Macro Econ Exam Two Multiple Choice

GrowthRate (%) Years toDouble Economy Nation A ?14 Nation B10 ? Nation C ?35 Nation D 7 ? Nation B is expected to double its output in: 5 years. 7 years. 10 years. 14 years.

7 years

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

All of the above

Which one of the following will determine the size of the production possibilities curve? amount of labor amount of capital entrepreneurship all of the above

All of the above

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

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

According to Claudia Goldin and Lawrence Katz, income inequality narrows when technology wins the race against education. True False

False

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

False

The World Bank's 1993 report, "the East Asian Miracle," does not attribute the development of the nations to the government policy. True False

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 The use of tax revenues for investment and capital formation Special subsidies for capital-intensive forms of production Promotion of education and training programs for workers

High taxes on companies that spend a lot on capital formation

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

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

Which of the following is false? Accepting a reduction in current income to acquire education and training can increase future earning ability, which can raise the standard of living. Improvements in literacy stimulate economic growth by reducing barriers to the flow of information and raising labor productivity. 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. Investment alone guarantees economic growth per capita.

Investment alone guarantees economic growth per capita.

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

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

Which of the following is true? 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. Economic growth is usually measured by the annual percent change in the nominal output of goods and services per capita. An increase in labor input necessarily increases output per capita. Neither the initial development process nor the sustained growth of an economy is dependent on a large natural resource base.

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

Would companies and individuals invest as much in significant research and development if a system of patents were not available? Yes they would, because they could still hope to monopolize the market. Yes they would, because firms are civic-minded and highly motivated to introduce innovations that improve the standard of living. No they would not, because if they made a significant investment in the development, they would be unable to protect the innovations or discoveries long enough to be sufficiently compensated for their efforts. No they would not, because the benefits to society of engaging in research and development would be less than the costs to society.

No they would not, because if they made a significant investment in the development, they would be unable to protect the innovations or discoveries long enough to be sufficiently compensated for their efforts.

Is it possible to have economic growth with no opportunity cost? Yes, economic growth requires no current sacrifices-only the passage of time. No, but economic growth is always worth whatever sacrifice is required. No, because growth depletes the stock of knowledge so that more growth today means less growth tomorrow. No, because growth requires the sacrifice of consumption goods in order to invest in such things as capital formation and research and development.

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

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

None of the above are false; all are true.

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. Population grows at a slower pace than the production of output. Resources grow faster than humankind can reproduce itself. Therefore, humankind can never take full advantage of available resources. Resources and population grow at constant percentage rates, but political divisions prevent an equitable division of world output.

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

The prosperity of a nation today is typically measured by its: total output or gross national product. real output per capita. gold reserves. proportionate share of international trade.

Real output per capita

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

True

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

True

In his book, "Capital in the Twenty Century," Thomas Piketty proposes redistribution through a higher tax rate on the returns from investment. True False

True

The Kuznets curve shows the pattern of income inequality: income inequality first increases, peaks, and then decreases as countries develop. True False

True

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

True

Thomas Piketty's book, "Capital in the Twenty Century," argues that rate of returns from investment is higher than the rate of income growth. True False

True

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

True

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 a rate of population growth that is greater than the rate of growth of real GDP an increase in the size of the labor force an increase in the capital stock

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 an increase in the productivity of labor technological progress higher rates of investment

a reduction in the rate of savings

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

a very low birth rate

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

all of the above

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

all of the above

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

all of the above

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

all of the above are true

Rapid population increase in which of the following economies may threaten and deter economic growth the most? highly industrialized countries an agriculture based economy developed economies a technology driven economy

an agriculture based economy

Growth in a production possibilities curve diagram is shown as: a movement along the curve to the southeast. a movement along the curve to the southwest. an outward shift of the curve. an inward shift of the curve.

an outward shift of the curve

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

any of the above

In a fully employed economy, invention and discovery: are automatic. are achieved through sacrifices in current consumption. have negative opportunity costs. All of the above are correct.

are achieved through sacrifices in current consumption.

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

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

An increase in the stock of capital: causes a movement from a point on an economy's production possibilities curve to a point inside the curve. causes an economy's production possibilities curve to shift inward over time. causes an economy's production possibilities curve to shift outward over time. has no effect on the position of an economy's production possibilities curve over time.

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

Allowing free trade can lead to greater output because of the principle of: absolute advantage. rule of 70. comparative advantage. scarcity.

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. capital formation. labor force productivity. capital investments.

compound interest

Over the last several decades, the amount of government investment in U.S. infrastructure in real terms has: remained the same. decreased. increased marginally. increased substantially.

decreased

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

economic growth may be a consequence of improved education.

Endogenous growth theorists believe that increased economic growth is primarily driven by: higher level of savings. higher level of capital investments. increased foreign investment. education

education

According to Claudia Goldin and Lawrence Katz in their book, "Race between Technology and Education," technology is a driving force to the U.S. economic growth until 1970s. True False

false

If real GDP per capita is decreasing, real output is: growing less rapidly than the population. growing more rapidly than the population. growing at the same rate as the population. growing more rapidly than are prices.

growing less rapidly than the population.

If real GDP per capita is increasing, real output is: growing less rapidly than the population. growing more rapidly than the population. growing at the same rate as the population. growing more rapidly than are prices.

growing more rapidly than the population.

Education would be considered investments in: physical capital financial capital human capital all of the above

human capital

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. increase; be indeterminate. decrease; decrease. decrease; be indeterminate

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. increase; be indeterminate. decrease; decrease. decrease; be indeterminate

increase; increase.

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

increased infant mortality rates

Rapid population growth can threaten sustained economic growth if it: leads to diminishing marginal returns in production. remains unmonitored by government agencies. enables economies of scale in production to be exploited. leads to increased capital formation.

leads to diminishing marginal returns in production.

Enforcement of property rights is likely to result in: more incentives to invest. lower rates of economic growth. political instability. corruption.

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-fourth one-half double triple

one-half

In the 1700s, Reverend Thomas Malthus predicted that: per capita economic growth would not change very much since humans were already content with their standards of living. per capita economic growth would tend to rise as modern birth control techniques caused the rate of population growth to decline. per capita economic growth would eventually become negative since population growth would tend to outstrip production. per capita economic growth would tend to rise in the future because technological advances in production would outpace population growth.

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: interest rates must be falling. the economy must be experiencing inflation. per capita real GDP will be increasing. per capita real GDP will be decreasing.

per capita real GDP will be increasing.

The per-worker production function is ____ sloped and ____ at a(n) ____ rate. negatively; decreases; diminishing negatively; decreases; increasing positively; increases; increasing positively; increases; diminishing

positively; increases; diminishing

To achieve a high standard of living, a nation should: increase welfare payments to the poor. use less capital and more labor in the production process. promote economic growth. increase the tax deduction for child dependents.

promote economic growth

Output per capita will tend to increase if the labor force participation rate in a country ____ or if workers put in ____ hours. rises; longer. rises, shorter. falls; longer. falls; shorter

rises; longer.

How much a country's economy will produce at its potential output is also called: the trough of the business cycle. its economic welfare. the trend line. the natural rate of output.

the natural rate of output.

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 increased they have averaged zero they have generally fallen they have done exactly as Malthus forecast, outstripping the production of output

they have generally fallen

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

transportation infrastructure

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

work effort is less intense in the heat of the tropics