Econ Chapter 20 Practice Questions

A nation can achieve higher economic growth if:

it devotes more resources to research and development.

Most modern economists agree that there is a single factor that can be used to explain economic growth.

This is a false statement because nearly all economists believe that economic growth is a complex process without a single dominant factor.

A technological advance may come in either the form of a product or a process innovation.

True

If real GDP per capita is decreasing, real output is:

growing less rapidly than the population.

If real GDP per capita is increasing, real output is:

growing more rapidly than the population

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

14 percent

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

3.5 percent

If a country's annual growth rate is 2%, then its output will double in approximately ____ years

35

Real output per capita

A. is measured by real GDP per capita. B. is total real output ( real GDP) divided by the number of persons among whom it will be distributed. C. is one measure of the average level of economic well being in a country.

When measuring economic growth, economists typically focus on per capita real GDP in order to account for variations in the:

A. size of the population B. price level

Which of the following affects the rate of economic growth?

A. the quality of available resources. B. the quantity of available resources. C. technological change

Which of the following is not considered a significant factor contributing to economic growth by economists today? A. work effort is less intense in the heat of the tropics B. an increase in the quantity of physical capital C. increased use of land inputs D. greater division of labor and specialization

A. work effort is less intense in the heat of the tropics

Which of the following statements is not correct? A.Economic growth is best measured by the annual percentage change in nominal GDP per capita. B. An economy producing along the production possibilities curve is operating at its potential output. C. Economic growth is a crucial determinant of people's well-being. D. If the quality of labor improves, an economy's production possibilities curve will shift outward.

A.Economic growth is best measured by the annual percentage change in nominal GDP per capita

Which of the following is correct? A. An increase in the quantity of labor always leads to economic growth. B. Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital. C. A decrease in the productivity of labor leads to economic growth. D. Japan and Hong Kong are rich in natural resources.

B. Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.

69. Which of the following is not considered a factor that contributes to economic growth? A. increased labor productivity B. increased infant mortality rates C. technological advances D. the migration of resources from areas of low productivity to areas of high productivity

B. increased infant mortality rates

Which of the following is not considered a factor contributing to economic growth? A. Growth in the quantity and quality of labor resources used B. Growth in physical capital inputs (machines, tools, buildings, and inventories) C. Growth in the money supply relative to the growth of final goods and services D. Government protection of property rights

C. Growth in the money supply relative to the growth of final goods and services

Which one of the following will not cause the production possibilities curve to shift outward? A. improvements in the stock of land B. increased educational opportunities C. a very low birth rate D. increased entrepreneurial activity

C. a very low birth rate

Which of the following countries have a relative abundance of natural resources?

Canada

Which of the following will not affect the size of a nation's physical or human capital stock? A. A new factory is constructed. B. A new machine is installed in company's plant. C. An eighteen-year-old enrolls in college as a full-time student. D. All of the above affect the size of a nation's capital stock

D. All of the above affect the size of a nation's capital stock

There are several factors that nearly everyone agrees have contributed to economic growth in some or all countries. They do not include which of the following? A. Growth in the quantity and quality of labor resources used B. Increase in the use of inputs provided by the land C. Growth in physical capital inputs D. All of the above are included.

D. All of the above are included.

Which of the following is false? A. Accepting a reduction in current income to acquire education and training can increase future earning ability, which can raise the standard of living. B. Improvements in literacy stimulate economic growth by reducing barriers to the flow of information and raising labor productivity. C. One problem of providing enough education in poorer countries is that since children in developing countries are an important part of the labor force at a young age, there is a higher opportunity cost of education in terms of foregone contribution to family income. D. Investment alone guarantees economic growth per capita

D. Investment alone guarantees economic growth per capita

Which of the following did not result in economic growth? A. Installing a network of irrigation ditches and pumping stations in order to grow fruits and vegetables in parts of southern California B. Cyrus McCormack inventing a threshing machine for harvesting grains C. After World War II, the U.S. instituting the GI bill, which provided education subsidies to soldiers being released from service duty D. Many citizens emigrating from a nation when a politically repressive regime takes office

D. Many citizens emigrating from a nation when a politically repressive regime takes office

Which of the following is true? A. The Rule of 70 says that the number of years necessary for a nation to double its output is approximately equal to the nation's growth rate divided by 70. B. Economic growth is usually measured by the annual percent change in the nominal output of goods and services per capita. C. An increase in labor input necessarily increases output per capita. D. Neither the initial development process nor the sustained growth of an economy is dependent on a large natural resource base.

D. Neither the initial development process nor the sustained growth of an economy is dependent on a large natural resource base

114. Which of the following is false? A. Generally speaking, higher levels of saving will lead to higher levels of investment and capital formation and, therefore, to greater economic growth. B. Economic growth rates tend to be higher in countries where the government enforces property rights. C. Investment alone does not guarantee economic growth, which hinges importantly on the quality and the type of investment as well. D. None of the above are false; all are true.

D. None of the above are false; all are true.

The Malthusian prospect of starvation of the population could be prevented by: A. increasing the amount of land available for agriculture. B. investing in research and development of new technologies. C. expanding food production on available land. D. all of the above

D. all of the above

Which of the following affect the growth in real GDP per capita? A. the total production of final goods in the economy. B. the population. C. the production of final services in the economy. D. all of the above

D. all of the above

Which of the following factors contribute to economic growth? A. growth in physical capital B. technological advances C. an increase in the productivity of labor D. all of the above

D. all of the above

Which one of the following will cause the production possibilities curve to shift outward? A. improved public education B. improved health care systems C. larger budgets for research, development, and exploration D. all of the above

D. all of the above

Which one of the following will determine the size of the production possibilities curve? A. amount of labor B. amount of capital C. entrepreneurship D. all of the above

D. all of the above

When observing economic growth and literacy rates, it is clear that: A. economic growth causes higher literacy rates. B. economic growth may be a consequence of improved education. C. improved levels of education may be the result of increasing economic growth. D. all of the above are likely to be true.

D. all of the above are likely to be true.

According to the rule of 70, A. if a country is growing at 14% per year, its output will double in approximately 5 years. B. if a country is growing at 10% per year, its output will double in approximately 7 years. C. if a country is growing at 2% per year, its output will double in approximately 35 years. D. all of the above are true.

D. all of the above are true.

In countries with low levels of income: A. the opportunity cost of an education is higher than in high-income countries. B. illiteracy rates are higher than in high-income countries . C. economies are primarily agricultural-based. D. all of the above tend to be true.

D. all of the above tend to be true.

Technology can enable producers to economize on: A. labor. B. capital. C. land. D. any of the above.

D. any of the above

Many scholars believe that the importance of research and development is understated. Efforts in research and development can include: A. the introduction of new products. B. management improvements . C. production innovations. D. any of the above.

D. any of the above.

If population is expanding at the same rate as a country's real output: A. real per capita output would increase. B. real per capita output would remain unchanged. C. the production possibilities curve for the country as a whole will be shifting outward. D. both (b) and (c) would be true

D. both (b) and (c) would be true

If population is expanding at a faster rate than a country's real output is expanding: A. real per capita output would increase. B. real per capita output would decrease. C. the production possibilities curve for the country as a whole will be shifting outward. D. both (b) and (c) would be true.

D. both (b) and (c) would be true.

Improvements in literacy stimulate economic growth by: A. reducing the barriers to the flow of information. B. improving the flow of resources to more productive uses. C. imparting skills, which raises labor productivity. D. doing all of the above.

D. doing all of the above.

Higher levels of savings will result in all of following except: A. greater economic growth. B. higher capital formation. C. more consumption in the future. D. lower rates of investment.

D. lower rates of investment.

Which of the following factors contribute to economic growth? A. the construction of new factories B. an increase in the proportion of the population that is college-educated C. a decrease in the productivity of labor D. only (a) and (b).

D. only (a) and (b).

An increase in the quantity of labor inputs always leads to economic growth.

False

As economic growth rises, literacy rates tend to fall.

False

Brazil has a relatively low income per capita because it has relatively few natural resources.

False

Economists generally define economic growth as an increase in the nominal income of the population.

False

Generally there is an inverse relationship between the level of savings and the level of long-term economic growth

False

Higher rates of real economic growth can allow a less-developed, low per capita income country to attain the same standard of living as a more developed, high per capita income country in a few years.

False

If the educational attainment of a nation's population increases, the economy's production possibilities curve shifts inward

False

In developing countries, the opportunity cost of an education is relatively low compared to the cost in a highly developed country

False

Increases in the quality and quantity of an economy's resources have little effect on its potential output in the long run.

False

It is impossible to have economic growth unless a country or a region has abundant natural resources to sustain the growth

False

Which of the government policies below is not likely to encourage per capita economic growth?

High taxes on companies that spend a lot on capital formation

Education would be considered investments in:

Human Capital

Which of the following countries is lacking an abundance of natural resources?

Japan

People who make the arguments that economic growth will deplete natural resources make the same assumption Malthus made about resources. What is that assumption?

Natural resources cannot be produced, so they are available in fixed quantities

Would companies and individuals invest as much in significant research and development if a system of patents were not available?

No they would not, because if they made a significant investment in the development, they would b

Is it possible to have economic growth with no opportunity cost?

No, because growth requires the sacrifice of consumption goods in order to invest in such things as capital formation and research and development.

Malthus's gloomy economic outlook for humankind is based on the following principle:

Population, when unchecked, increases at a faster pace than the production of output

The measure most commonly used by economists to gauge the standard of living of a nation is:

Real GDP per capita

Capital formation is a key component of economic growth.

True

Economies of large-scale production may exist in some forms of production, so larger markets associated with greater populations can lead to more efficiently sized production units.

True

Economists generally define economic growth as an increase in real income per capita.

True

Free trade can promote greater output because of the principle of comparative advantage

True

Hong Kong and Japan have achieved relatively high incomes per capita despite lacking an abundance of natural resources.

True

The higher opportunity cost of obtaining an education in developing countries is one of the reasons that school enrollments are lower

True

Thomas Malthus believed that in the long run, the growth rates of real GDP would not exceed population growth

True

Thomas Malthus's predictions did not come to pass because he implicitly assumed that there would be no technological advances and did not foresee that agricultural land was not completely fixed in quantity or quality.

True

Ultimately, productivity growth is the major determinant of a country's standard of living

True

When an economy experiences significant economic growth

a direct relationship exists between output per capita and adult literacy rates.

One of the most important determinants of accelerated economic growth is:

a high level of savings

Which of the following will not contribute to increasing the stock of physical or human capital of a nation?

a lack of enforcement of private property rights

Given a constant rate of growth of real GDP, what would cause a fall in real GDP per capita?

a rate of population growth that is greater than the rate of growth of real GDP

Given a constant rate of growth of real GDP, what would lead to an increasing real GDP per capita?

a rate of population growth that is less than the rate of growth of real GDP

Which of the following will not increase the rate of growth in an economy?

a reduction in the rate of savings

Rapid population increase in which of the following economies may threaten and deter economic growth the most?

an agriculture based economy

A negative growth rate will cause:

an inward shift of an economy's production possibilities curve

An increase in growth rates will cause:

an outward shift of an economy's production possibilities curve.

Growth in a production possibilities curve diagram is shown as

an outward shift of the curve.

Economic growth is measured by the

annual percentage change in per capita real output of goods and services

In a fully employed economy, invention and discovery

are achieved through sacrifices in current consumption.

An increase in the stock of capital:

causes an economy's production possibilities curve to shift outward over time.

Changes in the growth rate of real GDP per capita do not reflect which of the following?

changes in the distribution of income

Allowing free trade can lead to greater output because of the principle of:

comparative advantage

The rule of 70 which predicts the time required for the economy of a nation to double, is based on the mechanism of

compound interest

Over the last several decades, the amount of government investment in U.S. infrastructure in real terms has:

decreased

As more capital per worker is added, a per worker production function generally becomes:

flatter because capital is subject to diminishing marginal returns.

According to the Malthusian prediction in the long run:

growth in real output of an economy would eventually become negative

In the long run, the most important source of increase in a nation's standard of living is a:

high rate of economic growth

If there was both an increase in technology and an increase in labor force participation, real GDP growth would ____ and real GDP growth per capita would ____.

increase: increase

If people began to retire at a later age and there was an increase in the capital stock, real GDP growth would ____ and real GDP growth per capita would ____.

increase; increase.

If there was an increase in technology other things equal, real GDP growth would ____ and real GDP growth per capita would ____.

increase; increase.

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.

Rapid population growth can threaten sustained economic growth if it:

leads to diminishing marginal returns in production

In a consumer-oriented economy, the decision to save in order to promote economic growth:

means a sacrifice of current consumption in order to enhance future consumption.

Enforcement of property rights is likely to result in:

more incentives to invest

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

one-half

Improvements in and greater stocks of land, labor, capital, and entrepreneurial activity will shift the production possibilities curve:

outward, such that more goods and services can be produced.

In the 1700s, Reverend Thomas Malthus predicted that:

per capita economic growth would eventually become negative since population growth would tend to outstrip production

If real GDP is increasing more rapidly than the population, then:

per capita real GDP will be increasing.

The per-worker production function is ____ sloped and ____ at a(n) ____ rate.

positively; increases; diminishing

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

promote economic growth.

In any country, the population will generally be better off as long as the ____ over time and population ____.

quantity and quality of output increases; does not increase faster than real output

The prosperity of a nation today is typically measured by its:

real output per capita

Output per capita will tend to increase if the labor force participation rate in a country ____ or if workers put in ____ hours.

rises; longer.

The ____ shows roughly how long it will take a nation to double its output at various growth rates.

rule of 70

Which of the following was not one of Malthus assumptions? A. stable prices B. production with only two inputs - land and labor C. a fixed supply of land D. human desire to increase the population

stable prices

For a low-income country to develop into a high-income country, ____ is (are) needed.

sustained economic growth

New growth theorists believe that increased economic growth is primarily driven by:

technological innovations and ideas

If productivity of an economy increases then:

the amount of goods and services produced by a worker per hour increases

Which of the following factors contribute to economic growth?

the discovery of new oil reserves

The faster the rate of technological progress:

the greater the rate of economic growth

How much a country's economy will produce at its potential output is also called:

the natural rate of output

The slower the rate of capital formation

the slower the rate of economic growth

In making the "Malthusian Prediction," Reverend Malthus assumed that:

the supply of land was fixed in quantity; there would be little if any technological advance; the sexual desires of humans would work to increase production.

Which of the following would not be considered an investment in human capital? A. education B. training programs C. transportation infrastructure D. literacy programs

transportation infrastructure

Foreign direct investment-capital injections from abroad-can promote economic growth

true

As savings grow in an economy, economic growth rises

True

In the nearly 200 years since Malthus wrote An Essay on the Principle of Population, what has happened to population growth rates as nations have become increasingly industrialized?

they have generally fallen