Econ Quiz 1

The GDP per capita of Greece was $22,494 in 2012 and $21,966 in 2013. Based on these figures, the growth rate of GDP between 2012 and 2013 (to two decimal places) was:

-2.35% ((21,966-22494)/(22494))

Look again at Figure 2.14b which depicts the production function of grain for farmers under average growing conditions with the currently available technology. We can ascertain that:

A discovery of new high-yielding crop seeds would tilt the production function curve higher, pivoted anti-clockwise at the origin AND If there is an upper limit on the amount of grain that can be produced, then the curve will end up horizontal for large numbers of farmers.

Look again at Figure 2.1 and Figure 2.19 showing graphs of real wages in England between 1300 and 2000. You are also told the following facts: During the bubonic plague of 1348 and 1351, between one-quarter and one-third of Europe's population died. In the seventeenth and eighteenth centuries, the wages of unskilled workers relative to the incomes of land owners were only one-fifth of what they had been in the sixteenth century. What can we conclude from this information?

According to the Malthusian model, the fall in the population due to the bubonic plague would have led to an increase in the average productivity of workers, causing the observed rise in the real wage post-plague.

Imagine that the GDP per capita of a country had doubled every 100 years. You are asked to draw both linear and ratio scale graphs that plot GDP on the vertical axis, and the year on the horizontal axis. What will be the shapes of the curves?

An upward-sloping curve with increasing slope (called convex shape) (An upward-sloping straight line on a ratio scale graph means that the growth rate of the GDP per capita is constant. An upward-sloping convex curve on a linear scale graph means that the GDP per capita increases by a greater and greater amount in absolute terms over time, consistent with a positive constant growth rate.)

Which of the following variables have followed the so-called 'hockey-stick' trajectory—that is, little to no growth for most of history followed by a sudden and sharp change to a positive growth rate?

GDP per capita, labour productivity, atmospheric CO2

Look at the three isocost lines in Figure 2.8. Based on this information, what can we conclude?

Isocosts MN and FG represent the same price ratio (wage/price of coal) but different total costs of production.

Look again at Figure 1.10, which shows a graph of GDP per capita for West and East Germany, Japan and Spain between 1950 and 1990. Which of the following statements is correct?

Spain was able to grow at a higher growth rate than Germany between 1950 and 1990. (The growth rate of an economy's GDP per capita can be inferred from the steepness of its curve when plotted on a ratio scale graph, as done here. The fact that the slope of Spain's curve is greater than that of either West or East Germany from 1950 to 1990 indicates that it grew at a faster rate.)

Figure 2.3 shows different technologies for producing 100 metres of cloth. From the graph, what can we conclude?

Technology B dominates technology D.

Look again at Figure 2.20, which plots real wages against population in England from the 1280s to the 1860s. According to Malthus, with diminishing average product of labour in production and population growth in response to increases in real wages, an increase in productivity will result in a larger population but not higher real wages in the long run. Based on the information above, which of the following statements is correct?

The Malthusian model does not take into account the possibility of a persistent positive technology shock that may offset the diminishing average product of labour.

Figure 2.1 shows an index of average real wages of skilled workers in London between 1264 and 2001. What can we conclude from this graph?

The average real wage increased by around 600% between 1850 and 2001.

Look again at Figure 2.12 which depicts isocost lines for the 1600s and the 1700s in Britain. Which of the following is true?

The comparison between isocost line FG and the parallel isocost going through B suggests that an innovation rent was earned in 1700s Britain when firms moved from technology B to A.

Look again at Figure 1.11. Which of these conclusions is suggested by the graph?

The contrasting performances of Botswana and Nigeria illustrate that rich natural resources alone do not guarantee higher economic growth, but that higher quality institutions (government, markets and firms) may also be necessary.

Which of the following is an economic rent?

The extra profit that a successful innovator makes on bringing a new product to the market before its competitors. (This particular form of economic rent is called an innovation rent, where profits are made in excess of those offered by the next best alternative due to the adoption of new technology.)

Which of the following are examples of markets?

auction websites such as eBay, touts selling tickets outside concert halls, sale of illegal arms

Which of the following are examples of private property?

computers belonging to your college; shares in a company

What does UK GDP per capita measure?

the total output of the UK's economy, divided by the country's population