Question 1

If two countries have the same steady-state levels of output, the country that is ______ today will eventually ______ in per capita output.

Accepted Answer

A)  poorer; lag behind 
B)  poorer; catch up 
C)  richer; fall behind 
D)  richer; be further ahead 
A)  poorer; lag behind 
B)  poorer; catch up 
C)  richer; fall behind 
D)  richer; be further ahead

Question 2

If a country is at its steady-state level of capital stock, which of the following will NOT result in economic growth in future years, ceteris paribus?

Accepted Answer

A)  a technological advancement 
B)  an increase in the savings rate 
C)  producing capital at its current rate 
D)  a decrease in the depreciation rate 
A)  a technological advancement 
B)  an increase in the savings rate 
C)  producing capital at its current rate 
D)  a decrease in the depreciation rate

Question 3

Pharmaceutical companies tend to concentrate on drugs for common diseases because

Accepted Answer

A)  more people can be helped. 
B)  spillovers are smaller. 
C)  they are more likely to be granted patents. 
D)  potential profits are larger. 
A)  more people can be helped. 
B)  spillovers are smaller. 
C)  they are more likely to be granted patents. 
D)  potential profits are larger.

Question 4

Which of the following is an example of an increase in human capital?

Accepted Answer

A)  an increase in the training of bone cancer researchers 
B)  an increase in the use of bone cancer research centers 
C)  the discovery of a cure for bone cancer 
D)  an increase in the number of scientists working on curing bone cancer 
A)  an increase in the training of bone cancer researchers 
B)  an increase in the use of bone cancer research centers 
C)  the discovery of a cure for bone cancer 
D)  an increase in the number of scientists working on curing bone cancer

Question 5

Growth consists of two types: catching-up growth and cutting- edge growth.

Accepted Answer

A) True 
 B)False

Question 6

Why might a country experience a higher growth rate after a war? I. With a depleted, or destroyed, capital stock, any new capital would contribute greatly to growth. II. Capital accumulation always causes higher growth rates. III. A winning country may see its exports surge as it helps others rebuild leading to a higher growth rate.

Accepted Answer

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

Question 7

Which of the following is NOT a reason that world GDP per capita could grow even faster than its current rate?

Accepted Answer

A)  The number of scientists and engineers is increased. 
B)  Consumers become richer. 
C)  Government spending has decreased. 
D)  Barriers to international trade are lowered. 
A)  The number of scientists and engineers is increased. 
B)  Consumers become richer. 
C)  Government spending has decreased. 
D)  Barriers to international trade are lowered.

Question 8

What has led to the high growth rate in China's economy over the last twenty-five years?

Accepted Answer

A)  an increasing population 
B)  improved worker productivity 
C)  better government planning 
D)  a decrease in interest rates 
A)  an increasing population 
B)  improved worker productivity 
C)  better government planning 
D)  a decrease in interest rates

Question 9

In the Solow model, if the first unit of capital increases output by one unit, then the second unit of capital will cause total output to

Accepted Answer

A)  increase, but by less than one unit. 
B)  double. 
C)  remain the same as with one unit of capital. 
D)  increase exponentially. 
A)  increase, but by less than one unit. 
B)  double. 
C)  remain the same as with one unit of capital. 
D)  increase exponentially.

Question 10

In a steady state, the capital stock

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  becomes unimportant. 
A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  becomes unimportant.

Question 11

Depreciation is defined as the wear and tear on capital goods.

Accepted Answer

A) True 
 B)False

Question 12

In recent years, real GDP in China has grown

Accepted Answer

A)  at the same rate as real GDP in the United States. 
B)  faster than real GDP in the United States. 
C)  slower than real GDP in the United States. 
D)  faster than real GDP in the United States in some years, 
slower than real GDP in the United States in other 
years. 
A)  at the same rate as real GDP in the United States. 
B)  faster than real GDP in the United States. 
C)  slower than real GDP in the United States. 
D)  faster than real GDP in the United States in some years, 
slower than real GDP in the United States in other 
years.

Question 13

If a country's saving preference increased from 10 percent to 12 percent of disposable income and it was operating at its steady state before the change, we would expect to see which of the following? I. a decrease in capital stock II. a decrease in real GDP III. an increase in real GDP IV. an increase in capital stock

Accepted Answer

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

Question 14

When investment is equal to depreciation, the capital stock

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  becomes unimportant. 
A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  becomes unimportant.

Question 15

Following World War II, the United States grew faster than Germany.

Accepted Answer

A) True 
 B)False

Question 16

All other things equal, increases in capital will cause output to

Accepted Answer

A)  increase at an increasing rate. 
B)  increase at a constant rate. 
C)  increase at a decreasing rate. 
D)  remain constant. 
A)  increase at an increasing rate. 
B)  increase at a constant rate. 
C)  increase at a decreasing rate. 
D)  remain constant.

Question 17

All else equal, an increase in savings will cause investment to

Accepted Answer

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

Question 18

Why do some economists think that economic growth due to ideas will be faster in the future?

Accepted Answer

A)  an increasing number of scientists and researchers 
B)  globalization leads to increased market size for firms 
C)  increased economic growth in countries like China and India that translate into more scientists and larger markets 
D)  All of these answers are correct. 
A)  an increasing number of scientists and researchers 
B)  globalization leads to increased market size for firms 
C)  increased economic growth in countries like China and India that translate into more scientists and larger markets 
D)  All of these answers are correct.

Question 19

The economy's production function relates __________ to output.

Accepted Answer

A)  real GDP 
B)  the inflation rate 
C)  the unemployment rate 
D)  the factors of production 
A)  real GDP 
B)  the inflation rate 
C)  the unemployment rate 
D)  the factors of production

Question 20

With additional education, the marginal product of human capital

Accepted Answer

A)  increases at an increasing rate. 
B)  increases at a decreasing rate. 
C)  is relatively constant. 
D)  decreases and then increases. 
A)  increases at an increasing rate. 
B)  increases at a decreasing rate. 
C)  is relatively constant. 
D)  decreases and then increases.

Exam 26: Gdp and the Measurement of Progress

If two countries have the same steady-state levels of output, the country that is ______ today will eventually ______ in per capita output.

If a country is at its steady-state level of capital stock, which of the following will NOT result in economic growth in future years, ceteris paribus?

Pharmaceutical companies tend to concentrate on drugs for common diseases because

Which of the following is an example of an increase in human capital?

Growth consists of two types: catching-up growth and cutting- edge growth.

Which of the following is NOT a reason that world GDP per capita could grow even faster than its current rate?

What has led to the high growth rate in China's economy over the last twenty-five years?

In the Solow model, if the first unit of capital increases output by one unit, then the second unit of capital will cause total output to

In a steady state, the capital stock

Depreciation is defined as the wear and tear on capital goods.

In recent years, real GDP in China has grown

When investment is equal to depreciation, the capital stock

Following World War II, the United States grew faster than Germany.

All other things equal, increases in capital will cause output to

All else equal, an increase in savings will cause investment to

Why do some economists think that economic growth due to ideas will be faster in the future?

The economy's production function relates __________ to output.

With additional education, the marginal product of human capital

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

If two countries have the same steady-state levels of output, the country that is today will eventually in per capita output.