capital per person, it is called:

Capital deepening

Allied Business Consultants employs five researchers that each work 8 hour days. In one day the researchers prepared 10 reports for its 2 largest clients. What was Allied Business Consultants' worker productivity?:

1/4 report per hour

Last year real GDP in the imaginary nation of Neverland was 907.5 billion and the population was 3.3 million. The year before real GDP was 750 billion and the population was 3 million. What was the growth rate of real GDP per person during the year?:

10 Percent

Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of real GDP per person during the year?:

2 Percent

There are large differences in the standard of living:

Across countries and within countries overtime

In macroeconomics, the connection from inputs to outputs for the entire economy is called:

An aggregate function

When Chile experiences investment from abroad, it experiences, as a result:

An increase in productivity

Investment from abroad: A. is a way for poor countries to learn the state-of-the-art technologies developed and used in richer countries. B. is viewed by economists as a way to increase growth. C. often requires removing restrictions that governments have imposed on foreign ownership of domestic capital. D. All of the above are correct.

D. All of the above are correct.

Which of the following is a correct way to measure worker productivity?:

Divide the quantity of output by the number of hours worked.

In determining living standards, productivity plays a key role:

For both nations and individuals

When discussing economic growth, to avoid studying changes in the size of GDP that represent only having more people in the economy, and focus on those increases in GDP which represent an actual rise in the standard of living on a per person basis, it is often useful to use which of the following measures?:

GDP Per Capita

An economy's rate of productivity growth is closely linked to the growth rate of its ______________, although the two aren't identical:

GDP per capita

Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that ________________ is typically the most important contributor to U.S. economic growth:

Technology

Which of the following is unlikely to affect the rate of economic growth?:

The level of government spending

Which of the following is an example of human capital?: a. the comfortable chair in your room where you read economics texts b. the amount you get paid each week to work at the library c. the things you have learned this semester d. any capital goods that require a human to be present to operat

The things you have learned this semester.

A country's human capital increases: a. if its workers become better educated or healthier b. only if its workers become better educated. c. only if its workers become healthier. d. None of the above is correct.

a. if its workers become better educated or healthier

Country A and country B are the same except country A currently has more capital. Assuming diminishing returns, if both countries increase their capital by 100 units and other factors that determine output are unchanged, then:

c. output in country A increases by less than in country B.

​If real income per person was $47,210 in the U.S. in 2010, and $55,860 in 2014, what was the annual growth rate over this time period?:

4.29 percent per year

Despite its status as one of the richest countries in the world, Japan: a. has a very low level of productivity. b. has few natural resources. c. has very little human capital. d. engages in a relatively small amount of international trade.

Has very few natural resources.

Which of the government policies below is most unlikely to encourage per capita economic growth?:

High taxes on companies that spend a lot on capital formation

Which of the following best describes the relationship between economic growth and literacy?:

Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.

Suppose that real GDP grew more in Country A than in Country B last year.: a. Country A must have a higher standard of living than country B. b. Country A's worker productivity must have grown faster than country B's. c. Both of the above are correct. d. None of the above are correct.

None of the above are correct.

Country Alpha and Country Beta initially have the same real GDP per capita. Country Alpha experiences no economic growth, while Country Beta grows at a sustained rate of 5 percent. In 14 years, Country Alpha's GDP will be approximately _________ that of Country Beta:

One-Half

Given that a country's real output has increased, in which of the following cases can we be sure that its productivity also has increased?:

a. The total number of hours worked rose. b. The total number of hours worked stayed the same. c. The total number of hours worked fell. d. Both b and c are correct.

Other things the same, which of the following could explain an increase in productivity?: a. either an increase in human capital or an increase in physical capital b. an increase in human capital but not an increase in physical capital c. an increase in physical capital but not an increase in human capital d. neither an increase in human capital nor an increase in physical capital

a. either an increase in human capital or an increase in physical capital

To achieve a high standard of living, a nation should:

Promote economic growth.

Phoenix furniture uses 12 workers, each working eight hours, to produce 192 rocking chairs. What is Phoenix's productivity?:

2 rocking chairs per hour

During the last two centuries, the average rate of growth of GDP per capita in the leading industrial countries has averaged about:

2% per year

In 2016, the imaginary nation of Fluffypuppy had a population of 8,200 and real GDP of 210,500. Fluffypuppy had 5% growth in real GDP per person. In 2017 it had a population of 8,400. To the nearest dollar what was real GDP in Fluffypuppy in 2017?:

226,416

In 2017, the imaginary nation of Avocaland had a population of 10,000 and real GDP of 42,000,000. During the year its real GDP per person grew by about 1.94%. Which of the following sets of growth rates is consistent with this growth in real GDP per person?:

3% Population growth and 5% real GDP growth

A country will roughly double its GDP in twenty years if its annual growth rate is:

3.5 precent

Last year real GDP per person in the imaginary nation of Olympus was 4,250. The year before it was 4,100. By about what percentage did Olympian real GDP per person grow during the period?:

3.7 Percent

Assuming a country's economy maintains an 8% rate of growth, young adults starting at age 20 would see the average standard of living in their country more than double by the time they had reached age:

30

Over the last ten years productivity grew faster in Mapoli than in Romeria while the population and total hours worked did not change in both countries. It follows that: a real GDP per person grew faster in Mapoli than in Romeria. b. real GDP per person must be higher in Mapoli than in Romeria. c. the standard of living must be higher in Mapoli than in Romeria. d. All of the above are correct.

Real GDP per person grew faster in Mapoli than in Romeria.

Which of the following is correct?: The level of real GDP per person is a good gauge of economic prosperity, and the growth rate of real GDP per person is a good gauge of economic progress. Although levels of real GDP per person vary substantially from country to country, the growth rate of real GDP per person is similar across countries. Productivity is not closely linked to government policies. The level of real GDP per person is a good gauge of economic prosperity, and the growth rate of real GDP per person is a good gauge of economic progress. Productivity may be measured by the growth rate of real GDP per person.

The level of real GDP per person is a good gauge of economic prosperity, and the growth rate of real GDP per person is a good gauge of economic progress.

Which of the following is not correct?:

With a growth rate of about 2 percent per year, average income per person doubles every 60 years.

The value of what is produced per worker, or per hour worked, is called ____________.

Worker productivity

Which of the following is generally an opportunity cost of investment in human capital?: a. future job security b. forgone present wages c. increased earning potential d. All of the above are correct.

b. forgone present wages

Investment in: a. physical capital, unlike investment in human capital, has an opportunity cost. b. physical capital, like investment in human capital, has an opportunity cost. c. human capital is particularly attractive because it involves no externalities. d. human capital has been shown to be relatively unimportant, relative to investment in physical capital, for a country's long-run economic success.

b. physical capital, like investment in human capital, has an opportunity cost.

Which of the following statements is correct?: a. Productivity is a determinant of human capital per worker. b. Technological knowledge is a determinant of productivity. c. Human capital and technological knowledge are the same thing. d. All of the above are correct.

b. Technological knowledge is a determinant of productivity.

Which of the following can explain faster growth of real GDP in country A than in Country B?: a. both greater population growth and greater productivity growth in Country A b. greater population growth in Country A, but not greater productivity growth in Country A c. greater productivity growth in Country A, but not greater population growth in Country A d. neither greater population growth nor greater productivity growth in Country A

both greater population growth and greater productivity growth in Country A

Last year the imaginary country of Fluffypuppy had a population of 10,000. 6,000 Fluffypuppians worked 8 hours a day, and produced a real GDP of $30,000,000. The imaginary country of Fuzzykitty had a population of 12,000. 8,000 Fuzzykittiens worked 8 hours a day, and produced a real GDP of $38,000,000. Which of the following is correct? a. Fluffypuppy had higher productivity and higher real GDP per person. b. Fuzzykitty had the higher productivity and higher real GDP per person. c. Fluffypuppy had the higher productivity while Fuzzykitty had the higher real GDP per person. d. Fuzzykitty had the higher productivity while Fluffypuppy had the higher real GDP per person.

c. Fluffypuppy had the higher productivity while Fuzzykitty had the higher real GDP per person.

If WarmWear, a U.S.manufacturer of winter clothing, opens a new factory in Austria, then: a. Austrian GNP increases by more than Austrian GDP, because GDP includes income earned by foreigners working in Austria. b. Austrian GNP increases by more than Austrian GDP, because GDP excludes income earned by foreigners working in Austria. c. Austrian GNP increases by less than Austrian GDP, because GDP includes income earned by foreigners working in Austria. d. Austrian GNP increases by less than Austrian GDP, because GDP excludes income earned by foreigners working in Austria.

c. Austrian GNP increases by less than Austrian GDP, because GDP includes income earned by foreigners working in Austria.

"When workers already have a large quantity of capital to use in producing goods and services, giving them an additional unit of capital increases their productivity only slightly." This statement: a. represents the traditional view of the production process. b. is an assertion that capital is subject to diminishing returns. c. is made under the assumption that the quantities of human capital, natural resources, and technology are being held constant. d. All of the above are correct.

d. All of the above are correct.

The logic behind the catch-up effect is that a. workers in countries with low incomes will work more hours than workers in countries with high incomes. b. the capital stock in rich countries deteriorates at a higher rate because it already has a lot of capital. c. new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital. d. None of the above is correct.

c. new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital.

Which of the following is not an example of physical capital?: a. a new factory building b. a delivery van c. the knowledge of workers d. the office chair in a lawyer's office

c. the knowledge of workers

Which of the following best states economists' understanding of the facts concerning the relationship between natural resources and economic growth?: a. A country with no or few domestic natural resources is destined to be poor. b. Differences in natural resources have virtually no role in explaining differences in standards of living. c. Some countries can be rich mostly because of their natural resources and countries without natural resources need not be poor, but can never have very high standards of living. d. Abundant domestic natural resources may help make a country rich, but even countries with few natural resources can have high standards of living.

d. Abundant domestic natural resources may help make a country rich, but even countries with few natural resources can have high standards of living.

Which of the following statements is correct?: a. In an economy-wide sense, property rights are an important prerequisite for the free market (price system) to work. b. Property rights give people the ability to exercise authority over the resources they own. c. Based on the available evidence, the existence of well-established and well-enforced property rights appears to be associated with an enhanced standard of living. d. All of the above are correct.

d. All of the above are correct.

In order to promote growth in living standards, policymakers must: a. protect property rights. b. maintain political stability. c. encourage the accumulation of factors of production. d. All of the above.

d. All of the above.

Which of the following statements is correct?: a. By definition, all natural resources are nonrenewable. b. Market prices give us reason to believe that natural resources are a limit to economic growth. c. An economy must be blessed with ample quantities of natural resources if it is to be a highly productive economy. d. Differences in natural resources can explain some of the differences in standards of living around the world but not all of it.

d. Differences in natural resources can explain some of the differences in standards of living around the world but not all of it.