Question 1

The successful introduction and adoption of a new product or process is called

Accepted Answer

A) invention. 
B) innovation. 
C) economies of scale. 
D) economic growth. 
A) invention. 
B) innovation. 
C) economies of scale. 
D) economic growth.

Question 2

Which of the following would be most likely to improve the standard of living of the residents of a less-developed country?

Accepted Answer

A) the development of strong labor unions 
B) a sharp increase in the legal minimum wage 
C) an increase in expenditures on education and capital investment 
D) rapid growth rate of the money supply 
A) the development of strong labor unions 
B) a sharp increase in the legal minimum wage 
C) an increase in expenditures on education and capital investment 
D) rapid growth rate of the money supply

Question 3

The historical record indicates that foreign aid has

Accepted Answer

A) played a major role in helping formerly poor countries grow rapidly and achieve high income levels. 
B) re-enforced corrupt governments and policies that stifle productive activities. 
C) helped poor countries escape counterproductive policies imposed by authoritarian political leaders. 
D) promoted economic growth, but slowed the movement toward political democracy. 
A) played a major role in helping formerly poor countries grow rapidly and achieve high income levels. 
B) re-enforced corrupt governments and policies that stifle productive activities. 
C) helped poor countries escape counterproductive policies imposed by authoritarian political leaders. 
D) promoted economic growth, but slowed the movement toward political democracy.

Question 4

High income countries with larger governments as a share of GDP have generally

Accepted Answer

A) grown less rapidly than their counterparts with smaller governments. 
B) experienced less deadweight losses resulting from taxes and/or government borrowing. 
C) seen the government decrease in size as real GDP rises. 
D) been able to be more economically efficient. 
A) grown less rapidly than their counterparts with smaller governments. 
B) experienced less deadweight losses resulting from taxes and/or government borrowing. 
C) seen the government decrease in size as real GDP rises. 
D) been able to be more economically efficient.

Question 5

How do high marginal tax rates influence the growth and prosperity of countries? What type of tax policy is needed to foster economic efficiency and growth?

Accepted Answer

Economic theory suggests that marginal t

Question 6

In a market economy, what must an entrepreneur do in order to be successful?

Accepted Answer

A) purchase resources at lower prices than rivals 
B) produce a good that can be sold for more than its production cost 
C) obtain large subsidies from the government 
D) hire workers at low wage rates 
A) purchase resources at lower prices than rivals 
B) produce a good that can be sold for more than its production cost 
C) obtain large subsidies from the government 
D) hire workers at low wage rates

Question 7

The growth records of Japan and Hong Kong during the last fifty years indicate that an economy can grow rapidly without

Accepted Answer

A) securely defined property rights. 
B) abundant domestic natural resources. 
C) significant capital formation. 
D) adopting modern technology. 
A) securely defined property rights. 
B) abundant domestic natural resources. 
C) significant capital formation. 
D) adopting modern technology.

Question 8

Which of the following would be most likely to encourage capital formation in a less-developed country?

Accepted Answer

A) the expectation of sustained high inflation 
B) the expectation that property rights will be highly secure in the years ahead 
C) the imposition of high tariffs and other restraints limiting imports 
D) higher personal and corporate tax rates 
A) the expectation of sustained high inflation 
B) the expectation that property rights will be highly secure in the years ahead 
C) the imposition of high tariffs and other restraints limiting imports 
D) higher personal and corporate tax rates

Question 9

Monetary and price instability will

Accepted Answer

A) make it easier for both individuals and businesses to plan wisely for the future. 
B) generate uncertainty, and encourage investors and businesses to move their activities to countries with a more stable monetary environment. 
C) encourage businesses to invest and expand their future output. 
D) encourage domestic citizens to increase their rate of saving. 
A) make it easier for both individuals and businesses to plan wisely for the future. 
B) generate uncertainty, and encourage investors and businesses to move their activities to countries with a more stable monetary environment. 
C) encourage businesses to invest and expand their future output. 
D) encourage domestic citizens to increase their rate of saving.

Question 10

Some low-income countries generally remain poor because

Accepted Answer

A) their institutional arrangements and policies often discourage productive activity and reduce the potential gains from specialization and exchange. 
B) they are oppressed by developed nations that benefit from the cheap goods available from countries with low wage rates. 
C) they are poorly endowed with natural resources, which are essential for long-term growth. 
D) when the average income level is low, workers have little incentive to earn higher incomes. 
A) their institutional arrangements and policies often discourage productive activity and reduce the potential gains from specialization and exchange. 
B) they are oppressed by developed nations that benefit from the cheap goods available from countries with low wage rates. 
C) they are poorly endowed with natural resources, which are essential for long-term growth. 
D) when the average income level is low, workers have little incentive to earn higher incomes.

Question 11

Which of the following did Thomas Malthus believe would deter sustained increases in the growth of income per capita?

Accepted Answer

A) excessive growth of government expenditures 
B) rapid growth of population 
C) the availability of natural resources 
D) adverse climate conditions 
A) excessive growth of government expenditures 
B) rapid growth of population 
C) the availability of natural resources 
D) adverse climate conditions

Question 12

The replacement of the phonograph by the cassette tape player and the eventual replacement of the latter by CD and MP3 players is an example of

Accepted Answer

A) economies of scale. 
B) planned obsolescence. 
C) diseconomies of scale. 
D) creative destruction. 
A) economies of scale. 
B) planned obsolescence. 
C) diseconomies of scale. 
D) creative destruction.

Question 13

(I) Governments that respect property rights and freedom of exchange while following monetary (and fiscal) policies consistent with relative price stability, establish the foundation for economic growth. (II) Governments have often diminished the economic prospects of a nation by levying high taxes, instituting price controls, and following inflationary monetary policies.

Accepted Answer

A) I is true; II is false. 
B) I is false; II is true. 
C) Both I and II are true. 
D) Both I and II are false. 
A) I is true; II is false. 
B) I is false; II is true. 
C) Both I and II are true. 
D) Both I and II are false.

Question 14

Which of the following is true?

Accepted Answer

A) Poor countries are unable to ignite the growth process unless they receive financial aid from richer countries. 
B) Countries that fail to adopt institutions and policies supportive of trade, entrepreneurial discovery, and private investment will remain poor in the foreseeable future. 
C) Countries that lack an abundance of natural resources have been unable to grow and achieve high income levels. 
D) Countries with a large population relative to their land area are destined to remain poor. 
A) Poor countries are unable to ignite the growth process unless they receive financial aid from richer countries. 
B) Countries that fail to adopt institutions and policies supportive of trade, entrepreneurial discovery, and private investment will remain poor in the foreseeable future. 
C) Countries that lack an abundance of natural resources have been unable to grow and achieve high income levels. 
D) Countries with a large population relative to their land area are destined to remain poor.

Question 15

The historical record indicates that foreign aid has

Accepted Answer

A) played a major role in helping formerly poor countries grow rapidly and achieve high income levels. 
B) re-enforced corrupt governments and policies that stifle productive activities. 
C) helped poor countries escape counterproductive policies imposed by authoritarian political leaders. 
D) promoted economic growth, but slowed the movement toward political democracy. 
A) played a major role in helping formerly poor countries grow rapidly and achieve high income levels. 
B) re-enforced corrupt governments and policies that stifle productive activities. 
C) helped poor countries escape counterproductive policies imposed by authoritarian political leaders. 
D) promoted economic growth, but slowed the movement toward political democracy.

Question 16

Why do political instability and insecure property rights retard economic growth?

Accepted Answer

A) Fear that private property will be confiscated substantially reduces the incentive to invest and create wealth. 
B) When property rights are insecure, foreign investors will be reluctant to invest in the country. 
C) Savings will tend to flow out of a country if individuals fear their property is insecure. 
D) All of the above are correct. 
A) Fear that private property will be confiscated substantially reduces the incentive to invest and create wealth. 
B) When property rights are insecure, foreign investors will be reluctant to invest in the country. 
C) Savings will tend to flow out of a country if individuals fear their property is insecure. 
D) All of the above are correct.

Question 17

Which of the following is true?

Accepted Answer

A) In a competitive capital market, private investors have a strong incentive to evaluate projects carefully and allocate their funds toward those projects expected to yield the highest rates of return. 
B) In a competitive environment, profitable investment projects will tend to increase the wealth of the nation. 
C) When investment funds are allocated by governments (rather than capital markets), political clout rather than the expected rate of return will generally determine which projects are undertaken. 
D) All of the above are correct. 
A) In a competitive capital market, private investors have a strong incentive to evaluate projects carefully and allocate their funds toward those projects expected to yield the highest rates of return. 
B) In a competitive environment, profitable investment projects will tend to increase the wealth of the nation. 
C) When investment funds are allocated by governments (rather than capital markets), political clout rather than the expected rate of return will generally determine which projects are undertaken. 
D) All of the above are correct.

Question 18

Institutions that encourage productive activities and discourage counterproductive ones, will tend to promote

Accepted Answer

A) economic growth. 
B) rent-seeking 
C) economic fluctuations 
D) high rates of unemployment. 
A) economic growth. 
B) rent-seeking 
C) economic fluctuations 
D) high rates of unemployment.

Question 19

Which of the following is most important if a country is going to grow rapidly and achieve a high level of per capita income?

Accepted Answer

A) an abundance of natural resources 
B) a warm moist climate 
C) a small population relative to the geographic size of the country 
D) institutions and policies that encourage people to engage in productive activities 
A) an abundance of natural resources 
B) a warm moist climate 
C) a small population relative to the geographic size of the country 
D) institutions and policies that encourage people to engage in productive activities

Question 20

When the money supply is expanding and prices rise rapidly, economic growth

Accepted Answer

A) is slowed by the resulting unpredictability of the future level of prices. 
B) is enhanced as economic activity grows more rapidly. 
C) is enhanced because profits are higher so that capital investment is greater. 
D) is enhanced because existing debt is reduced in value, so people are willing to buy more goods. 
A) is slowed by the resulting unpredictability of the future level of prices. 
B) is enhanced as economic activity grows more rapidly. 
C) is enhanced because profits are higher so that capital investment is greater. 
D) is enhanced because existing debt is reduced in value, so people are willing to buy more goods.

The successful introduction and adoption of a new product or process is called

Which of the following would be most likely to improve the standard of living of the residents of a less-developed country?

The historical record indicates that foreign aid has

High income countries with larger governments as a share of GDP have generally

How do high marginal tax rates influence the growth and prosperity of countries? What type of tax policy is needed to foster economic efficiency and growth?

In a market economy, what must an entrepreneur do in order to be successful?

The growth records of Japan and Hong Kong during the last fifty years indicate that an economy can grow rapidly without

Which of the following would be most likely to encourage capital formation in a less-developed country?

Monetary and price instability will

Some low-income countries generally remain poor because

Which of the following did Thomas Malthus believe would deter sustained increases in the growth of income per capita?

The replacement of the phonograph by the cassette tape player and the eventual replacement of the latter by CD and MP3 players is an example of

Which of the following is true?

The historical record indicates that foreign aid has

Why do political instability and insecure property rights retard economic growth?

Which of the following is true?

Institutions that encourage productive activities and discourage counterproductive ones, will tend to promote

Which of the following is most important if a country is going to grow rapidly and achieve a high level of per capita income?

When the money supply is expanding and prices rise rapidly, economic growth

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 16: Creating an Environment for Growth and Prosperity

The successful introduction and adoption of a new product or process is called

Which of the following would be most likely to improve the standard of living of the residents of a less-developed country?

The historical record indicates that foreign aid has

High income countries with larger governments as a share of GDP have generally

How do high marginal tax rates influence the growth and prosperity of countries? What type of tax policy is needed to foster economic efficiency and growth?

In a market economy, what must an entrepreneur do in order to be successful?

The growth records of Japan and Hong Kong during the last fifty years indicate that an economy can grow rapidly without

Which of the following would be most likely to encourage capital formation in a less-developed country?

Monetary and price instability will

Some low-income countries generally remain poor because

Which of the following did Thomas Malthus believe would deter sustained increases in the growth of income per capita?

The replacement of the phonograph by the cassette tape player and the eventual replacement of the latter by CD and MP3 players is an example of

Which of the following is true?

The historical record indicates that foreign aid has

Why do political instability and insecure property rights retard economic growth?

Which of the following is true?

Institutions that encourage productive activities and discourage counterproductive ones, will tend to promote

Which of the following is most important if a country is going to grow rapidly and achieve a high level of per capita income?

When the money supply is expanding and prices rise rapidly, economic growth

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters