Question 1

Use the following to answer questions 
Exhibit: Production Possibilities Curves 2  
-The rule of 72 states that grows at some exponential rate of z percent

Accepted Answer

A) will double in value in approximately 72 years. 
B) will double in value in approximately 72 ÷ z years. 
C) will double in value in approximately 72 * z years. 
D) will double in value in approximately 72z years. 
A) will double in value in approximately 72 years. 
B) will double in value in approximately 72 ÷ z years. 
C) will double in value in approximately 72 * z years. 
D) will double in value in approximately 72z years. B

Question 2

An increase in the capital stock would shift the production function _______ and the long-run aggregate supply curve to the _______.

Accepted Answer

A) upward; right 
B) upward; left 
C) downward; left 
D) to the right; right 
A) upward; right 
B) upward; left 
C) downward; left 
D) to the right; right A

Question 3

If the rate of growth of output per capita is 8% and the rate of growth of population is 2%, what is the rate of growth of output?

Accepted Answer

A) 4% 
B) 6% 
C) 8% 
D) 10% 
A) 4% 
B) 6% 
C) 8% 
D) 10% D

Question 4

Use the following to answer questions 
Exhibit: Production Possibilities Curves 2  
-Economic growth is an exponential process.What does this mean?

Accepted Answer

A) It means that the returns to huge capital investments made today will diminish at an increasing rate over time. 
B) It means that small differences in sustained growth rates have significant effects on a nation's real income over long periods of time. 
C) It means that countries must allocate increasing amounts of resources to capital goods to see constant increases in the growth rate of potential output. 
D) It means that if a country allocates a fixed amount of resources to capital goods, its potential output will increase at an increasing rate over long periods of time. 
A) It means that the returns to huge capital investments made today will diminish at an increasing rate over time. 
B) It means that small differences in sustained growth rates have significant effects on a nation's real income over long periods of time. 
C) It means that countries must allocate increasing amounts of resources to capital goods to see constant increases in the growth rate of potential output. 
D) It means that if a country allocates a fixed amount of resources to capital goods, its potential output will increase at an increasing rate over long periods of time.

Question 5

For economic growth to take place, we must consume more and save less.

Accepted Answer

A) True 
 B)False

Question 6

What is the relationship between average household income and standard of living?

Accepted Answer

A) There is no relationship.Increasing average income says nothing about income distribution. 
B) Rising income enables households to acquire more of the goods and services that improve their material standard of living. 
C) Rising income tends to increase the crime rate and violence, thereby lowering a country's standard of living. 
D) There is no relationship.Standard of living depends on productivity not household income. 
A) There is no relationship.Increasing average income says nothing about income distribution. 
B) Rising income enables households to acquire more of the goods and services that improve their material standard of living. 
C) Rising income tends to increase the crime rate and violence, thereby lowering a country's standard of living. 
D) There is no relationship.Standard of living depends on productivity not household income.

Question 7

Use the following to answer questions 
Exhibit: Aggregate Production Function, Labor Market, and LRAS  
-(Exhibit: Aggregate Production Function, Labor Market, and LRAS)
If a change in technology moves the aggregate production function upward,

Accepted Answer

A) the demand for labor will remain the same. 
B) the demand for labor falls. 
C) the demand for labor increases. 
D) the demand and supply of labor will increase. 
A) the demand for labor will remain the same. 
B) the demand for labor falls. 
C) the demand for labor increases. 
D) the demand and supply of labor will increase.

Question 8

A change in the supply of labor will shift the long-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following events would be most likely to increase an economy's potential output?

Accepted Answer

A) a tax increase 
B) an increase in transfer payments by the government 
C) an improvement in technology 
D) an increase in net exports 
A) a tax increase 
B) an increase in transfer payments by the government 
C) an improvement in technology 
D) an increase in net exports

Question 10

Suppose that real GDP per capita of a rich country is $40,000.Real GDP per capita in a poor country is $10,000.Suppose that rate of growth of GDP per capita in the rich country is 3.6% per year and in the poor country is 7.2% per year.Using the rule of 72, calculate how many years it will take for real GDP per capita in the poor country to catch up with GDP per capita in the rich country?

Accepted Answer

A) 10 years 
B) 20 years 
C) 30 years 
D) 40 years 
A) 10 years 
B) 20 years 
C) 30 years 
D) 40 years

Question 11

Use the following to answer questions 
Exhibit: Aggregate Production Function, Labor Market, and LRAS  
-(Exhibit: Aggregate Production Function, Labor Market, and LRAS)
In the long run, any price level is consistent with a real wage of $40,000 because

Accepted Answer

A) real wage is perfectly flexible. 
B) the labor force is perfectly mobile. 
C) nominal wage is perfectly flexible. 
D) nominal wage is sticky. 
A) real wage is perfectly flexible. 
B) the labor force is perfectly mobile. 
C) nominal wage is perfectly flexible. 
D) nominal wage is sticky.

Question 12

If population increases at an average rate of 2% per year and output increases at an average rate of 5% per year, then output per capita will double in

Accepted Answer

A) 14.4 years. 
B) 18 years. 
C) 24 years. 
D) 36 years. 
A) 14.4 years. 
B) 18 years. 
C) 24 years. 
D) 36 years.

Question 13

If the rate of growth of output is 10% and the rate of growth of per capita real GDP is 6%, what is the rate of growth of population?

Accepted Answer

A) 2 
B) 4 
C) 6 
D) 8 
A) 2 
B) 4 
C) 6 
D) 8

Question 14

Economic growth can generally be achieved through a(n)

Accepted Answer

A) decrease in economic freedom. 
B) decline in the rate of growth in the working-age population. 
C) increase in the proportion of GDP used for saving. 
D) increase in the depreciation of capital goods. 
A) decrease in economic freedom. 
B) decline in the rate of growth in the working-age population. 
C) increase in the proportion of GDP used for saving. 
D) increase in the depreciation of capital goods.

Question 15

If real GDP grows at 3% and population grows at 1.2%, then real GDP per capita grows by 4.2%.

Accepted Answer

A) True 
 B)False

Question 16

Real GDP tends to fluctuate around potential output.

Accepted Answer

A) True 
 B)False

Question 17

The rate of economic growth per capita in Mamoogia from 20006 to 2010 was 1.8% per year, while in Kennan, over the same period it was 3.6%.In 2010, per capita real GDP was $28,900 in Mamoogia and $12,700 in Kennan.Assume the growth rates for each country remain the same.Which country will have a higher level of potential output in 2050?

Accepted Answer

A) Kennan 
B) Mamoogia 
C) Their potential output will be the same. 
D) It will depend on the rate of population growth in each country. 
A) Kennan 
B) Mamoogia 
C) Their potential output will be the same. 
D) It will depend on the rate of population growth in each country.

Question 18

Use the following to answer questions 
Exhibit: Production Possibilities Curves 2  
-Suppose that GDP of a small tropical island grows at 4% per year.This year, output is equal to 100,000 units of output.Using the rule of 72, how long will it take before GDP is equal to 400,000 units of output?

Accepted Answer

A) 18 years 
B) 36 years 
C) 45 years 
D) 72 years 
A) 18 years 
B) 36 years 
C) 45 years 
D) 72 years

Question 19

An increase in saving, all other things unchanged,

Accepted Answer

A) decreases the amount of resources available for investment. 
B) increases the amount of resources that can be devoted to the purchase of capital goods. 
C) reduces real GDP by decreasing consumption. 
D) increases a country's present standard of living. 
A) decreases the amount of resources available for investment. 
B) increases the amount of resources that can be devoted to the purchase of capital goods. 
C) reduces real GDP by decreasing consumption. 
D) increases a country's present standard of living.

Question 20

A factor critical to economic growth is

Accepted Answer

A) increased saving rates. 
B) increases in human consumption. 
C) reduced dependence on imports. 
D) technological change that increases labor productivity. 
A) increased saving rates. 
B) increases in human consumption. 
C) reduced dependence on imports. 
D) technological change that increases labor productivity.

Use the following to answer questions Exhibit: Production Possibilities Curves 2 -The rule of 72 states that grows at some exponential rate of z percent

An increase in the capital stock would shift the production function _ and the long-run aggregate supply curve to the _.

If the rate of growth of output per capita is 8% and the rate of growth of population is 2%, what is the rate of growth of output?

Use the following to answer questions Exhibit: Production Possibilities Curves 2 -Economic growth is an exponential process.What does this mean?

For economic growth to take place, we must consume more and save less.

What is the relationship between average household income and standard of living?

Use the following to answer questions Exhibit: Aggregate Production Function, Labor Market, and LRAS -(Exhibit: Aggregate Production Function, Labor Market, and LRAS) If a change in technology moves the aggregate production function upward,

A change in the supply of labor will shift the long-run aggregate supply curve.

Which of the following events would be most likely to increase an economy's potential output?

Use the following to answer questions Exhibit: Aggregate Production Function, Labor Market, and LRAS -(Exhibit: Aggregate Production Function, Labor Market, and LRAS) In the long run, any price level is consistent with a real wage of $40,000 because

If population increases at an average rate of 2% per year and output increases at an average rate of 5% per year, then output per capita will double in

If the rate of growth of output is 10% and the rate of growth of per capita real GDP is 6%, what is the rate of growth of population?

Economic growth can generally be achieved through a(n)

If real GDP grows at 3% and population grows at 1.2%, then real GDP per capita grows by 4.2%.

Real GDP tends to fluctuate around potential output.

Use the following to answer questions Exhibit: Production Possibilities Curves 2 -Suppose that GDP of a small tropical island grows at 4% per year.This year, output is equal to 100,000 units of output.Using the rule of 72, how long will it take before GDP is equal to 400,000 units of output?

An increase in saving, all other things unchanged,

A factor critical to economic growth is

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Exam 8: Economic Growth

Use the following to answer questions Exhibit: Production Possibilities Curves 2 -The rule of 72 states that grows at some exponential rate of z percent

An increase in the capital stock would shift the production function _______ and the long-run aggregate supply curve to the _______.

If the rate of growth of output per capita is 8% and the rate of growth of population is 2%, what is the rate of growth of output?

Use the following to answer questions Exhibit: Production Possibilities Curves 2 -Economic growth is an exponential process.What does this mean?

For economic growth to take place, we must consume more and save less.

What is the relationship between average household income and standard of living?

Use the following to answer questions Exhibit: Aggregate Production Function, Labor Market, and LRAS -(Exhibit: Aggregate Production Function, Labor Market, and LRAS) If a change in technology moves the aggregate production function upward,

A change in the supply of labor will shift the long-run aggregate supply curve.

Which of the following events would be most likely to increase an economy's potential output?

Use the following to answer questions Exhibit: Aggregate Production Function, Labor Market, and LRAS -(Exhibit: Aggregate Production Function, Labor Market, and LRAS) In the long run, any price level is consistent with a real wage of $40,000 because

If population increases at an average rate of 2% per year and output increases at an average rate of 5% per year, then output per capita will double in

If the rate of growth of output is 10% and the rate of growth of per capita real GDP is 6%, what is the rate of growth of population?

Economic growth can generally be achieved through a(n)

If real GDP grows at 3% and population grows at 1.2%, then real GDP per capita grows by 4.2%.

Real GDP tends to fluctuate around potential output.

Use the following to answer questions Exhibit: Production Possibilities Curves 2 -Suppose that GDP of a small tropical island grows at 4% per year.This year, output is equal to 100,000 units of output.Using the rule of 72, how long will it take before GDP is equal to 400,000 units of output?

An increase in saving, all other things unchanged,

A factor critical to economic growth is

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

An increase in the capital stock would shift the production function _ and the long-run aggregate supply curve to the _.