Question 1

The primary reason why countries around the world have not converged to the same level of income is that they

Accepted Answer

A)  do not have access to the same resources. 
B)  do not have the same level of the capital stock. 
C)  have different numbers of people. 
D)  have different institutions. 
E)  do not have access to the same technology. 
A)  do not have access to the same resources. 
B)  do not have the same level of the capital stock. 
C)  have different numbers of people. 
D)  have different institutions. 
E)  do not have access to the same technology. D

Question 2

The relationship between the growth rate of real gross domestic product GDP) and the growth rate of real investment is

Accepted Answer

A)  positive. 
B)  negative. 
C)  unpredictable. 
D)  nonexistent. 
E)  positive at low levels of real GDP and then negative at higher levels of GDP. 
A)  positive. 
B)  negative. 
C)  unpredictable. 
D)  nonexistent. 
E)  positive at low levels of real GDP and then negative at higher levels of GDP. A

Question 3

Use the following graph to answer the next questions.
  
-If net investment is positive, then

Accepted Answer

A)  the production function will shift upward. 
B)  the production function will shift downward. 
C)  there is an upward movement along the production function. 
D)  there is a downward movement along the production function. 
E)  there is an upward shift of the production function and an upward movement along the production function. 
A)  the production function will shift upward. 
B)  the production function will shift downward. 
C)  there is an upward movement along the production function. 
D)  there is a downward movement along the production function. 
E)  there is an upward shift of the production function and an upward movement along the production function. C

Question 4

Human capital relates to ________ and physical capital relates to ________.

Accepted Answer

A)  people; buildings 
B)  firms; people 
C)  education; money 
D)  money; buildings 
E)  output; money 
A)  people; buildings 
B)  firms; people 
C)  education; money 
D)  money; buildings 
E)  output; money

Question 5

Use the following graph to answer the next questions.
  
-The marginal product of the 5th unit of capital is ________ and the marginal product of the 10th unit
is ________.

Accepted Answer

A)  100; 180 
B)  100; 80 
C)  10; 8 
D)  20; 18 
E)  20; 16 
A)  100; 180 
B)  100; 80 
C)  10; 8 
D)  20; 18 
E)  20; 16

Question 6

Economic growth theory is based on

Accepted Answer

A)  the Ricardian growth model. 
B)  the Solow growth model. 
C)  business cycle theory. 
D)  the theory of supply and demand. 
E)  the theory of investment. 
A)  the Ricardian growth model. 
B)  the Solow growth model. 
C)  business cycle theory. 
D)  the theory of supply and demand. 
E)  the theory of investment.

Question 7

The Solow model emphasizes

Accepted Answer

A)  the development of institutions. 
B)  capital and diminishing returns. 
C)  the importance of skilled labor. 
D)  technological change. 
E)  cultural factors. 
A)  the development of institutions. 
B)  capital and diminishing returns. 
C)  the importance of skilled labor. 
D)  technological change. 
E)  cultural factors.

Question 8

Use the following graph to answer the next questions.

-If more natural resources are discovered, then

Accepted Answer

A)  the production function will shift upward. 
B)  the production function will shift downward. 
C)  there will be an upward movement along the production function. 
D)  there will be a downward movement along the production function. 
E)  there will be no effect on the production function. 
A)  the production function will shift upward. 
B)  the production function will shift downward. 
C)  there will be an upward movement along the production function. 
D)  there will be a downward movement along the production function. 
E)  there will be no effect on the production function.

Question 9

Consider the following table that shows the number of trucks owned by a delivery firm and the corresponding number of deliveries made. Use the table to answer the next questions. $$\begin{array} { l c } 
\hline \begin{array} { l } 
\text { Number of } \
\text { Trucks }
\end{array} & \begin{array} { c } 
\text { Number of } \
\text { Deliveries }
\end{array} \
\hline 0 & 1 \
1 & 20 \
2 & 30 \
3 & 36 \
4 & 38 \
5 & 38 \
\hline
\end{array}$$
-The marginal product of the third truck is __________ deliveries.

Accepted Answer

A)  12 
B)  6 
C)  36 
D)  15 
E)  2 
A)  12 
B)  6 
C)  36 
D)  15 
E)  2

Question 10

As a country approaches the steady state, the returns to capital

Accepted Answer

A)  increase. 
B)  decrease. 
C)  turn negative. 
D)  become equal to zero. 
E)  are unaffected. 
A)  increase. 
B)  decrease. 
C)  turn negative. 
D)  become equal to zero. 
E)  are unaffected.

Question 11

Suppose that the value of the capital stock in the economy is $150 million. If investment is equal to zero, then

Accepted Answer

A)  output will remain at its current level. 
B)  the capital stock will decline in value but output will remain the same. 
C)  the capital stock will decline in value and output will move down along the production function to a new lower level of output. 
D)  the capital stock will decline in value and the production function will shift down as output falls. 
E)  firms will hire more labor to compensate for the lack of investment and output will remain the same. 
A)  output will remain at its current level. 
B)  the capital stock will decline in value but output will remain the same. 
C)  the capital stock will decline in value and output will move down along the production function to a new lower level of output. 
D)  the capital stock will decline in value and the production function will shift down as output falls. 
E)  firms will hire more labor to compensate for the lack of investment and output will remain the same.

Question 12

As a nation approaches its steady state, the returns to capital ________ and the growth of real gross
domestic product (GDP) ________.

Accepted Answer

A)  increase; increases 
B)  decrease; slows down 
C)  increase; slows down 
D)  decrease; increases 
E)  remain unchanged; remains unchanged 
A)  increase; increases 
B)  decrease; slows down 
C)  increase; slows down 
D)  decrease; increases 
E)  remain unchanged; remains unchanged

Question 13

Five college students share a house. As the number of computers owned by these students increases from one to five, what happens to the total number of hours they spend using a computer? As each computer is purchased, what happens to the marginal product, in terms of additional hours spent using the computer?

Accepted Answer

The total number of hours spent using a

Question 14

Consider a marketing research company that offers consulting services to companies to help them increase sales. Would one expect to find that the marketing research company has diminishing marginal product of labor? How about diminishing marginal product of physical capital?

Accepted Answer

The marketing research company will expe

Question 15

In the economy, the level of capital will remain the same if

Accepted Answer

A)  net investment is zero. 
B)  investment is zero. 
C)  output is increasing. 
D)  net investment is greater than investment. 
E)  net investment is less than investment. 
A)  net investment is zero. 
B)  investment is zero. 
C)  output is increasing. 
D)  net investment is greater than investment. 
E)  net investment is less than investment.

Question 16

The graphical relationship between real gross domestic product GDP) and capital is called the

Accepted Answer

A)  steady state. 
B)  capital function. 
C)  production function. 
D)  investment function. 
E)  marginal product curve. 
A)  steady state. 
B)  capital function. 
C)  production function. 
D)  investment function. 
E)  marginal product curve.

Question 17

When the marginal product of an input falls as the quantity of the input rises, this is known as

Accepted Answer

A)  diminishing marginal product. 
B)  diminishing output. 
C)  diminishing production. 
D)  decreasing returns to scale. 
E)  inverse marginal product. 
A)  diminishing marginal product. 
B)  diminishing output. 
C)  diminishing production. 
D)  decreasing returns to scale. 
E)  inverse marginal product.

Question 18

When moving up along the production function, the marginal product of capital will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  first decrease and then increase. 
D)  first increase and then remain constant. 
E)  remain constant. 
A)  increase. 
B)  decrease. 
C)  first decrease and then increase. 
D)  first increase and then remain constant. 
E)  remain constant.

Question 19

According to modern growth theory, the key to economic growth is

Accepted Answer

A)  paved roads. 
B)  modern buildings. 
C)  skilled labor. 
D)  a large pool of unskilled labor. 
E)  institutions. 
A)  paved roads. 
B)  modern buildings. 
C)  skilled labor. 
D)  a large pool of unskilled labor. 
E)  institutions.

Question 20

When the value of a resource declines over time, this is known as

Accepted Answer

A)  depreciation. 
B)  the steady state. 
C)  diminishing returns. 
D)  diminishing marginal product. 
E)  net loss. 
A)  depreciation. 
B)  the steady state. 
C)  diminishing returns. 
D)  diminishing marginal product. 
E)  net loss.

The primary reason why countries around the world have not converged to the same level of income is that they

The relationship between the growth rate of real gross domestic product GDP) and the growth rate of real investment is

Use the following graph to answer the next questions. -If net investment is positive, then

Human capital relates to and physical capital relates to .

Use the following graph to answer the next questions. -The marginal product of the 5th unit of capital is and the marginal product of the 10th unit is .

Economic growth theory is based on

The Solow model emphasizes

Use the following graph to answer the next questions. -If more natural resources are discovered, then

As a country approaches the steady state, the returns to capital

Suppose that the value of the capital stock in the economy is $150 million. If investment is equal to zero, then

As a nation approaches its steady state, the returns to capital and the growth of real gross domestic product (GDP) .

Consider a marketing research company that offers consulting services to companies to help them increase sales. Would one expect to find that the marketing research company has diminishing marginal product of labor? How about diminishing marginal product of physical capital?

In the economy, the level of capital will remain the same if

The graphical relationship between real gross domestic product GDP) and capital is called the

When the marginal product of an input falls as the quantity of the input rises, this is known as

When moving up along the production function, the marginal product of capital will

According to modern growth theory, the key to economic growth is

When the value of a resource declines over time, this is known as

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy Learning Objectives

International Trade

International Finance

Filters

Exam 12: Growth Theory

The primary reason why countries around the world have not converged to the same level of income is that they

The relationship between the growth rate of real gross domestic product GDP) and the growth rate of real investment is

Use the following graph to answer the next questions. -If net investment is positive, then

Human capital relates to ________ and physical capital relates to ________.

Use the following graph to answer the next questions. -The marginal product of the 5th unit of capital is ________ and the marginal product of the 10th unit is ________.

Economic growth theory is based on

The Solow model emphasizes

Use the following graph to answer the next questions. -If more natural resources are discovered, then

As a country approaches the steady state, the returns to capital

Suppose that the value of the capital stock in the economy is $150 million. If investment is equal to zero, then

As a nation approaches its steady state, the returns to capital ________ and the growth of real gross domestic product (GDP) ________.

Consider a marketing research company that offers consulting services to companies to help them increase sales. Would one expect to find that the marketing research company has diminishing marginal product of labor? How about diminishing marginal product of physical capital?

In the economy, the level of capital will remain the same if

The graphical relationship between real gross domestic product GDP) and capital is called the

When the marginal product of an input falls as the quantity of the input rises, this is known as

When moving up along the production function, the marginal product of capital will

According to modern growth theory, the key to economic growth is

When the value of a resource declines over time, this is known as

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy Learning Objectives

International Trade

International Finance

Filters

Human capital relates to and physical capital relates to .

Use the following graph to answer the next questions. -The marginal product of the 5th unit of capital is and the marginal product of the 10th unit is .

As a nation approaches its steady state, the returns to capital and the growth of real gross domestic product (GDP) .