Question 1

All else equal, an increase in savings will cause capital stock to

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  increase and then decrease. 
A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  increase and then decrease.

Question 2

How can a government reduce the private marginal cost of research and development for a firm? I. Offer the firm tax breaks for research and development expenses. II. Subsidize the firm's research and development process. III. Lower the social benefits of research and development.

Accepted Answer

A)  I only 
B)  I and II only 
C)  III only 
D)  I, II, and III 
A)  I only 
B)  I and II only 
C)  III only 
D)  I, II, and III

Question 3

A small country has 400 units of capital for each labor hour. This year it will produce 20 units of new capital goods, and depreciate 5 percent of its capital stock. Based on this information it should expect to have ______ growth over the next year if technological advancement occurs; otherwise it should expect to have _______.

Accepted Answer

A)  positive; no growth 
B)  positive; positive growth but less than the amount it would have with technological advancement 
C)  no; negative growth 
D)  negative; positive growth 
A)  positive; no growth 
B)  positive; positive growth but less than the amount it would have with technological advancement 
C)  no; negative growth 
D)  negative; positive growth

Question 4

What is meant by a nonrivalrous good?

Accepted Answer

A)  Additional people can consume a good without diminishing another's consumption. 
B)  There exists a perfectly competitive market for the good. 
C)  There is only a single consumer of the good. 
D)  None of these answers is correct. 
A)  Additional people can consume a good without diminishing another's consumption. 
B)  There exists a perfectly competitive market for the good. 
C)  There is only a single consumer of the good. 
D)  None of these answers is correct.

Question 5

What is key to growth for countries on the cutting edge such as the United States and Japan?

Accepted Answer

A)  more physical capital investments 
B)  investments in human capital 
C)  new ideas 
D)  larger institutions 
A)  more physical capital investments 
B)  investments in human capital 
C)  new ideas 
D)  larger institutions

Question 6

Worldwide per capita income continues to grow at only 0.5 percent.

Accepted Answer

A) True 
 B)False

Question 7

In the Solow model, better ideas will lead to

Accepted Answer

A)  more capital. 
B)  less government regulation. 
C)  a constant stream of output. 
D)  less capital. 
A)  more capital. 
B)  less government regulation. 
C)  a constant stream of output. 
D)  less capital.

Question 8

Which of the following would help a country develop from catch-up growth to cutting-edge growth?

Accepted Answer

A)  a well-functioning market system 
B)  abolishing the system of patents and copyrights 
C)  limiting domestic savings 
D)  spillovers from idea production 
A)  a well-functioning market system 
B)  abolishing the system of patents and copyrights 
C)  limiting domestic savings 
D)  spillovers from idea production

Question 9

Countries with more human capital have a

Accepted Answer

A)  higher GDP per capita. 
B)  lower GDP per capitB. 
C)  higher population. 
D)  lower population. 
A)  higher GDP per capita. 
B)  lower GDP per capitB. 
C)  higher population. 
D)  lower population.

Question 10

Which of the following is correct?

Accepted Answer

A)  If investment > depreciation, the nation's capital stock will grow. 
B)  If investment  depreciation, the nation's capital stock will stay constant. 
A)  If investment > depreciation, the nation's capital stock will grow. 
B)  If investment  depreciation, the nation's capital stock will stay constant.

Question 11

A good is nonrivalrous if more than one person can use it at the same time without impeding someone else's use of the good.

Accepted Answer

A) True 
 B)False

Question 12

The optimal private investment in R&D would likely be __________ the optimal social investment.

Accepted Answer

A)  the same as 
B)  less than 
C)  greater than 
D)  half of 
A)  the same as 
B)  less than 
C)  greater than 
D)  half of

Question 13

The very large migration of workers from rural areas to cities positively impacted Chinese economic growth because the marginal product of labor was much higher in the cities.

Accepted Answer

A) True 
 B)False

Question 14

Because of spillovers, the social benefit of research and development

Accepted Answer

A)  is greater than the private benefit. 
B)  is less than the private benefit. 
C)  is equal to the private benefit. 
D)  may be less than, greater than, or equal to the private benefit. 
A)  is greater than the private benefit. 
B)  is less than the private benefit. 
C)  is equal to the private benefit. 
D)  may be less than, greater than, or equal to the private benefit.

Question 15

In the Solow model, an increase in the investment rate will _____ the amount of capital needed to achieve a steady state of output.

Accepted Answer

A)  increase 
B)  decrease 
C)  not affect 
D)  equal 
A)  increase 
B)  decrease 
C)  not affect 
D)  equal

Question 16

Which of the following is NOT an outcome of the Solow growth model?

Accepted Answer

A)  When a greater proportion of output goes to investment, more growth will occur. 
B)  Growth will be faster the further a country is below its steady-state level of capital stock. 
C)  Capital accumulation alone will lead to zero long-run economic growth. 
D)  All of these answers are correct. 
A)  When a greater proportion of output goes to investment, more growth will occur. 
B)  Growth will be faster the further a country is below its steady-state level of capital stock. 
C)  Capital accumulation alone will lead to zero long-run economic growth. 
D)  All of these answers are correct.

Question 17

Member nations of the Organization for Economic Co- Operation and Development (OECD) with a lower GDP per capita in 1960 experienced what sort of growth during the subsequent 40 years?

Accepted Answer

A)  relatively lower growth than higher GDP per capita countries 
B)  relatively faster growth than higher GDP per capita countries 
C)  no growth at all 
D)  similar growth as countries with a high 1960 GDP per capita 
A)  relatively lower growth than higher GDP per capita countries 
B)  relatively faster growth than higher GDP per capita countries 
C)  no growth at all 
D)  similar growth as countries with a high 1960 GDP per capita

Question 18

As more units of capital are added, the marginal product of capital

Accepted Answer

A)  increases. 
B)  decreases at first, then increases. 
C)  decreases. 
D)  remains constant. 
A)  increases. 
B)  decreases at first, then increases. 
C)  decreases. 
D)  remains constant.

Question 19

A patient with a rare disease has the same chance of survival as one with a common disease, thanks to the spillover effect.

Accepted Answer

A) True 
 B)False

Question 20

In the United States, most scientists who research and develop new products work for

Accepted Answer

A)  private firms. 
B)  the U.S. government. 
C)  public universities. 
D)  private universities. 
A)  private firms. 
B)  the U.S. government. 
C)  public universities. 
D)  private universities.

Exam 26: Gdp and the Measurement of Progress

All else equal, an increase in savings will cause capital stock to

How can a government reduce the private marginal cost of research and development for a firm? I. Offer the firm tax breaks for research and development expenses. II. Subsidize the firm's research and development process. III. Lower the social benefits of research and development.

What is meant by a nonrivalrous good?

What is key to growth for countries on the cutting edge such as the United States and Japan?

Worldwide per capita income continues to grow at only 0.5 percent.

In the Solow model, better ideas will lead to

Which of the following would help a country develop from catch-up growth to cutting-edge growth?

Countries with more human capital have a

Which of the following is correct?

A good is nonrivalrous if more than one person can use it at the same time without impeding someone else's use of the good.

The optimal private investment in R&D would likely be __________ the optimal social investment.

The very large migration of workers from rural areas to cities positively impacted Chinese economic growth because the marginal product of labor was much higher in the cities.

Because of spillovers, the social benefit of research and development

In the Solow model, an increase in the investment rate will _____ the amount of capital needed to achieve a steady state of output.

Which of the following is NOT an outcome of the Solow growth model?

Member nations of the Organization for Economic Co- Operation and Development (OECD) with a lower GDP per capita in 1960 experienced what sort of growth during the subsequent 40 years?

As more units of capital are added, the marginal product of capital

A patient with a rare disease has the same chance of survival as one with a common disease, thanks to the spillover effect.

In the United States, most scientists who research and develop new products work for

The Big Ideas in Economics

The Power of Trade and Comparative Advantage

Business Fluctuations: Aggregate Demand and Supply

Equilibrium: How Supply and Demand Determine Prices

Elasticity and Its Applications

Taxes and Subsidies

The Price System: Signals, Speculation, and Prediction

Price Ceilings and Floors

International Trade

Externalities: When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination and Pricing Strategy

Oligopoly and Game Theory

Competing for Monopoly: the Economics of Network Goods

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Asymmetric Information: Moral Hazard and Adverse Selection

Consumer Choice

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation, and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Supply and Demand

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

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