econ exam 2
52. The ability to collect on a debt in a timely manner is due to: A) economies of scale. B) a good legal system. C) a highly educated workforce. D) investment in physical capital.
b
15. Private spending on final goods and services is part of: A) consumption. B) investment. C) government spending. D) net exports.
a
24. GDP per capita is GDP divided by: A) population. B) the price level. C) the inflation rate. D) the unemployment rate.
a
26. Between 1993 and 2003, Guatemala experienced real GDP growth of about 3.6% a year. Over that same period, population grew at 2.8% a year, so real GDP per capita in Guatemala grew at: A) 0.8% a year. B) 2.8% a year. C) 3.2% a year. D) 6.4% a year.
a
3. The value of production by a U.S. worker employed by a firm located in Canada is included in: A) Canada's GDP only. B) U.S. GDP only. C) GDP for both Canada and the United States. D) neither country's GDP.
a
32. One measure of student output is number of completed math problems produced. Using pen and paper only, a student can complete 50 math problems in 2 hours. Using pen, paper, and a calculator, the same student can complete 100 math problems in 2 hours. (The student is already familiar with, and knows how to use, the calculator.) This scenario illustrates the use of which factor of production? A) physical capital B) human capital C) technological knowledge D) both human capital and technological knowledge
a
44. (Figure: The Distribution of World Income) Refer to the figure. Based on the data in the figure, about how many times wealthier is the richest country when compared to the poorest countries in the world? A) 500 times B) 100 times C) 10 times D) 30 times
b
28. GDP in the United States was $14,119 billion in 2009, and grew to $14,660.4 billion in 2010. This represents an annual growth rate of: A) $541.4 billion. B) 1.04%. C) 3.7%. D) 3.8%.
d
30. A set of tires installed on a vehicle in an automobile factory is counted as: A) a final good and its market price is part of GDP. B) a final good and its market price is not part of GDP. C) an intermediate good and its market price is part of GDP. D) an intermediate good and its market price is not part of GDP.
d
34. Which statement best describes the economic growth patterns in the world since World War II? A) Japan and South Korea experienced rapid growth while Argentina and Nigeria experienced slow growth. B) Japan and South Korea experienced slow growth while Argentina and Nigeria experienced rapid growth. C) Most countries in the world experienced rapid growth. D) Most countries in the world except the United States experienced no growth at all.
a
35. Physical capital is the: A) stock of tools, including machines, structures, and equipment, used to produce output. B) productive knowledge and skills that workers acquire through education, training, and experience. C) knowledge about how the world works that is used to produce goods and services. D) financial resources available to business owners.
a
37. Countries that are NOT landlocked tend to grow _____ because _____. A) faster; easy access to water naturally opens a country to trade B) slower; easy access to water naturally opens a country to trade C) faster; fewer resources are required to build a strong military D) slower; fewer resources are required to build a strong military
a
41. Which of the following has the greatest potential for solving free-rider problems? A) property rights B) a stable political system C) an honest government D) the rule of law
a
48. What is a result of a high level of government corruption? A) There are few entrepreneurs. B) Government officials have a low standard of living. C) Politicians hold little power over the market. D) The form of government tends toward Communism.
a
49. Increases in the level of political stability in a country tend to: A) increase per capita GDP. B) decrease per capita GDP. C) have no impact on per capita GDP. D) increase per capita GDP at lower levels of stability, but decrease per capita GDP at higher levels of stability.
a
50. (Figure: Economic Growth in Major World Regions) Refer to the figure, which shows real GDP per capita over time in different regions of the world. The chart shows that all regions of the world: A) were poor at one time. B) have been relatively rich throughout most of human history. C) have experienced moderate growth throughout most of human history. D) remain poor today.
a
51. At an average growth rate of 4%, approximately how long would it take for an economy to double its GDP? A) 17.5 years B) 25 years C) 50 years D) 70 years
a
60. Two thousand years ago, per capita GDP (in 2010 dollars) was: A) less than $1,000. B) about $10,000. C) more than $50,000. D) about the same as today.
a
61. There is: A) a strong positive correlation between per capita GDP and infant survival. B) a weak positive correlation between per capita GDP and infant survival. C) no correlation between per capita GDP and infant survival. D) a weak negative correlation between per capita GDP and infant survival.
a
62. When the Communist Party took over China, "The Great Leap Forward" was instituted as a system to encourage the growth of agricultural production in China. Yet, during this time, millions of people starved to death. Why did this occur? A) Farmers' self-interest was not aligned with social interest. B) The land and its output were controlled by a few wealthy individuals. C) The farmers violated government policy. D) The farmers were being jailed.
a
63. Increasing the amount of physical capital tends to _____ output per hour of workers and _____ the value of workers. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase
a
64. A developing country could buy (or be given) _____ and _____ more easily than _____. A) technological knowledge; physical capital; human capital B) physical capital; human capital; technological knowledge C) human capital; technological knowledge; physical capital D) human capital; work experience; technological knowledge
a
70. If real GDP per capita in a country was $14,000 in year 1 and $14,140 in year 2, then the economic growth rate for this country from year 1 to year 2 was: A) 1%. B) 2%. C) 3%. D) 4%.
a
73. Technological knowledge: A) may continue to increase even if human capital remains relatively constant. B) is bounded by the limits of human capital. C) is the productive knowledge and skills that workers acquire through education and training. D) has remained relatively constant over time.
a
76. Knowledge of the computer software used by a business is an example of: A) human capital. B) physical capital. C) production technology. D) technical knowledge.
a
86. Discouraged workers and underemployed workers are examples of: A) workers not included in the unemployment rate. B) populations that cause higher unemployment taxes. C) users of unemployment insurance. D) poor national employment planning.
a
87. Which of the following is NOT part of natural unemployment? A) cyclical unemployment B) frictional unemployment C) structural unemployment D) frictional and structural
a
98. Frictional unemployment is caused by: A) creative destruction. B) recessions. C) the transformation of the United States into a service economy. D) the changing seasons of the year.
a
99. In a nonrecession year, the majority of U.S. unemployment is: A) frictional. B) structural. C) cyclical. D) recurrent.
a
5. Which of the following would NOT be included in this year's GDP for the United States? A) A U.S. business spends $100 million to build a new factory in South Carolina. B) The U.S. government distributes $10 million in social security payments. C) A foreign country purchases $2 billion worth of U.S. exports. D) U.S. consumers spend $40 million on domestically produced medical services.
b
1. Which of the following would most likely NOT be counted in GDP? A) The legal sale of marijuana for medical purposes in the State of California. B) You build a shed in your back yard to store your lawn mower. C) An outside company is hired to clean up a chemical spill at a local factory. D) The fee you pay to snorkel with manatees while on vacation in Florida.
b
10. Final goods are goods: A) used to produce other goods. B) consumed or held in personal inventories. C) used up in the production process. D) that cannot be exported.
b
12. Which of the following would NOT be included in the calculation of GDP as a government purchase? A) military payrolls B) distribution of food stamps C) purchase of 100 new C-5A aircraft D) hiring 1,000 workers to build a new interstate roadway
b
14. The value of volunteer services is: A) included in GDP, but should not be because nothing tangible is produced. B) not included in GDP, but should be because a service is produced. C) included in GDP and should be because a service is produced. D) not included in GDP and should not be because nothing tangible is produced.
b
16. If a country is experiencing inflation, it would mean that: A) nominal GDP and real GDP are growing at the same rate. B) nominal GDP is growing faster than real GDP. C) real GDP is growing faster than nominal GDP. D) nominal GDP is growing and real GDP is falling.
b
17. Gross domestic product is the market value of all: A) goods and services sold within a country in a year. B) final goods and services produced within a country in a year. C) goods and services produced within a country in a year. D) final goods and services produced by a country's permanent residents, wherever located, in a year.
b
19. GNP measures: A) the same things as GDP, but also includes financial assets. B) production by U.S. citizens wherever they work in the world. C) the production of both intermediate and final goods and services. D) goods and services produced by foreign businesses inside U.S. borders.
b
31. Institutions: A) are the advantages of large-scale production that reduce average cost as quantity increases. B) are the rules of the game that structure economic incentives. C) are the framework that allows the government to control the economy. D) do not vary much from country to country.
b
36. Corruption is like a "tax" on firms because: A) firms can file for a refund for the money paid as bribes. B) bribes add to a firm's production costs. C) firms usually pay bribes to avoid paying corporate taxes. D) firms have to pay a certain percentage of their profits at the end of the fiscal year as bribes.
b
39. Which scenario has the greatest potential for free riding? A) an unstable political system B) a system in which work effort and pay are not connected C) a dishonest government that promotes corruption D) secure property rights
b
54. Which statement is TRUE for the Great Leap Forward period in China? A) Technological advance was strong because of the hard work of farmers. B) A lack of private property rights provided no incentive for farmers to be productive. C) Communal property in agricultural land helped align farmers' self-interest with the social interest. D) Collective property rights failed to improve farming productivity because of the existence of private property rights.
b
59. A tractor is an example of: A) human capital. B) physical capital. C) production technology. D) technical knowledge.
b
66. One of the best explanations for why some countries are rich and others are poor is that: A) technological knowledge is more advanced in rich countries than in poor countries. B) rich countries organize their factors of production more efficiently than poor countries. C) rich countries may have simply gotten lucky and poor countries remain unlucky. D) rich countries have far greater natural resources than poor countries.
b
72. If the GDP of country X is 4 times the GDP of country Y and if the GDP of country X remains constant while GDP of country Y grows at a rate of 7% per year, which of the following statements is true? A) Country Y's GDP will be equal to country X's GDP in 10 years. B) Country Y's GDP will be equal to country X's GDP in 20 years. C) Country Y's GDP will be equal to country X's GDP in 40 years. D) Country Y's GDP will never catch up with country X's GDP.
b
74. A business that pays for its workers to attend a technical college is increasing its: A) physical capital. B) human capital. C) organizational skills. D) technical knowledge.
b
79. Landlocked countries tend to grow _____ because _____. A) faster; lack of water access makes trade more difficult and costly B) slower; lack of water access makes trade more difficult and costly C) faster; fewer resources are required to build a strong military D) slower; fewer resources are required to build a strong military
b
8. Programmers produce a large amount of software on an unpaid, open-source basis. As a result: A) GDP double-counts some software production. B) GDP undercounts some software production. C) no software should be counted in GDP. D) GDP is a good measure of software productivity.
b
80. When economists speak of "long-run economic growth," they mean increasing the: A) real GDP of a country. B) per capita real GDP of a country. C) geographic size of a country. D) population of a country.
b
81. Corruption causes investment in physical capital to: A) increase. B) decrease. C) remain unchanged. D) become impossible.
b
89. Government can influence a person's choice to work or not through: A) taxes on nonworkers and benefits paid to workers. B) taxes on workers and benefits paid to nonworkers. C) taxes on both workers and nonworkers. D) benefits paid to both workers and nonworkers.
b
9. A computer chip sold to Dell is an example of: A) a final good. B) an intermediate good. C) a service. D) an inferior good.
b
93. As the baby boomers retire, the United States labor force participation rate will: A) increase. B) decrease. C) remain the same. D) fluctuate unpredictably.
b
94. A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. What is this country's labor force participation rate? A) 50% B) 66.7% C) 75% D) 83.3%
b
95. If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's unemployment rate is: A) 5%. B) 9.1%. C) 10%. D) 11%.
b
100. Which of the following is an example of an unemployed person? A) a retiree working as a volunteer in a hospital B) a worker who is willing to work more hours if available C) a recent college graduate looking for her first job D) a full-time student working part time at night
c
13. (Table: Three-Good Economy II) Suppose an economy produces only the three final goods shown in the table. The table gives information on the quantities produced and the prices of goods sold in 2008 and 2009. What is the real GDP in 2009 if 2009 prices are used in the calculation of real GDP? A) $33,700 B) $35,000 C) $34,310 D) $35,350
c
21. In 2010, nominal GDP was $14.6 trillion and the GDP deflator was 110.6. What was real GDP for that year? A) $16.1 trillion B) $14.3 trillion C) $13.2 trillion D) $12.1 trillion
c
23. Which of the following statements is TRUE about GDP? A) GDP includes all known goods and services in the underground economy. B) GDP includes a negative adjustment for damage caused by pollution. C) GDP does not account for the distribution of income in a country. D) GDP includes a positive adjustment for the value of leisure and well-being.
c
25. Which statement is TRUE about a recession? A) It can be concentrated only in a single geographic area, but it must be widespread across many sectors of the economy within that area. B) It must be a significant decline in economic activity that lasts for at least three years in a row. C) It is a significant decline in economic activity lasting more than a few months and must be widespread geographically. D) It can be a significant and widespread decline lasting only a month or two.
c
29. Which transaction will be included in GDP? A) the purchase of a used bicycle on Ebay B) the purchase of a home built in 1957 C) the purchase of a real estate agent's services D) the purchase of 1,000 shares of IBM stock
c
4. Which of the following government outlays is a transfer payment that would NOT be included in GDP? A) The Veteran's Administration pays a doctor to care for a wounded veteran. B) The National Security Agency builds a new building for its headquarters. C) The Social Security program sends a monthly payment to a senior citizen. D) The Defense Department buys a new aircraft carrier.
c
45. Property rights are important institutions for encouraging investment because: A) they eliminate corruption. B) they increase the average return to investing, thus increasing the overall level of investment in the economy. C) people won't invest if they feel their property is at risk and that they may not realize a return on their investment. D) they tend to support industrial sectors more than agricultural sectors.
c
46. If a country's initial real GDP is $60,000 and its annual growth rate is 5%, use the Rule of 70 to determine approximately how many years it would take for this economy to double its GDP. A) 70 years B) 20 years C) 14 years D) 12 years
c
47. Agricultural productivity in China sharply declined during its experiment with communal farming. This was primarily a result of: A) a decade-long drought in China. B) the transition to open markets in China. C) a lack of property rights for farm land. D) political instability.
c
53. According to the text, we can understand the "wealth of nations" best by examining: A) how natural resources are distributed around the world. B) the extent to which governments support the domestic markets. C) the laws and regulations that affect people's incentives to work and invest. D) the amount of technological knowledge obtained from other countries.
c
57. If real GDP per capita in a country was $14,000 in year 1 and $14,420 in year 2, then the economic growth rate for this country from year 1 to year 2 was: A) 1%. B) 2%. C) 3%. D) 4%.
c
65. Economies more open to foreign trade are more efficient in production partly because: A) more open economies tend to receive more foreign aid. B) foreign producers are more productive than domestic producers. C) economies of scale occur in larger markets. D) property rights are less important in a more open economy.
c
68. (Figure: Economic Growth in Major World Regions) Refer to the figure, which shows real GDP per capita over time in different regions of the world. The chart shows that: A) all regions of the world eventually achieved significant growth. B) some regions of the world have always experienced growth. C) significant growth has occurred in some regions only since 1950. D) all regions of the world remain poor today.
c
69. A rural village in a developing country has an economy based on agriculture. Then the government of the country provides the village with newly developed hybrid seeds that more than double the agricultural yield per acre. This story illustrates the growth of per capita GDP in the village through which factor(s) of production? A) physical capital B) human capital C) technological knowledge D) both human capital and technological knowledge
c
71. Which statement is TRUE about economic growth? A) All countries eventually grow rich. B) Once a country starts to grow, it will continue to grow. C) A country can grow and become wealthy, never grow, or grow and then begin to stagnate. D) Growth is a random process; in some years a country grows and in other years it doesn't.
c
77. The correlation between infant mortality and real GDP per capita is: A) zero. B) positive. C) negative. D) unpredictable.
c
90. Individuals who have given up looking for work but still would take a job are considered: A) unemployed workers. B) displaced workers. C) discouraged workers. D) part of the labor force.
c
92. The natural rate of unemployment is defined as the rate of: A) frictional plus cyclical unemployment. B) structural plus cyclical unemployment. C) structural plus frictional unemployment. D) structural plus frictional plus cyclical unemployment.
c
97. Structural unemployment has been a more serious problem in Europe than in the United States because of: A) a low level of labor regulations. B) active labor unions. C) more generous unemployment benefits. D) much tighter government control.
c
11. The growth rate of GDP tells how rapidly the country's level of _____ is rising or falling over time. A) spending B) trade activity C) investment D) production
d
18. (Table: GDP Data) Using the GDP data in the table, how much did nominal GDP grow between 1995 and 2000? A) -14.5% B) 16% C) 13.63% D) 31.8%
d
2. (Table: Wheat and Corn) Consider a country that produces only wheat and corn. Based on the data in the table, the growth rate of nominal GDP from 2005 to 2006 is: A) 8%. B) 16%. C) 21%. D) 27%.
d
20. GDP is calculated by: A) adding the quantities of all goods and services in an economy. B) adding the prices of all goods and services in an economy. C) dividing the quantity of all goods and services by their prices and adding together the results. D) multiplying the quantity of all goods and services by their prices and adding together the results.
d
22. Using the national spending approach to measuring GDP, if Tyler buys 50 shares of Apple stock, it is included in GDP as part of: A) consumption. B) investment. C) government purchases. D) nothing; it is not included as part of GDP.
d
27. A sound system produced by a supplier to Ford Motor Company is an example of: A) an inferior good. B) a final good. C) a public good. D) an intermediate good.
d
33. In North Korea, workers are rewarded for: A) providing goods and services of value to consumers. B) inventing new ideas for more efficient production. C) investing in human and physical capital. D) being loyal to the ruling Communist Party.
d
38. The rule of 70 states that if the annual growth rate of a variable is x%, the necessary time for doubling is: A) 70 plus x. B) 70 minus x. C) 70 times x. D) 70 divided by x.
d
40. The world's poorest country is: A) Nigeria. B) Argentina. C) India. D) the Democratic Republic of the Congo.
d
42. Economic growth refers to the growth rate of: A) personal income. B) GNP. C) GDP. D) GDP per capita.
d
43. Piped water and flush toilets together can reduce infant mortality from diarrhea by approximately: A) 20%. B) 40%. C) 60%. D) 70% or more.
d
55. At an annual growth rate of 3.5%, approximately how long does it take for real GDP per capita to increase from $30,000 to $60,000 in a country? A) 5 years B) 10 years C) 15 years D) 20 years
d
56. Which is NOT an institution that leads to sustained long-term economic growth? A) a dependable legal system B) a stable political system C) an honest government D) a more equal income distribution
d
58. Development of new computer software that increases productivity is an example of: A) human capital. B) physical capital. C) production technology. D) technical knowledge.
d
6. Increases in _____ are considered the best measure of increases in living standards because they measure only increases in production. A) national wealth B) consumer spending C) nominal GDP D) real GDP
d
67. Institutions ultimately come from: A) luck. B) culture. C) geography. D) luck, culture, and geography.
d
7. Which statement is TRUE? A) Nominal GDP is always larger than real GDP. B) Nominal GDP can only rise from one year to the next because of price increases. C) Nominal GDP can only rise from one year to the next because of production increases. D) Nominal GDP can rise from one year to the next because of price increases or because of production increases, or both.
d
75. Beginning in the _____ century, economic growth became a clear trend in parts of the world. A) sixteenth B) seventeenth C) eighteenth D) nineteenth
d
78. If real GDP in an economy increases from $20,000 billion to $20,200 billion from 2010 to 2011, what is the annual growth rate in this economy? A) 10% B) 5% C) 2.01% D) 1%
d
82. The least corrupt countries tend to be located on which continent? A) Asia B) North America C) South America D) Europe
d
83. Countries that have high per capita GDP tend to have: A) high levels of physical capital per worker. B) high levels of human capital per worker. C) high levels of technology per worker. D) high levels of all three factors of production.
d
84. A country increases its physical capital by engaging in: A) research and development. B) education and training. C) programs that improve workers' health. D) investment.
d
85. Two countries that may be considered examples of growth miracles are: A) Mexico and China. B) the United States and Spain. C) Denmark and Luxembourg. D) South Korea and Japan.
d
88. Which of the following is NOT true of structural unemployment? A) It is persistent over time. B) It is long-term in duration. C) It results from industry restructuring. D) It results from scarcity of information.
d
91. Which of the following does NOT determine the labor force participation rate? A) lifecycle effects B) demographics C) incentives D) education
d
