Question 1

When individuals and businesses are permitted to trade freely over a larger market area,

Accepted Answer

A) wages will decline to the level of the poorest country in the region. 
B) the monopoly power of business firms will increase. 
C) they will be able to produce a larger output and consume a more diverse bundle of goods. 
D) businesses will be able to earn higher profits,but the income levels of individuals will decline. 
A) wages will decline to the level of the poorest country in the region. 
B) the monopoly power of business firms will increase. 
C) they will be able to produce a larger output and consume a more diverse bundle of goods. 
D) businesses will be able to earn higher profits,but the income levels of individuals will decline. C

Question 2

Which of the following is most important if a country is going to achieve and sustain rapid economic growth?

Accepted Answer

A) large government expenditures as a share of GDP 
B) institutions and policies that are supportive of competition (open markets)and freedom of exchange. 
C) free elections and political democracy 
D) monetary policy makers who are willing to expand the supply of money rapidly 
A) large government expenditures as a share of GDP 
B) institutions and policies that are supportive of competition (open markets)and freedom of exchange. 
C) free elections and political democracy 
D) monetary policy makers who are willing to expand the supply of money rapidly B

Question 3

Life expectancy at birth for the world rose from 24 years to 26 years between 1000 and 1820,but by 2003,life expectancy had risen to

Accepted Answer

A) 36 years. 
B) 44 years. 
C) 52 years. 
D) 64 years. 
A) 36 years. 
B) 44 years. 
C) 52 years. 
D) 64 years. D

Question 4

Which of the following will most likely contribute to the growth of a country?

Accepted Answer

A) secure property rights and low marginal tax rates 
B) price controls that keep the cost of agricultural products low 
C) rapid monetary growth 
D) exchange rate controls and export restrictions 
A) secure property rights and low marginal tax rates 
B) price controls that keep the cost of agricultural products low 
C) rapid monetary growth 
D) exchange rate controls and export restrictions

Question 5

If the political leaders of a country want to promote economic growth,which of the following policy alternatives would be most effective?

Accepted Answer

A) imposition of price controls on agricultural products in an effort to keep food cheap 
B) a public-sector investment program financed by highly progressive taxation 
C) low taxes,a monetary policy consistent with long-run price stability,and the abolition of price controls and trade restrictions 
D) expansionary monetary policy designed to keep interest rates low 
A) imposition of price controls on agricultural products in an effort to keep food cheap 
B) a public-sector investment program financed by highly progressive taxation 
C) low taxes,a monetary policy consistent with long-run price stability,and the abolition of price controls and trade restrictions 
D) expansionary monetary policy designed to keep interest rates low

Question 6

Which of the following is most likely to be a serious obstacle retarding the growth of less-developed nations?

Accepted Answer

A) a lack of knowledge about modern technology 
B) a lack of natural resources 
C) slow population growth 
D) low capital formation as the result of a weak legal system 
A) a lack of knowledge about modern technology 
B) a lack of natural resources 
C) slow population growth 
D) low capital formation as the result of a weak legal system

Question 7

Which of the following would be most likely to enhance the growth rate of an economy?

Accepted Answer

A) imposition of a quota restricting the quantity of steel imports 
B) gradual elimination of all tariffs over the next 10 years 
C) legislation limiting the number of hours employees can work during a week to 32 
D) legislation requiring employers to provide one year of severance pay to any employee who is dismissed from employment 
A) imposition of a quota restricting the quantity of steel imports 
B) gradual elimination of all tariffs over the next 10 years 
C) legislation limiting the number of hours employees can work during a week to 32 
D) legislation requiring employers to provide one year of severance pay to any employee who is dismissed from employment

Question 8

Which of the following will be most likely to contribute to the growth of a less-developed country?

Accepted Answer

A) price controls that keep the cost of agricultural products low 
B) rapid population growth 
C) exchange rate controls and export restrictions 
D) secure property rights and low marginal tax rates 
A) price controls that keep the cost of agricultural products low 
B) rapid population growth 
C) exchange rate controls and export restrictions 
D) secure property rights and low marginal tax rates

Question 9

The "rule of 70" is a simple rule

Accepted Answer

A) 70 divided by the growth rate) that approximates the number of years it will take for income to double at various growth rates. 
B) 70 multiplied by the growth rate) that approximates the number of years it will take for income to double at various growth rates. 
C) 70 divided by the percentage of population over age 70) that can be used to approximate a nation's growth of real GDP. 
D) 70 multiplied by the percentage of population over age 70) that can be used to approximate a nation's growth of real GDP. 
A) 70 divided by the growth rate) that approximates the number of years it will take for income to double at various growth rates. 
B) 70 multiplied by the growth rate) that approximates the number of years it will take for income to double at various growth rates. 
C) 70 divided by the percentage of population over age 70) that can be used to approximate a nation's growth of real GDP. 
D) 70 multiplied by the percentage of population over age 70) that can be used to approximate a nation's growth of real GDP.

Question 10

When competition is present and private ownership rights are clearly defined and securely enforced,

Accepted Answer

A) production and trade are encouraged and plunder (taking from others)is discouraged. 
B) people get ahead by helping others in exchange for income. 
C) employers will have to provide prospective employees with at least as good a deal as they could get elsewhere. 
D) all of the above are correct. 
A) production and trade are encouraged and plunder (taking from others)is discouraged. 
B) people get ahead by helping others in exchange for income. 
C) employers will have to provide prospective employees with at least as good a deal as they could get elsewhere. 
D) all of the above are correct.

Question 11

Investment in both physical and human capital tends to enhance economic growth because it generally

Accepted Answer

A) increases consumption during the current period. 
B) makes it possible for individuals to produce more goods and services per hour worked. 
C) encourages firms to expand output by employing more low productivity workers. 
D) encourages workers to unionize and thereby fight for higher wages. 
A) increases consumption during the current period. 
B) makes it possible for individuals to produce more goods and services per hour worked. 
C) encourages firms to expand output by employing more low productivity workers. 
D) encourages workers to unionize and thereby fight for higher wages.

Question 12

Most economists believe that the poor economic performance of countries located in tropical areas is primarily the result of

Accepted Answer

A) the hot climate that saps the energy of people in tropical countries. 
B) the poor institutional quality in most tropical countries. 
C) the lack of natural resources in most tropical countries. 
D) the failure of rich countries to provide foreign aid to tropical countries. 
A) the hot climate that saps the energy of people in tropical countries. 
B) the poor institutional quality in most tropical countries. 
C) the lack of natural resources in most tropical countries. 
D) the failure of rich countries to provide foreign aid to tropical countries.

Question 13

Which of the following is an important ingredient of efficient economic organization?

Accepted Answer

A) high marginal tax rates 
B) competitive markets 
C) rapid increases in the money supply 
D) imposition of high tariffs that will protect domestic producers from the ravages of foreign competition 
A) high marginal tax rates 
B) competitive markets 
C) rapid increases in the money supply 
D) imposition of high tariffs that will protect domestic producers from the ravages of foreign competition

Question 14

How can increased investment help a country achieve increased economic growth? What costs are involved?

Accepted Answer

Countries can profit from investment in

Question 15

How do high tariffs and other restraints on international trade affect a nation's prosperity?

Accepted Answer

A) They increase employment and thereby promote the growth of real GDP. 
B) They prevent the nation from fully realizing the potential gains from specialization,exchange,and competition. 
C) They protect domestic producers and thereby promote economic growth. 
D) Both a and c are correct. 
A) They increase employment and thereby promote the growth of real GDP. 
B) They prevent the nation from fully realizing the potential gains from specialization,exchange,and competition. 
C) They protect domestic producers and thereby promote economic growth. 
D) Both a and c are correct.

Question 16

When a nation's institutional environment is more favorable,it will

Accepted Answer

A) attract more physical investment. 
B) encourage individuals to invest more heavily in human capital. 
C) encourage the development and efficient use of natural resources. 
D) all of the above. 
A) attract more physical investment. 
B) encourage individuals to invest more heavily in human capital. 
C) encourage the development and efficient use of natural resources. 
D) all of the above.

Question 17

Measured in 1990 dollars,the GDP per person of the world was $667 in 1813.By 2003,the world's income per person had risen to

Accepted Answer

A) nearly $1200,almost twice the level of 1813. 
B) $2,422,almost four times the level of 1813. 
C) a little more than $3,600,approximately six times the level of 1813. 
D) $6,516,nearly ten times the level of 1813. 
A) nearly $1200,almost twice the level of 1813. 
B) $2,422,almost four times the level of 1813. 
C) a little more than $3,600,approximately six times the level of 1813. 
D) $6,516,nearly ten times the level of 1813.

Question 18

The replacement of older products by newer improved ones is called

Accepted Answer

A) trickle-down economic growth. 
B) creative destruction. 
C) economies of scale. 
D) planned obsolescence. 
A) trickle-down economic growth. 
B) creative destruction. 
C) economies of scale. 
D) planned obsolescence.

Question 19

When competition is present and property rights secure,people will be encouraged to

Accepted Answer

A) plunder the resources of others. 
B) pay the lowest possible wages. 
C) provide others with things that they value in exchange for income. 
D) Invest in other countries where markets are less competitive and property rights less secure. 
A) plunder the resources of others. 
B) pay the lowest possible wages. 
C) provide others with things that they value in exchange for income. 
D) Invest in other countries where markets are less competitive and property rights less secure.

Question 20

Which of the following would be most likely to help the residents of a nation produce a larger output and consume a wide variety of products at economical prices?

Accepted Answer

A) imposition of tariffs on imported goods 
B) quotas that protect domestic businesses against foreign producers that pay workers low wages 
C) free trade 
D) exchange rate controls 
A) imposition of tariffs on imported goods 
B) quotas that protect domestic businesses against foreign producers that pay workers low wages 
C) free trade 
D) exchange rate controls

Exam 16: Creating an Environment for Growth and Prosperity

When individuals and businesses are permitted to trade freely over a larger market area,

Which of the following is most important if a country is going to achieve and sustain rapid economic growth?

Life expectancy at birth for the world rose from 24 years to 26 years between 1000 and 1820,but by 2003,life expectancy had risen to

Which of the following will most likely contribute to the growth of a country?

If the political leaders of a country want to promote economic growth,which of the following policy alternatives would be most effective?

Which of the following is most likely to be a serious obstacle retarding the growth of less-developed nations?

Which of the following would be most likely to enhance the growth rate of an economy?

Which of the following will be most likely to contribute to the growth of a less-developed country?

The "rule of 70" is a simple rule

When competition is present and private ownership rights are clearly defined and securely enforced,

Investment in both physical and human capital tends to enhance economic growth because it generally

Most economists believe that the poor economic performance of countries located in tropical areas is primarily the result of

Which of the following is an important ingredient of efficient economic organization?

How can increased investment help a country achieve increased economic growth? What costs are involved?

How do high tariffs and other restraints on international trade affect a nation's prosperity?

When a nation's institutional environment is more favorable,it will

Measured in 1990 dollars,the GDP per person of the world was $667 in 1813.By 2003,the world's income per person had risen to

The replacement of older products by newer improved ones is called

When competition is present and property rights secure,people will be encouraged to

Which of the following would be most likely to help the residents of a nation produce a larger output and consume a wide variety of products at economical prices?

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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