Econ 251 exam #2
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40) The implied growth rate for a country between 1960 and 2010 was 6 percent. This implies that ________. A) the country grew at an average rate of 6 percent per year between 1960 and 2010 to reach the 2010 level of GDP starting at the 1960 level B) the country grew at rates above 6 percent per year between 1960 and 2010 to reach the 2010 level of GDP starting at the 1960 level C) the country grew by at least 6 percent in any of the 50 years between 1960 to 2010 to reach the level of GDP in 2010 starting at the 1960 level D) the growth rate of GDP in the country was above 6 percent between 1960 and 2010
A
The following table compares some attributes of workers in South Korea, Spain, and the United States. Country Income per worker Average years of schooling Percentage of U.S. physical capital stock per worker Spain 88,944 10.27 81.2% South Korea 67,247 12.05 52.6% United States 112,517 13.18 100% 6) Refer to the table above. If workers in Spain and South Korea had access to the level of technology available in the United States, what might we expect with respect to income per worker? 6) A) Income per worker would likely increase more for workers in South Korea. B) Income per worker in Spain would reach the level of the United States. C) Income per worker would only increase for workers in South Korea. D) No change, because these countries already have access to the U.S. level of technology.
A) Income per worker would likely increase more for workers in South Korea
The following table shows the balance sheet for Poor Baby Bank. 75) Refer to the table above. If the required reserve ratio is 20 percent, then how much in excess reserves does Poor Baby Bank have? 75) A) $0 B) $3 C) $18 D) $9
A. $0
Scenario: Amateur Bank is just starting out and has had the following transactions: • Amateur Bank takes out a $3,000 loan from Pro Bank. • Amateur bank has $2,500 invested in building and operations. • Suzie deposits $1,200. • Joe deposits $750. • Robbie takes out a loan for $900. • Jackie takes out a business loan for $625. • Amateur Bank invests $1,000 in GoPro. 78) Refer to the scenario above. How much does Amateur Bank have in excess reserves? 78) A) $230 B) $105 C) $300 D) $425
A. $230
Scenario: In 2000, the GDP per capita in Ohio is $35,000. Ohio's GDP per capita is predicted to increase 3 percent per year for the next 5 years. 33) Refer to the scenario above. If the prediction in the scenario is correct, what will Ohio's GDP per capita be in 2005 (to the nearest thousand)? 33) A) $41,000 B) $42,000 C) $40,000 D) $39,000
A. $41,000
Scenario: The price of a given basket of goods in Country 1 is 10 karls. The price of the same basket of goods in Country 2 is 25 ritz and is $2 in the United States. Country 1 has an income per capita of 3,200 karls, and Country 2 has an income per capita of 5,500 ritz. 24) Refer to the scenario above. The price of a basket of goods worth $1 in the United States is ________ in Country 1. 24) A) 5 karls B) 25 karls C) 50 karls D) 20 karls
A. 5 Karls
Scenario: In 2000, world GDP per capita was $5,500. In 2010, world GDP per capita was $9,500. 45) Refer to the scenario above. What formula would you use to calculate the world average annual growth rate g? A) 5,500 × (1 + g)^10 = 9,500 B) 9,500 × (1 + g)^10 = 5,500 C) g = (9,500 - 5,500)/10 D) g^10 = (9,500 - 5,500)
A. 5,500 × (1 + g)^10 = 9,500
39) Which of labor and capital experiences diminishing marginal product? 39) A) Both labor and capital B) Capital, but not labor C) Labor, but not capital D) Neither labor nor capital
A. Both labor and capital
36) Which of the following statements is true? 36) A) Physical capital accumulation will be high in the current year if the physical capital stock of the previous year was high. B) The rate of depreciation will be high in the current year if the investment on physical capital the previous year was low. C) The rate of depreciation will be low in the current year if the investment on physical capital the previous year was high. D) Physical capital accumulation will be high if the physical capital stock of the previous year was low.
A. Physical capital accumulation will be high in the current year if the physical capital stock of the previous year was high.
20) Suppose an economy has the production function Y = A × K1/4 × H3/4, where Y denotes total output, A denotes the level of technology, K denotes the physical capital stock, and H denotes the efficiency units of production. Which of the following is true of this economy? A) Production in this economy exhibits constant returns to scale. B) Production in this economy decreases when the price level increases. C) Production in this economy exhibits decreasing returns to scale. D) Production in this economy exhibits increasing returns to scale.
A. Production in this economy exhibits constant returns to scale
72) Which of the following statements is true? 72) A) Some workers may be willing to work only at a wage rate above the equilibrium wage rate. B) At all wages below the equilibrium wage rate, labor supplied exceeds labor demanded. C) At all wages above the equilibrium wage rate, labor demanded equals zero. D) All workers are willing to work at the equilibrium wage rate.
A. Some workers may be willing to work only at a wage rate above the equilibrium wage rate.
87) The income per capita was equal in two neighboring countries in a particular year. However, Country 1 had a higher income per worker than Country 2. Which of the following is likely to be true? 87) A) The number of people employed will be higher in Country 2 than in Country 1. B) The number of retired people will be higher in Country 2 than in Country 1. C) The number of children younger than 15 will be higher in Country 2 than in Country 1. D) The number of people unemployed will be lower in Country 1 than in Country 2.
A. The number of people employed will be higher in Country 2 than in Country 1.
11) Which of the following tools is used to compare the income per capita across countries? 11) A) The purchasing power parity (PPP) B) The production possibilities frontier C) The headcount index D) The GDP deflator
A. The purchasing power parity (PPP)
42) Which of the following statements is true? 42) A) To depict variables that have exponential growth, it is more convenient to use an axis with a proportional scale. B) Exponential growth refers to growth by the same amount in every time period. C) To depict variables that have exponential growth, it is more convenient to use an axis with a linear scale. D) Linear growth refers to growth by the same proportion in every time period.
A. To depict variables that have exponential growth, it is more convenient to use an axis with a proportional scale.
Scenario: Two economies, A and B, have identical aggregate production functions with diminishing returns. In both economies, capital and labor are equally important for production. Economy A has twice as many efficiency units of labor as economy B. Economy B has twice as much physical capital stock as economy A. Refer to the scenario above. If population doubles and GDP remains unchanged, the economies' ________. 12) A) average standard of living will decrease B) GDP per capita will increase C) income per capita will remain unchanged D) productivity will increase
A. average standard of living will decrease
60) Certain countries remain backward because they nurture superstition and are suspicious of new technology. This argument is based on the ________. 60) A) culture hypothesis B) location hypothesis C) capital hypothesis D) geography hypothesis
A. culture hypothesis
69) Workers who are unemployed but are not actively looking for jobs are referred to as ________. 69) A) discouraged workers B) abandoned workers C) unskilled workers D) laid-off workers
A. discouraged workers
58) The availability of vast stocks of natural resources is an example of a(n) ________. 58) A) fundamental cause of prosperity B) implicit cause of prosperity C) proximate cause of prosperity D) explicit cause of prosperity
A. fundamental cause of prosperity
99) Consider two economies: Economy A and Economy B. Economy A is a command economy, while Economy B is a market economy. Given this information, which of the following statements is likely to be true? 99) A) Institutions in Economy A are likely to be more inclusive than institutions in Economy B. B) Institutions in Economy B are likely to be more inclusive than institutions in Economy A. C) Both economies are likely to grow at the same rate. D) Both economies are likely to stagnate without any increase in GDP.
A. institutions in Economy A are likely to be more inclusive than institutions in Economy B
102) Political creative destruction is likely to be opposed ________. 102) A) less in an economy with inclusive institutions than in an economy with extractive institutions B) more in an economy with inclusive institutions than in an economy with extractive institutions C) more in a market economy than in a command economy D) equally in all types of economies
A. less in an economy with inclusive institutions than in an economy with extractive institutions
Scenario: Consider two countries: Country A and Country B. Both countries have the identical aggregate production functions, populations, and efficiency units of labor, but they have different saving rates. The saving rate is higher in Country A than in Country B. 96) Refer to the scenario above. If both economies have identical depreciation rates, then Country A's steady-state equilibrium will ________ Country B's steady-state equilibrium. 96) A) lie to the right and above B) lie to the right and below C) lie to the left and above D) lie to the left and below
A. lie to the right and above
59) Extractive economic institutions are ________. 59) A) likely to prevent entrepreneurs with new ideas from entering into the right line of business B) found only in market economies C) likely to encourage entrepreneurs with new ideas to enter into the right line of business D) found only in command economies
A. likely to prevent entrepreneurs with new ideas from entering into the right line of business
27) Refer to the figure above. The data in Graph B best represent ________. 27) A) linear growth B) no growth C) exponential growth D) exponential decline
A. linear growth
101) The process in which economic growth destabilizes existing regimes and reduces the political power of rulers and monarchs is referred to as ________. 101) A) political creative destruction B) polarization C) institutional destruction D) division of powers
A. political creative destruction
19) Refer to the figure above. Assume the economy is at point B of the aggregate production function 2 in 2010. It will move toward point A in 2012 if the ________. A) quantity of physical capital increases and technology remains constant B) quantity of physical capital increases and technology increases C) total efficiency units of labor increase and technology increases D) number of workers increases and technology remains constant
A. quantity of physical capital increases and technology remains constant
88) Suppose production in an economy is represented by a Cobb-Douglas production function. If each worker in the economy becomes more productive, while the number of workers in the economy, the physical capital stock, and the state of technology remain unchanged, ________. 88) A) the GDP of the economy will increase B) the exchange value of its currency will increase in the foreign exchange market C) the inflation rate in the economy will decrease D) the income per capita in the economy will decrease
A. the GDP of the economy will increase
34) The process by which a quantity grows at a constant proportion in every time period is called ________ growth. 34) A) linear B) exponential C) logarithmic D) catch-up
B
77) If the nominal interest rate in an economy is 4 percent and the real interest rate in the economy is 2 percent, the rate of inflation in the economy must be ________. 77) A) -2 percent B) 2 percent C) 0.5 percent D) 4 percent
B. 2 percent
44) If the level of investment in an economy is $4,000 and the GDP of the economy is $10,000, the saving rate in the economy must be ________. 44) A) 30 percent B) 40 percent C) 44 percent D) 20 percent
B. 40%
81) Which of the following is likely to shift the credit demand curve of an automobile manufacturer to the right, assuming all else equal? 81) A) A plan to decrease production and exit from existing markets B) A plan to increase production and expand to newer markets C) An increase in the real interest rate D) A decrease in the real interest rate
B. A plan to increase production and expand to newer markets
The following figure shows curves for labor demand and labor supply 68) Refer to the figure above. Collective bargaining leads to the negotiation of a new wage rate in the labor market. Which of the shifts in the quantity of labor supplied may be observed as a result of the negotiations? 68) A) A shift from Q3 to Q1 B) A shift from Q3 to Q5 C) A shift from Q3 to Q2 D) A shift from Q3 to Q4
B. A shift from Q3 to Q5
The following table shows the GDP and total population in a particular year for four fictional countries: Countries Gross Domestic Product ($) Total Population Agraria 10 million 5,200 Autarkia 4 million 4,000 Erbia 12 million 3,100 Montesia 7 million 3,350 25) Refer to the table above. Which country is likely to have the highest rate of poverty? 25) A) Agraria B) Autarkia C) Erbia D) Montesia
B. Autarkia
The following table shows the GDP and total population in a particular year for four fictional countries: Countries Gross Domestic Product ($) Total Population Agraria 10 million 5,200 Autarkia 4 million 4,000 Erbia 12 million 3,100 Montesia 7 million 3,350 3) Refer to the table above. Which country is likely to have the lowest life expectancy at birth? 3) A) Agraria B) Autarkia C) Erbia D) Montesia
B. Autarkia
5) Assume Industry Country relies more heavily on the use of capital and Farm Country relies more heavily on the use of labor in production. Holding labor constant, which country's output would be more negatively affected by a big storm that destroys large parts of the existing infrastructure? 5) A) Labor Country B) Industry Country C) Both countries equally D) Both countries equally if their initial GDP is equal
B. Both Countries equally if their initial GDP is equal
The following table shows economic data for two countries. Country A Country B Currency used Rupee Yen Currency exchange to U.S. $ 1 rupee = $0.85 1 yen = $1.05 Population 250 million 250 million Size of workforce 200 million 180 million GDP 10 trillion rupee 10 trillion yen PPP conversion $1 per 0.80 rupee $1 per 1.10 yen 1) Refer to the table above. GDP per capita is higher in which country? A) GDP per capita in Country A is equal to the GDP per capita in Country B B) Country B C) Country A D) Cannot determine with the information given above
B. Country B
23) Country A's income per capita is higher than that of Country B. Country A is likely to have ________. A) a higher unemployment rate B) a higher exchange rate C) a lower life expectancy at birth D) a higher life expectancy at birth
B. a higher exchange rate
53) According to Samuel Huntington, South Korea's economy experienced rapid economic growth because South Koreans valued thrift, investment, education, and discipline. In contrast, Ghana's economy did not grow as fast because the country had different social values. This argument claims that ________. 53) A) institutions are a proximate cause of prosperity B) culture is a fundamental cause of prosperity C) institutions are a fundamental cause of prosperity D) geographical location is a fundamental cause of prosperity
B. culture is a fundamental cause of prosperity
22) If ________, the total efficiency units of labor will increase. A) the rate of unemployment increases B) firms hire more workers C) the number of retired people in an economy increases D) the physical capital stock of an economy decreases
B. firms hire more workers
98) Adam Smith supported the view that the ________ of a nation greatly influenced its economic growth. 98) A) culture B) institutions C) geography D) location
B. institutions
50) A researcher claims that the standards of law and order are the basis of the economic prosperity of a certain country. This argument is based on the ________. A) location hypothesis B) institutions hypothesis C) geography hypothesis D) culture hypothesis
B. institutions hypothesis
85) Over the course of 10 years, a country's population doubles. During this time, its GDP increases from $10 trillion to $12 trillion. Pete, who lives in this country and buys the same goods and services every year, finds that he is still paying the same price for them. This implies that ________. 85) A) the country's workforce has more than doubled B) productivity in this country has decreased C) purchasing power parity in this country has decreased D) Both A and B
B. productivity in this country has decreased
30) Exponential growth implies that ________. A) relatively large differences in growth rates will translate into small differences in the level of a quantity after many years of growing B) relatively small differences in growth rates will translate into large differences in the level of a quantity after many years of growing C) growth rates can only be positive D) growth rates will alternate between positive and negative values in every consecutive time period
B. relatively small differences in growth rates will translate into large differences in the level of a quantity after many years of growing
41) Which of the following events opened the way for the rapid and steady technological changes that underpinned modern economic growth? 41) A) The agricultural revolution B) The Industrial Revolution C) Demographic transition in the Western world D) The American Civil War
B. the industrial revolution
105) Which of the following statements is true? 105) A) Unemployment in an economy normally increases during times of expansion and decreases during times of contraction. B) There always exists some amount of unemployment in an economy. C) In almost every economy, each job opening is instantly filled by a qualified worker. D) The unemployment rate in an economy is constant in the long run.
B. there always exists some amount of unemployment in an economy
93) According to the Solow model, given the levels of total efficiency units of labor and technology, ________. 93) A) the physical capital stock does not play any role in the determination of the steady-state equilibrium level of GDP B) there is a maximum fixed level of GDP that an economy can achieve by increasing saving C) increases in the saving rate is the sole reason for sustained economic growth D) increases in the rate of physical capital accumulation can be the sole reason for sustained economic growth
B. there is a maximum fixed level of GDP that an economy can achieve by increasing saving
114) "Catch-up growth" refers to a process where relatively poorer nations increase their incomes by ________. A) working harder than more advanced nations B) using technologies from more advanced nations C) extracting more natural resources than more advanced nations D) having higher birthrates than more advanced nations
B. using technologies from more advanced nations
c
C
7) The total number of workers in two different countries is equal. However, workers in Country A are three times more productive than workers in Country B. Which of the following is true in this case? 7) A) The physical capital stock in Country B is three times more than the physical capital stock in Country A. B) The total efficiency units of labor in Country B is six times more than the total efficiency units of labor in Country B. C) The total efficiency units of labor in Country A is three times more than the total efficiency units of labor in Country B. D) The total efficiency units of labor in Country A is one-third the total efficiency units of labor in Country B.
C) The total efficiency units of labor in Country A is three times more than the total efficiency units of labor in Country B.
95) Over the past couple of decades, which have been the most common directions of change in the poverty rate and GDP per capita across the world's nations? 95) A) Most nations have increased their poverty rate and their GDP per capita. B) Most nations have increased their poverty rate and decreased their GDP per capita. C) Most nations have decreased their poverty rate and increased their GDP per capita. D) Most nations have decreased their poverty rate and their GDP per capita.
C. Most nations have decreased their poverty rate and increased their GDP per capita
Scenario: Tree Country has a population of 18,000 people, of whom two-thirds are part of the workforce. The country's only asset is wood, where K = 18,000. The country only produces wooden furniture. In the figure below, Y stands for GDP, and H equals efficiency units of labor. 8) Refer to the scenario above. Tree Country's GDP likely will increase if ________. 8) A) the average worker is no longer needs to obtain a college degree in order to be able to find a job B) it passes a law that requires college graduates to travel around the world for 1 year before they are allowed to start working C) Tree Country gives permanent work visas to 5,000 workers from a neighboring country D) younger generations are less proficient in furniture making but more proficient with modern technology, such as smart phones or personal computers
C) Tree Country gives permanent work visas to 5,000 workers from a neighboring country
80) If the annual inflation rate in an economy is i, then $1 borrowed at the beginning of a year will have the same purchasing power as ________ dollars at the end of the year. 80) A) i B) (1/i) C) (1 + i) D) (1 - i)
C. (1 + i)
64) Refer to the figure above. If the government fixes the minimum wage rate at $25, the unemployment in the market will be ________. 64) A) 30 units of labor B) 10 units of labor C) 0 units of labor D) 20 units of labor
C. 0 units of labor
97) GDP per capita in Fiji grew from $5,000 to $13,000 over 20 years. Its average growth rate over this time is closest to ________. 97) A) 3 percent B) 4 percent C) 5 percent D) 2 percent
C. 5 percent
Scenario: Tree Country has a population of 18,000 people, of whom two-thirds are part of the workforce. The country's only asset is wood, where K = 18,000. The country only produces wooden furniture. In the figure below, Y stands for GDP, and H equals efficiency units of labor. 15) Refer to the scenario above. Which of the following is likely to reduce the total efficiency units of labor in Tree Country? 15) A) A decrease in the price of capital B) A loss of technology used in production C) An earthquake that kills a number of people D) A global recession that lowers aggregate demand
C. An earthquake that kills a number of people
13) Which of the following causes an economy to move upward along the aggregate production function? A) An increase in the price level B) A decrease in the physical capital stock C) An increase in the productivity of workers D) An improvement in technology
C. An increase in the productivity of workers
82) Everything else remaining unchanged, what is likely to happen to the equilibrium real interest rate and quantity of credit if the credit demand curve shifts to the left? 82) A) The equilibrium rate of interest will increase, and the equilibrium quantity of credit will decrease. B) Both the equilibrium rate of interest and quantity of credit will increase. C) Both the equilibrium rate of interest and quantity of credit will decrease. D) The equilibrium rate of interest will decrease, and the equilibrium quantity of credit will increase.
C. Both the equilibrium rate of interest and quantity of credit will decrease.
31) Which of the following statements is true? A) Countries with lower investment in research and development are likely to have higher standards of living. B) The Industrial Revolution started in the United States and spread to other parts of the world. C) Countries with higher investment in research and development are likely to have higher standards of living. D) The Industrial Revolution started in South America and spread to other parts of the world.
C. Countries with higher investment in research and development are likely to have higher standards of living
48) Which of the following statements is true of Europeans during the period of colonization? 48) A) Europeans set up extractive economic institutions in all areas. B) Europeans set up inclusive economic institutions in all areas. C) Europeans set up relatively extractive economic institutions in areas that had higher population densities. D) Europeans set up relatively inclusive economic institutions in areas that had higher population densities.
C. Europeans set up relatively extractive economic institutions in areas that had higher population densities.
54) Which of the following statements is true? 54) A) Cultures in a nation are likely to change faster than the institutions in a nation. B) The geography of a nation is likely to change faster than the institutions in a nation. C) Geographical handicaps affected economic prosperity more 500 years ago than they do now. D) Geographical handicaps affected economic prosperity less 500 years ago than they do now
C. Geographical handicaps affected economic prosperity more 500 years ago than they do now.
100) Which of the following statements is true? 100) A) Extractive economic institutions foster economic activity, productivity growth, and economic prosperity, while inclusive institutions fail to do so. B) Both extractive and inclusive institutions fail to foster economic activity, productivity growth, and economic activity. C) Inclusive economic institutions foster economic activity, productivity growth, and economic prosperity, while extractive institutions fail to do so. D) Both extractive and inclusive institutions foster economic activity, productivity growth, and economic activity.
C. Inclusive economic institutions foster economic activity, productivity growth, and economic prosperity, while extractive institutions fail to do so.
52) Which of the following is a characteristic of an institution? 52) A) Institutions have very little influence on a nation's economic prosperity. B) Institutions are determined by individual opinions without considering the government's preferences. C) Institutions place constraints on the behavior of economic agents. D) The institutions of a nation are permanent and cannot be changed over time
C. Institutions place constraints on the behavior of economic agents
Scenario: Farm Country and Industry Country are two neighboring countries. Both countries produce only one good: good X. Production in both countries is a function of total efficiency units of labor and physical capital stock. 21) Refer to the scenario above. How could research and development (R&D) lead to increases in productivity? 21) A) New natural resources are discovered. B) New technology allows for production of the same output with more inputs. C) New technology usually allows for production of the same output at lower cost. D) Workers are better educated.
C. New technology usually allows for production of the same output at lower cost.
10) Which of the following is an alternative measure of exchange rate proposed by The Economist magazine? 10) A) The midcap index B) The GDP deflator C) The Big Mac index D) The Consumer Price Index
C. The big mac index
57) What will happen if an economy transforms from being extractive to being inclusive? 57) A) The return-to-entrepreneurship schedule will shift leftward, and the opportunity cost to entrepreneurship will decrease. B) The return-to-entrepreneurship schedule will shift leftward, and the opportunity cost to entrepreneurship will increase. C) The return-to-entrepreneurship schedule will shift rightward, and the opportunity cost to entrepreneurship will decrease. D) The return-to-entrepreneurship schedule will shift rightward, and the opportunity cost to entrepreneurship will increase.
C. The return-to-entrepreneurship schedule will shift rightward, and the opportunity cost to entrepreneurship will decrease.
The figure below shows labor supply and labor demand curves. 71) Refer to the figure above. Assume that a shift in consumer preference causes the demand for a certain type of labor to shift downward. Assuming that there is downward wage rigidity, how will the wage rate and the quantity of labor demanded change? 71) A) The wage rate will increase, and the quantity of labor demanded will increase. B) The wage rate will remain the same, and the quantity of labor demanded will increase. C) The wage rate will remain the same, and the quantity of labor demanded will decrease. D) The wage rate will decrease, and the quantity of labor demanded will decrease.
C. The wage rate will remain the same, and the quantity of labor demanded will decrease.
65) Which of the following statements correctly differentiates between unemployed workers and discouraged workers? 65) A) The unemployment benefits received by unemployed workers are not capped, while the unemployment benefits received by discouraged workers are capped at a maximum. B) Unemployed workers do not have a paid job, while discouraged workers have a paid job. C) Unemployed workers are counted in the labor force, but discouraged workers are excluded from the labor force. D) Unemployed workers consist of skilled workers who have been laid off, while discouraged workers refer to the unskilled workers who have lost their jobs.
C. Unemployed workers are counted in the labor force, but discouraged workers are excluded from the labor force.
38) The term "demographic transition" refers to the ________ in fertility and number of children per family that many societies undergo as they transition ________. 38) A) decrease; from industry to agriculture B) increase; from industry to agriculture C) decrease; from agriculture to industry D) increase; from agriculture to industry
C. decrease; from agriculture to industry
61) The presence of navigable rivers and fertile soil is seen as a source of economic prosperity under the ________. 61) A) institutions hypothesis B) location hypothesis C) geography hypothesis D) culture hypothesis
C. geography hypothesis
62) An employed individual is one who ________. 62) A) was previously employed but has quit the job voluntarily B) has been actively looking for jobs C) has a full-time or part-time paid job D) has been performing household chores for free
C. has a full-time or part-time paid job
37) Decreases in the standard of living are associated with what sort of economic growth? 37) A) Zero economic growth B) Sustained economic growth C) Negative economic growth D) Slow economic growth
C. negative economic growth
56) Differences in the stock of human capital between nations are an example of a(n) ________. 56) A) implicit cause of prosperity B) explicit cause of prosperity C) proximate cause of prosperity D) fundamental cause of prosperity
C. proximate cause of prosperity
55) The relationship between urbanization and GDP per capita is likely to be represented by a(n) ________. 55) A) inverted U-shaped curve B) U-shaped curve C) upward-sloping curve D) downward-sloping curve
C. upward-sloping curve
63) Downward wage rigidity arises when ________. 63) A) firms resist increasing wages B) the quantity of labor demanded exceeds the quantity of labor supplied C) workers and firms resist wage cuts D) workers expect wages to increase because of economic expansion
C. workers and firms resist wage cuts
D
D
9) Xenonia has a larger supply of labor than does Inventia. If the labor supply in both countries increases by the same amount while their physical capital stocks remain unchanged, ________. A) Xenonia's income per capita will increase, while Inventia's income per capita will decrease B) Xenonia's income per capita will decrease, while Inventia's income per capita will increase C) the increase in Xenonia's output will be more than the increase in Inventia's output D) the increase in Inventia's output will be more than the increase in Xenonia's output
D) the increase in Inventia's output will be more than the increase in Xenonia's output
Scenario: In a closed economy without a government, the consumption expenditure equals $5,000 and the investment expenditure equals $2,000. 28) Refer to the scenario above. If the population of the economy is 200, the per capita national income is ________. 28) A) $10 B) $50 C) $17 D) $35
D.
35) In Australia, the saving rate is 15 percent, while GDP is $1.34 trillion. Total saving in Australia is closest to ________. 35) A) $220 billion B) $260 billion C) $240 billion D) $200 billion
D. $200 billion
Scenario: The depreciation rate of physical capital in an economy is 10 percent. The investment on physical capital in the current year is $500. 43) Refer to the scenario above. What is the current value of the physical capital stock in the economy if the physical capital stock in the last year was $1,000? 43) A) $1,800 B) $1,200 C) $1,600 D) $1,400
D. 1,400
86) If the income per capita in United Kingdom is £23,800 and the dollar per pound exchange rate is 1.68 in 2014, then income per capita in the United Kingdom in U.S. dollars in the same year is ________. 86) A) $30,400 B) $12,812 C) $22,829 D) $39,984
D. 39,984
92) By the end of the twentieth century, the share of U.S. income received by the top 10 percent of earners was about ________. 92) A) 30 percent B) 90 percent C) 25 percent D) 50 percent
D. 50 percent
18) Refer to the figure above. Which of the following best describes the difference between aggregate production functions 1 and 2? 18) A) The returns for increases in physical capital stock are higher in function 1. B) Human capital is higher for function 1. C) Physical capital stock is higher for function 1. D) Better technology is employed in function 1.
D. Better technology is employed in function 1.
The following figure shows the total output that an economy can produce using varying amounts of capital. 84) Refer to the figure above. The increase in output due to a one-unit increase in capital is the smallest at point ________. 84) A) A B) B C) C D) D
D. D
Scenario: Two neighboring countries, Sweetland and Sourland, are identical in terms of size, population (800,000), education of workforce, and value of natural resources owned. 4) Refer to the scenario above. Assume Sweetland has a higher GDP than does Sourland. Which of the following inputs in production might be greater in Sweetland? 4) A) Technology B) Land C) Total efficiency units of labor D) Entrepreneurship
D. Entrepeneurship
74) What is meant by the commonly used phrase "too big to fail"? 74) A) Large banks typically have enough equity to avoid failure. B) Large banks typically have enough potential lenders to increase solvency if faced with a threat of failure. C) Large banks are more strictly regulated by the government and thus less likely to fail. D) Governments will likely be politically motivated to bail out large banks if they fail due to systemic risk.
D. Governments will likely be politically motivated to bail out large banks if they fail due to systemic risk.
94) Which of the following statements is true? 94) A) Growth in technology is linear in nature. B) Growth in land productivity is exponential in nature. C) Growth in labor productivity is exponential in nature. D) Growth in technology is exponential in nature.
D. Growth in technology is exponential in nature.
Scenario: Assume the following aggregate production functions for two countries, A and B, respectively. YA=A KA1/2 HA1/2 YB=A KB2/3 HB1/3 2) Refer to the scenario above. Assume Country A and Country B have equal technology and human capital stock, but Country A's physical capital stock is 10 percent bigger than Country B's physical capital stock. What can you say about output in the two countries? 2) A) Output is bigger in Country A. B) Output is exactly equal in Country A and Country B. C) Output is bigger in Country B. D) It is not possible to come to any conclusions with the given information.
D. It is not possible to come to any conclusions with given information
32) Which of the following statements is true of the U.S. economy before 1800? 32) A) There were no major achievements in science and technology in the U.S. economy. B) The U.S. economy was growing at an average rate of more than 6 percent per year. C) There were no major achievements in arts in the U.S. economy. D) Sustained economic growth was rare or absent in the U.S. economy
D. Sustained economic growth was rare or absent in the U.S. economy
Scenario: The price of a standard basket of goods in Country A is 10 pesos. The price of the same basket of goods in country B is 25 francs and $5 in the United States. Country A has an income per capita of 60,000 pesos, and country B has an income per capita of 100,000 francs. Assume full employment in both countries. 89) Refer to the scenario above. Assume workers in Country A on average work 10 percent more hours for their equivalent income than workers in Country B. What would happen to GDP per capita in Country B if workers in Country B were required to increase their work by 10 percent for their equivalent income? 89) A) The difference between GDP per capita in Countries A and B would increase. B) Country B's GDP per capita would be equal to GDP per capita in Country A. C) Country B's GDP per capita would remain constant. D) The difference between GDP per capita in Countries A and B would decrease
D. The difference between GDP per capita in Countries A and B would decrease
26) Which of the following statements is true? A) The demographic transition of the nineteenth century led to an increase in fertility across the Western world. B) After the demographic transition in the nineteenth century, there were recurrent Malthusian cycles. C) The demographic transition of the nineteenth century led to a decrease in life expectancy across the Western world. D) Until the demographic transition in the nineteenth century, there were recurrent Malthusian cycles.
D. Until the demographic transition in the nineteenth century, there were recurrent Malthusian cycles.
Scenario: The unemployment rate in Country Y is 6 percent, and the labor force is equals about 200 million people. 73) Refer to the scenario above. Which statement is true about Country Y? 73) A) The labor force participation rate is about 94 percent. B) About 212 million people are considered potential workers. C) There are fewer than 200 million potential workers. D) About 188 million people have a job.
D. about 188 million people have a job
16) An economy with better technology is likely to ________. A) have lower levels of human capital B) use more labor than capital C) have a small physical capital stock D) achieve higher productivity
D. achieve higher productivity
Scenario: John is looking to buy a house in Bozeman. He has about $120,000 in savings, and the house he is interested in costs $300,000. When he approaches Boze Bank, the same bank at which all of his five brothers have accounts, he learns that he can borrow at a nominal interest rate of 5 percent. Inflation is 2 percent for 2 years after he buys the house and then increases to 3 percent. Assume that Boze Bank is the only bank in Bozeman and John's five brothers contribute a significant amount to the bank's total savings. Refer to the scenario above. Just before John purchases the house, the sales tax on big ticket items goes up by 5 percent. How might this affect John? 76) A) John might have to take longer to pay off his house. B) John might have to pay higher interest. C) John might be less interested in buying the house. D) All of the above could be true.
D. all of the above could be true
49) The aspects of the society's rules that concern economic transactions are referred to as ________. 49) A) financial regulations B) economic principles C) economic ideals D) economic institutions
D. economic institutions
83) Institutions that channel funds from suppliers of financial capital to users of financial capital are referred to as ________. 83) A) central banks B) mutual funds C) deposit insurance committees D) financial intermediaries
D. financial intermediaries
67) Frictional unemployment exists because ________. 67) A) firms do not make an attempt to advertise the vacancies they have B) job markets are heavily regulated by the government C) unemployment benefits are capped in most economies D) firms and workers have imperfect information about each other and the state of the economy
D. firms and workers have imperfect information about each other and the state of the economy
46) An implication of the return-to-entrepreneurship curve is that ________. 46) A) all entrepreneurs in an economy with extractive institutions have exactly the same return B) all entrepreneurs in an economy with inclusive institutions have exactly the same return C) for a relatively lower return, there will be fewer entrepreneurs with at least that return D) for a relatively lower return, there will be more entrepreneurs with at least that return
D. for a relatively lower return, there will be more entrepreneurs with at least that return
47) The ________ hypothesis claims that differences in natural environment, such as climate and ecology, are ultimately responsible for the major differences in prosperity observed around the world. 47) A) location B) climate C) ecology D) geography
D. geography
The following table shows economic data for two countries. Country A Country B Currency used Rupee Yen Currency exchange to U.S. $ 1 rupee = $0.85 1 yen = $1.05 Population 250 million 250 million Size of workforce 200 million 180 million GDP 10 trillion rupee 10 trillion yen PPP conversion $1 per 0.80 rupee $1 per 1.10 yen 17) Refer to the table above. Compared to Country B, Country A ________. 17) A) has a lower standard of living because the same bundle of goods is cheaper than in Country B B) has a comparable standard of living C) is more productive D) is less productive
D. is less productive
90) If a country's GDP increases and all other variables remain constant, ________. 90) A) its gross national product will fall B) its income per capita will fall C) its trade surplus will increase D) its income per worker will increase
D. its income per worker will increase
91) A country's physical capital stock decreases after a war while its labor supply remains constant. Which of the following will happen in this case if output is a function of physical capital stock and the efficiency units of labor? 91) A) Its per capita output will remain constant. B) Its per capita output will increase. C) Its total output will remain constant. D) Its total output will decrease.
D. its total output will decrease
70) International trade generally ________. 70) A) leads to lower wage rates B) leads to lower unemployment C) causes economic dislocation D) leads to all of the above
D. leads to all of the above
51) The colonization policy adopted by the European countries between the fifteenth century and the middle of the twentieth century ________. 51) A) aimed to set up inclusive economic institutions in all nations B) was welfare driven C) aimed to set up exclusive economic institutions in all nations D) was profit driven
D. was profit driven
