Question 1

Assume that a country's production function changes from to . Which of the following could explain the     change in this production function?

Accepted Answer

A)  the disappearance of diminishing returns from the production function 
B)  the arrival of robotic technology in production 
C)  greater capital accumulation 
D)  less depreciation due to better capital stock maintenance. 
A)  the disappearance of diminishing returns from the production function 
B)  the arrival of robotic technology in production 
C)  greater capital accumulation 
D)  less depreciation due to better capital stock maintenance.

Question 2

Governments can play a role in supporting the production of new ideas by

Accepted Answer

A)  taxing industries that become too competitive. 
B)  erecting protective trade barriers for the computer and telecommunication industries. 
C)  directing the exchange of all scientific ideas. 
D)  protecting intellectual property. 
A)  taxing industries that become too competitive. 
B)  erecting protective trade barriers for the computer and telecommunication industries. 
C)  directing the exchange of all scientific ideas. 
D)  protecting intellectual property.

Question 3

If output in an economy is 20, and the investment function is 0.25Y,

Accepted Answer

A)  16 units of output are being consumed. 
B)  25 units of output are being invested. 
C)  15 units of output are being consumed. 
D)  20 units of output are being invested. 
A)  16 units of output are being consumed. 
B)  25 units of output are being invested. 
C)  15 units of output are being consumed. 
D)  20 units of output are being invested.

Question 4

The larger the spillovers, the stronger the argument for

Accepted Answer

A)  research and development. 
B)  government subsidies. 
C)  government taxation of excess profits. 
D)  economic growth. 
A)  research and development. 
B)  government subsidies. 
C)  government taxation of excess profits. 
D)  economic growth.

Question 5

In the Solow model production function, an increase in capital stock with all other variables held constant will ________ the country's real Gross Domestic Product but at a(n) ________ rate.

Accepted Answer

A)  increase; decreasing 
B)  decrease; decreasing 
C)  increase; increasing 
D)  decrease; increasing 
A)  increase; decreasing 
B)  decrease; decreasing 
C)  increase; increasing 
D)  decrease; increasing

Question 6

The development of new and better ideas leads to

Accepted Answer

A)  more output. 
B)  more consumption and investment. 
C)  more capital accumulation. 
D)  All of the answers are correct. 
A)  more output. 
B)  more consumption and investment. 
C)  more capital accumulation. 
D)  All of the answers are correct.

Question 7

Which of the following are TRUE? I. Even with a low domestic savings rate, a country can still have high investment with foreign savings. II. Good savings rates require well-functioning financial intermediaries. III. If savings do not flow into an economy from other countries, it will have a low level of capital stock.

Accepted Answer

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

Question 8

Both institutions and property rights are becoming less favorable to entrepreneurship throughout the world.

Accepted Answer

A) True 
 B)False

Question 9

Consider the following production function . The level   of technology in this economy is represented by a value of

Accepted Answer

A)  1. 
B)  4. 
C)  2. 
D)  0.5. 
A)  1. 
B)  4. 
C)  2. 
D)  0.5.

Question 10

Which of the following would decrease national output?

Accepted Answer

A)  a new idea to improve the production process 
B)  a natural disaster that destroys some capital 
C)  an increase in human capital 
D)  an increase in labor 
A)  a new idea to improve the production process 
B)  a natural disaster that destroys some capital 
C)  an increase in human capital 
D)  an increase in labor

Question 11

A small country's aggregate production function per hour of labor is given by Y = K1/2. Its depreciation rate is 5 percent and its investment rate is 25 percent. What is its steady-state level of real GDP?

Accepted Answer

A)  25 
B)  5 
C)  1.25 
D)  You need to know the steady-state level of capital stock to answer this question. 
A)  25 
B)  5 
C)  1.25 
D)  You need to know the steady-state level of capital stock to answer this question.

Question 12

Which of the following is NOT a reason for high growth rates in Germany and Japan following World War II?

Accepted Answer

A)  Good institutions were in place soon after the war. 
B)  Both countries had higher growth rates than the United States before World War II. 
C)  New capital was highly productive during the rebuilding process. 
D)  The incentive to invest capital domestically was very high. 
A)  Good institutions were in place soon after the war. 
B)  Both countries had higher growth rates than the United States before World War II. 
C)  New capital was highly productive during the rebuilding process. 
D)  The incentive to invest capital domestically was very high.

Question 13

According to the Solow model, countries with higher savings rates have higher levels of

Accepted Answer

A)  investment. 
B)  output. 
C)  per capita GDP. 
D)  All of the answers are correct. 
A)  investment. 
B)  output. 
C)  per capita GDP. 
D)  All of the answers are correct.

Question 14

Explain why patents are important for innovation.

Accepted Answer

Patents prevent a new product from being

Question 15

The marginal product of capital is the increase in

Accepted Answer

A)  employment when one more unit of capital is added. 
B)  unemployment when one more unit of capital is added. 
C)  output when one more unit of capital is added. 
D)  the number of machines when one more unit of capital is added. 
A)  employment when one more unit of capital is added. 
B)  unemployment when one more unit of capital is added. 
C)  output when one more unit of capital is added. 
D)  the number of machines when one more unit of capital is added.

Question 16

An economy has a steady state output level of 50. The economy's labor, technology, and education levels are constant, and the economy is described by the production function: . Depreciation is described by the linear function D =   0.05K. What is the steady-state level of capital stock and what is the level of investment needed to maintain it?

Accepted Answer

The economy is at the steady state. Ther

Question 17

If a developing country wanted to increase its level of investment, which of these actions would directly lead to this goal?

Accepted Answer

A)  Strengthen and enforce private property laws. 
B)  Provide a minimum level of food to all people in the country. 
C)  Increase taxes to prevent corporations from keeping excess profits. 
D)  Nationalize all foreign manufacturing facilities in the country. 
A)  Strengthen and enforce private property laws. 
B)  Provide a minimum level of food to all people in the country. 
C)  Increase taxes to prevent corporations from keeping excess profits. 
D)  Nationalize all foreign manufacturing facilities in the country.

Question 18

What is meant by the steady-state level of capital?

Accepted Answer

A)  All of a nation's capital is reinvested back into that country. 
B)  Positive net capital investment continues to drive growth at a steady rate. 
C)  There is no new net investment, or any growth. 
D)  Investment eventually exceeds depreciation. 
A)  All of a nation's capital is reinvested back into that country. 
B)  Positive net capital investment continues to drive growth at a steady rate. 
C)  There is no new net investment, or any growth. 
D)  Investment eventually exceeds depreciation.

Question 19

The Solow model suggests that initially poor countries with steady-state levels of output ______ richer countries will grow ______ richer countries.

Accepted Answer

A)  similar to; faster than 
B)  similar to; slower than 
C)  lower than; at the same rate as 
D)  higher than; slower than 
A)  similar to; faster than 
B)  similar to; slower than 
C)  lower than; at the same rate as 
D)  higher than; slower than

Question 20

If two or more people can use a good at the same time without preventing others from using it, the good is said to be a(n)

Accepted Answer

A)  durable good. 
B)  public gooB. 
C)  investment gooC. 
D)  nonrivalrous good. 
A)  durable good. 
B)  public gooB. 
C)  investment gooC. 
D)  nonrivalrous good.

Exam 26: Gdp and the Measurement of Progress

Assume that a country's production function changes from to . Which of the following could explain the change in this production function?

Governments can play a role in supporting the production of new ideas by

If output in an economy is 20, and the investment function is 0.25Y,

The larger the spillovers, the stronger the argument for

In the Solow model production function, an increase in capital stock with all other variables held constant will ________ the country's real Gross Domestic Product but at a(n) ________ rate.

The development of new and better ideas leads to

Both institutions and property rights are becoming less favorable to entrepreneurship throughout the world.

Consider the following production function . The level of technology in this economy is represented by a value of

Which of the following would decrease national output?

A small country's aggregate production function per hour of labor is given by Y = K1/2. Its depreciation rate is 5 percent and its investment rate is 25 percent. What is its steady-state level of real GDP?

Which of the following is NOT a reason for high growth rates in Germany and Japan following World War II?

According to the Solow model, countries with higher savings rates have higher levels of

Explain why patents are important for innovation.

The marginal product of capital is the increase in

If a developing country wanted to increase its level of investment, which of these actions would directly lead to this goal?

What is meant by the steady-state level of capital?

The Solow model suggests that initially poor countries with steady-state levels of output ______ richer countries will grow ______ richer countries.

If two or more people can use a good at the same time without preventing others from using it, the good is said to be a(n)

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

Filters

In the Solow model production function, an increase in capital stock with all other variables held constant will the country's real Gross Domestic Product but at a(n) rate.

The Solow model suggests that initially poor countries with steady-state levels of output richer countries will grow richer countries.