Chapter 18

The government decides to subsidize the development of a new communications network. It is acting in its role to promote economic growth by: ensuring a stable and secure financial system. ensuring a stable legal system. enhancing physical and human capital. promoting free and competitive markets.

enhancing physical and human capital

Which of the following would promote long-run economic growth? renting unoccupied office space to new businesses technological advancement converting idle land into farm land firms hiring unemployed workers

technological advancement

If the Bureau of Economic Analysis reports that the annualized U.S. growth rate was 2.5% for the second quarter, then the actual growth rate from the first quarter to the second quarter was: 0.625%. 7.5%. 2.5%. 10%

0.625%.

If an economy's GDP will double in 25 years, then its growth rate must be about: 2.5%. 2.8%. 28%. 25%

2.8%

The recent global financial instability: harmed standards of living. slowed down economic growth. All of the answers are correct. caused severe credit crunches.

All of the answers are correct

The classical form of the production function states that: Output = f(N, K) Output = f(L/K) Output = f(N/K) Output = f(L, K)

Output = f(L, K)

Which is NOT an example of infrastructure? airports the Hoover Dam the federal highway system Walmart stores

Walmart stores

According to Malthus, a fixed quantity of land and a growing human population will eventually produce: a stationary state in which growth will cease. accelerating economic growth. continuous yet variable economic growth. a stationary state in which the economy grows but at a fixed rate.

a stationary state in which growth will cease.

Which of the following factors is NOT generally viewed by economists as critical to economic growth? strong and fair legal system economic freedom access to large amounts of natural resources stable monetary system

access to large amounts of natural resources

Developing countries can achieve higher productivity per unit of capital because they can use technologies developed by other countries. This is known as the: productivity effect. copycat effect. catch-up effect. increasing returns to capital effect.

catch-up effect.

The ability to use physical resources in creative ways to produce goods and services is known as: entrepreneurial ability, technology, and ideas. labor. natural resources. physical capital.

entrepreneurial ability, technology, and ideas.

According to the classical model, which of the following developments does NOT contribute to economic growth? labor productivity higher interest rates technological change more capital

higher interest rates

Developed nations tend to have: low capital-to-labor ratios. large amounts of both labor and capital. limited amounts of both labor and capital. limited labor supplies but lots of capital.

limited labor supplies but lots of capital.

The relationship between economic freedom and per capita GDP is: positive for advanced economies and negative for developing economies. positive. negative for advanced economies and positive for developing economies. negative.

positive

Over the past century, when worker productivity rose: fewer public goods were available. real wages rose. nominal prices rose. capital fell.

real wages rose.

A production function: shows the output that is produced using different combinations of technology combined with existing inputs. shows the most desired production method for a given level of output. shows the output that is most highly valued by consumers. shows the output that is produced using different combinations of inputs combined with existing technology.

shows the output that is produced using different combinations of inputs combined with existing technology.

What is the primary explanation for the rapid growth of the U.S. economy over the last century? increases in government spending for infrastructure increases in human capital technological progress increases in the number of immigrants

technological progress

If a country's population increases at a higher rate than the growth in its real GDP: the country's rate of inflation has increased. GDP per capita has increased. the standard of living in the country has declined. average output per person remains constant.

the standard of living in the country has declined.