Econ Hw 7

9) Refer to Table 1. Which of the following is correct? Athens Troy Quantities Ribs 200,000 300,000 Baked Potatoes 400,000 250,000 Base year prices Ribs $10 $10 Baked Potatoes $4 $4 Population and Employment Population 6,000 8,000 Total hrs of emplmnt 40,000 60,000 a. Both productivity and the standard of living are higher in Athens than Troy. b. Productivity is higher in Athens while the standard of living is higher in Troy c. Productivity is higher in Troy while the standard of living is higher in Athens. d. Both productivity and the standard of living are higher in Troy than Athens.

a. Both productivity and the standard of living are higher in Athens than Troy.

24) Suppose an economy experiences an increase in its saving rate. The higher saving rate leads to a higher growth rate of productivity a. in the short run, but not in the long run. b. in the long run, but not in the short run. c. in both the short run and the long run. d. in neither the short run nor the long run.

a. in the short run, but not in the long run.

21) Currently a country has real GDP per person of 500. Raising capital per worker by one would increase output per worker by 4. Other things the same, which of the following long-run combinations are consistent with the effects of this country increasing its saving rate? a. real GDP per person is 520 and raising capital per worker by one would increase output per worker by 3 b. real GDP per person is 520 and raising capital per worker by one would increase output per worker by 5 c. real GDP per person is 480 and raising capital per worker by one would increase output per worker by 3 d. real GDP per person is 480 and raising capital per worker by one would increase output per worker by 5

a. real GDP per person is 520 and raising capital per worker by one would increase output per worker by 3

12) If an inexpensive alternative to oil were found, the price of oil adjusted for inflation a. would decline as the alternative would reduce the demand for oil. b. would decline as the alternative would reduce the supply of oil. c. would increase as the alternative would increase the demand for oil. d. would increase as the alternative would increase the supply of oil.

a. would decline as the alternative would reduce the demand for oil.

31) The president of a poor country has announced that he will implement the following measures which he claims are designed to increase growth: 1. Reduce corruption in the legal system; 2. Reduce reliance on market forces because they allocate goods and services in an unfair manner; 3. Restrict investment in domestic industries by foreigners because they take some of the profits out of the country; 4. Encourage trade with neighboring countries; and 5. Increase the fraction of GDP devoted to consumption. How many of these measures will have a positive effect on growth? a. 1 b. 2 c. 3 d. 4

b. 2

2) In 2010, the imaginary nation of Bovina had a population of 5,000 and real GDP of 600,000. In 2011 it had a population of 5,200 and real GDP of 636,480. During 2011 real GDP per person in Bovina grew by a. 2 percent, which is high compared to average U.S. growth over the last one-hundred years. b. 2 percent, which is about the same as average U.S. growth over the last one-hundred years. c. 4 percent, which is high compared to average U.S. growth over the last one-hundred years. d. 4 percent, which is about the same as average U.S. growth over the last one-hundred years

b. 2 percent, which is about the same as average U.S. growth over the last one-hundred years.

32) Other things equal, the likelihood that a country will experience a relatively-high level of income is greater if the country a. pursues inward-oriented policies. b. has natural seaports. c. minimizes the role of the courts in its economy. d. enacts policies to encourage consumption and discourage saving.

b. has natural seaports.

22) Suppose that a country increased its saving rate. In the long run it would have a. higher productivity, and another unit of capital would increase output by more than before. b. higher productivity, but another unit of capital would increase output by less than before. c. lower productivity, and another unit of capital would increase output by more than before. d. lower productivity, but another unit of capital would increase output by less than before.

b. higher productivity, but another unit of capital would increase output by less than before.

25) An increase in the saving rate would, other things the same, a. increase growth more for a poor country than for a rich country, and raise growth permanently. b. increase growth more for a poor country than for a rich country, but raise growth temporarily. c. increase growth more for a rich country than for a poor country, and raise growth permanently. d. increase growth more for a rich country than for a poor country, but raise growth temporarily

b. increase growth more for a poor country than for a rich country, but raise growth temporarily.

16) If an economy with constant returns to scale were to double its physical capital stock, its available natural resources, and its human capital, but leave the size of the labor force the same, a. its output would stay the same and so would its productivity. b. its output and productivity would increase, but less than double. c. its output and productivity would increase by more than double. d. None of the above is correct.

b. its output and productivity would increase, but less than double.

17) An economy's production form takes the form Y = AF(L, K, H, N). If the production function has the constant-returns-to-scale property, then if we know the values of A, K/L, H/L, and N/L, we also know the value of a. output. b. labor productivity. c. A. d. All of the above are correct.

b. labor productivity.

28) An increase in capital will increase real GDP per person a. more in a poor country than a rich country. The increase in real GDP per person will be larger if the addition to capital is from domestic rather than foreign investment. b. more in a poor country than a rich country. The increase in real GDP per person will be the same whether the addition to capital is from domestic or foreign investment. c. less in a poor country than a rich country. The increase in real GDP per person will be larger if the addition to capital is from domestic rather than foreign investment. d. less in a poor country than a rich country. The increase in real GDP per person will be the same whether the addition to capital is from domestic or foreign investment.

b. more in a poor country than a rich country. The increase in real GDP per person will be the same whether the addition to capital is from domestic or foreign investment.

14) Suppose there are constant returns to scale. Now suppose that over time a country doubles its workers, its natural resources, its physical capital, and its human capital, but its technology is unchanged. Which of the following would double? a. both output and productivity b. output, but not productivity c. productivity, but not output d. neither productivity nor output

b. output, but not productivity

13) Suppose a country imposes new restrictions on how many hours people can work. If these restrictions reduce the total number of hours worked in the economy, but all other factors that determine output are held fixed, then a. productivity and output both rise. b. productivity rises and output falls. c. productivity falls and output rises. d. productivity and output fall.

b. productivity rises and output falls.

26) In some countries it is time consuming and costly to establish ownership of property. Reforms to reduce these costs would likely a. have no affect on either real GDP nor productivity b. raise real GDP and productivity. c. raise real GDP but not productivity. d. raise productivity but not real GDP.

b. raise real GDP and productivity

29) If over a short time there is an increase in the number of people retired and a decrease in the number of people working, then productivity a. and real GDP per person rise. b. rises but real GDP per person falls. c. falls and real GDP per person rises. d. and real GDP per person fall.

b. rises but real GDP per person falls.

1) In 2011, the imaginary nation of Maconia had a population of 8,200 and real GDP of 210,500. Maconia had 5% growth in real GDP per person. In 2012 it had a population of 8,400. To the nearest dollar what was real GDP in Maconia in 2012? a. 216,815 b. 221,025 c. 226,416 d. None of the above is correct.

c. 226,416

4) In 2012, the imaginary nation of Dorados had a population of 8,000 and real GDP of 3,000,000. During the year its real GDP grew by about 2.9%. Which of the following sets of growth rates is consistent with this growth in real GDP? a. 2% population growth and 6% real GDP growth b. 6% population growth and 2% real GDP growth c. 4% population growth and 7% real GDP growth d. 7% population growth and 4% real GDP growth

c. 4% population growth and 7% real GDP growth

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

c. Basova had the higher productivity while Andovia had the higher real GDP per person.

Athens and Troy both produce only ribs and baked potatoes. Athens Troy Quantities Ribs 200,000 300,000 Baked Potatoes 400,000 250,000 Base year prices Ribs $10 $10 Baked Potatoes $4 $4 Population and Employment Population 6,000 8,000 Total hrs of emplmnt 40,000 60,000 8) Refer to Table 1. Which of the following is correct? a. Both real GDP and real GDP per person are higher in Athens than Troy. b. Real GDP is higher in Athens while real GDP per person is higher in Troy c. Real GDP is higher in Troy while real GDP per person is higher in Athens. d. Both real GDP and real GDP per person are higher in Troy than Athens.

c. Real GDP is higher in Troy while real GDP per person is higher in Athens.

18) Refer to Figure 1. The curve becomes flatter as the amount of capital per worker increases because of On the horizontal axis, K/L represents capital (K) per worker (L). On the vertical axis, Y/L represents output (Y) per worker (L) a. increasing returns to capital. b. increasing returns to labor. c. diminishing returns to capital. d. diminishing returns to labor.

c. diminishing returns to capital.

27) The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, we would expect that the growth rate in Turan will a. fall temporarily, but will return to where it was when the new owners learn how to farm. b. increase because the total amount of human capital in the country will increase as the new owners learn how to farm. c. fall and remain lower for a long time. d. not be affected unless widespread civil disorder or civil war results

c. fall and remain lower for a long time

30) If over a short time a large number of teenagers become old enough to find employment and a much smaller number of people retire, then productivity a. and real GDP per person rise. b. rises but real GDP per person falls. c. falls but real GDP per person rises. d. and real GDP per person fall.

c. falls but real GDP per person rises.

11) If the price of a good has risen over time, a. it must have become more scarce. b. it must have become less scarce. c. it has become more scarce only if the price adjusted for inflation has risen. d. it has become less scarce only if the price adjusted for inflation has risen.

c. it has become more scarce only if the price adjusted for inflation has risen.

7) Country A had a population of 1,000, of whom 600 worked an average of 8 hours a day and had a productivity of 2.5. Country B had a population of 800, of whom 560 worked 8 hours a day and had productivity of 3.0. Country a. A had the higher level of real GDP and real GDP per person. b. A had the higher level of real GDP and Country B had the higher level of real GDP per person c. B had the higher level of real GDP and Country A had the higher level of real GDP per person d. B had the higher level of real GDP and real GDP per person.

d. B had the higher level of real GDP and real GDP per person.

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

d. None of the above are correct.

20) All else equal, if there are diminishing returns, then what happens to productivity if both capital and labor increase? a. Productivity will definitely fall. b. Productivity will definitely be unchanged. c. Productivity will definitely rise. d. None of the above are necessarily correct.

d. None of the above are necessarily correct.

3) Last year the imaginary nation of Panglossia had real GDP of 400 billion. This year it had real GDP of 472.5 billion. Which of the following changes in population is consistent with a 5 percent growth rate of real GDP per person over the last year? a. The population decreased from 75 million to 72 million. b. The population decreased from 60 million to 50 million. c. The population increased from 70 million to 80 million. d. The population increased from 80 million to 90 million.

d. The population increased from 80 million to 90 million.

15) An economy's production function has the constant-returns-to-scale property. If the economy's labor force doubled and all other inputs stayed the same, then real GDP would a. stay the same. b. increase by exactly 50 percent. c. increase by exactly 100 percent. d. increase, but not necessarily by either 50 percent or 100 percent.

d. increase, but not necessarily by either 50 percent or 100 percent.

10) Last year a country had 800 workers who worked an average of 8 hours and produced 12,800 units. This year the same country had 1000 workers who worked an average of 8 hours and produced 14,000 units. This country's productivity was a. higher this year than last year. A possible source of this change in productivity is a change in the size of the capital stock. b. higher this year than last year. A change in the size of the capital stock does not affect productivity. c. lower this year than last year. A possible source of this change in productivity is a change in the size of the capital stock. d. lower this year than last year. A change in the size of the capital stock does not affect productivity.

c. lower this year than last year. A possible source of this change in productivity is a change in the size of the capital stock.

23) The short-run effects of an increase in the saving rate include a. a higher level of productivity. b. a higher growth rate of productivity. c. a higher growth rate of income. d. All of the above are correct.

d. All of the above are correct.

On the horizontal axis, K/L represents capital (K) per worker (L). On the vertical axis, Y/L represents output (Y) per worker (L) 19) Refer to Figure 1. Choose a point anywhere on the curve and call it point A. If the economy is at point A in 2011, then it will definitely remain at point A in 2012 if, between 2011 and 2012, a. the quantity of physical capital remains constant; the number of workers doubles; and human capital, natural resources, and technology all double as well. b. the quantity of physical capital doubles; human capital, natural resources, and technology all Page 4 of 7 double as well; and the number of workers remains constant. c. the quantity of physical capital doubles; the number of workers doubles; and human capital, natural resources, and technology all double as well. d. the quantity of physical capital doubles; the number of workers doubles; and human capital, natural resources, and technology remain constant.

d. the quantity of physical capital doubles; the number of workers doubles; and human capital, natural resources, and technology remain constant.