Question 1

Why do political instability and insecure property rights retard economic growth?

Accepted Answer

A) Fear that private property will be confiscated substantially reduces the incentive to invest and create wealth. 
B) When property rights are insecure,foreign investors will be reluctant to invest in the country. 
C) Savings will tend to flow out of a country if individuals fear their property is insecure. 
D) All of the above are correct. 
A) Fear that private property will be confiscated substantially reduces the incentive to invest and create wealth. 
B) When property rights are insecure,foreign investors will be reluctant to invest in the country. 
C) Savings will tend to flow out of a country if individuals fear their property is insecure. 
D) All of the above are correct.

Question 2

Which of the following is most likely to help the residents of a nation produce more goods and services and achieve higher income levels?

Accepted Answer

A) higher tax rates 
B) a higher rate of investment 
C) a smaller trade sector 
D) greater use of taxation to transfer income from the rich to the poor 
A) higher tax rates 
B) a higher rate of investment 
C) a smaller trade sector 
D) greater use of taxation to transfer income from the rich to the poor

Question 3

Private ownership and competitive markets are important for economic growth because they provide individuals with a strong incentive to

Accepted Answer

A) care for resources and use them beneficially. 
B) innovate and introduce new products that are highly valued relative to their cost. 
C) produce goods efficiently. 
D) all of the above are correct. 
A) care for resources and use them beneficially. 
B) innovate and introduce new products that are highly valued relative to their cost. 
C) produce goods efficiently. 
D) all of the above are correct.

Question 4

Which of the following is most important for the achievement of long-term economic growth and a high level of per capita income?

Accepted Answer

A) abundant natural resources 
B) foreign aid 
C) policies and institutions that encourage productive activities 
D) institutions and policies that control the growth of population 
A) abundant natural resources 
B) foreign aid 
C) policies and institutions that encourage productive activities 
D) institutions and policies that control the growth of population

Question 5

Which of the following is most important if the living standards of people residing in a country are going to improve?

Accepted Answer

A) growth of population 
B) growth of per capita GDP 
C) growth of the money supply 
D) growth of government expenditures as a share of GDP 
A) growth of population 
B) growth of per capita GDP 
C) growth of the money supply 
D) growth of government expenditures as a share of GDP

Question 6

Which of the following would be most likely to improve the standard of living of a less-developed country?

Accepted Answer

A) development of strong labor unions 
B) more foreign investment,attracted by the expectation of economic and political stability 
C) adoption of trade barriers (higher tariffs and quotas) 
D) widespread use of price controls to allocate goods and resources 
A) development of strong labor unions 
B) more foreign investment,attracted by the expectation of economic and political stability 
C) adoption of trade barriers (higher tariffs and quotas) 
D) widespread use of price controls to allocate goods and resources

Question 7

Which of the following did Thomas Malthus believe would deter sustained increases in the growth of income per capita?

Accepted Answer

A) excessive growth of government expenditures 
B) rapid growth of population 
C) the availability of natural resources 
D) adverse climate conditions 
A) excessive growth of government expenditures 
B) rapid growth of population 
C) the availability of natural resources 
D) adverse climate conditions

Question 8

In a country that is experiencing economic growth at 7 percent per year,per capita income will double in approximately

Accepted Answer

A) seven years. 
B) ten years. 
C) fourteen years. 
D) twenty-one years. 
A) seven years. 
B) ten years. 
C) fourteen years. 
D) twenty-one years.

Question 9

Which of the following is true?

Accepted Answer

A) The United States is rich because it has democratic political institutions. 
B) Economic growth is primarily the result of gains from trade,discovery of better ways of doing things,and capital investment. 
C) Without foreign aid,poor countries are unable to break the cycle of poverty,low savings and investment,and economic stagnation. 
D) Most all countries with an abundance of natural resources have been able to achieve rapid growth and high levels of per capita income. 
A) The United States is rich because it has democratic political institutions. 
B) Economic growth is primarily the result of gains from trade,discovery of better ways of doing things,and capital investment. 
C) Without foreign aid,poor countries are unable to break the cycle of poverty,low savings and investment,and economic stagnation. 
D) Most all countries with an abundance of natural resources have been able to achieve rapid growth and high levels of per capita income.

Question 10

(I)A monetary policy that results in price stability will encourage the realization of gains from trade and thereby help promote economic growth.
(II)High tariffs and restrictive quotas will encourage rapid economic growth.

Accepted Answer

A) I is true;II is false. 
B) II is true;I is false. 
C) Both I and II are true. 
D) Both I and II are false. 
A) I is true;II is false. 
B) II is true;I is false. 
C) Both I and II are true. 
D) Both I and II are false.

Question 11

Which of the following is most likely to help promote the efficient use of resources and rapid economic growth?

Accepted Answer

A) high tariffs and imposition of other trade restrictions 
B) high marginal tax rates 
C) an open and competitive capital market 
D) high rates of inflation 
A) high tariffs and imposition of other trade restrictions 
B) high marginal tax rates 
C) an open and competitive capital market 
D) high rates of inflation

Question 12

Economic growth is important because expansion in the output of goods and services

Accepted Answer

A) necessarily creates more jobs (more work for people). 
B) makes it possible for individuals to consume more and achieve higher living standards. 
C) leads to an increase in the general level of prices. 
D) generates additional tax revenues for the government. 
A) necessarily creates more jobs (more work for people). 
B) makes it possible for individuals to consume more and achieve higher living standards. 
C) leads to an increase in the general level of prices. 
D) generates additional tax revenues for the government.

Question 13

During the past 200 years,income per person has

Accepted Answer

A) increased in the developed countries of Western Europe and North America,but declined in the rest of the world. 
B) declined in the developed countries of Western Europe and North America,but increased in the rest of the world. 
C) increased far more rapidly in both developed and less developed countries than during the centuries prior to 1800. 
D) Increased far less rapidly in both developed and less developed countries than during the centuries prior to 1800. 
A) increased in the developed countries of Western Europe and North America,but declined in the rest of the world. 
B) declined in the developed countries of Western Europe and North America,but increased in the rest of the world. 
C) increased far more rapidly in both developed and less developed countries than during the centuries prior to 1800. 
D) Increased far less rapidly in both developed and less developed countries than during the centuries prior to 1800.

Question 14

In recent years,wireless cellular telephones have been replacing land-line phone service.This is an example of

Accepted Answer

A) economies of scale. 
B) division of labor. 
C) creative destruction. 
D) entry barriers into a market. 
A) economies of scale. 
B) division of labor. 
C) creative destruction. 
D) entry barriers into a market.

Question 15

Institutions that encourage productive activities and discourage counterproductive ones,will tend to promote

Accepted Answer

A) economic growth. 
B) rent-seeking 
C) economic fluctuations 
D) high rates of unemployment. 
A) economic growth. 
B) rent-seeking 
C) economic fluctuations 
D) high rates of unemployment.

Question 16

Some low-income countries generally remain poor because

Accepted Answer

A) their institutional arrangements and policies often discourage productive activity and reduce the potential gains from specialization and exchange. 
B) they are oppressed by developed nations that benefit from the cheap goods available from countries with low wage rates. 
C) they are poorly endowed with natural resources,which are essential for long-term growth. 
D) when the average income level is low,workers have little incentive to earn higher incomes. 
A) their institutional arrangements and policies often discourage productive activity and reduce the potential gains from specialization and exchange. 
B) they are oppressed by developed nations that benefit from the cheap goods available from countries with low wage rates. 
C) they are poorly endowed with natural resources,which are essential for long-term growth. 
D) when the average income level is low,workers have little incentive to earn higher incomes.

Question 17

(I)When a country's institutions and policies provide secure property rights,a fair and balanced judicial system,monetary stability,and effective limits on government's ability to transfer wealth through taxation and regulation,creative individuals are more likely to engage in product development,investment,and other productive activities.
(II)When a country's legal and regulatory environment fails to protect property rights and is often used to favor some at the expense of others,individuals are instead more likely to engage in attempts to manipulate the political and legal process in order to plunder wealth from others.

Accepted Answer

A) I is true,II is false. 
B) I is false,II is true. 
C) Both I and II are true. 
D) Both I and II are false. 
A) I is true,II is false. 
B) I is false,II is true. 
C) Both I and II are true. 
D) Both I and II are false.

Question 18

(I)Governments that respect property rights and freedom of exchange while following monetary (and fiscal)policies consistent with relative price stability,establish the foundation for economic growth.
(II)Governments have often diminished the economic prospects of a nation by levying high taxes,instituting price controls,and following inflationary monetary policies.

Accepted Answer

A) I is true;II is false. 
B) I is false;II is true. 
C) Both I and II are true. 
D) Both I and II are false. 
A) I is true;II is false. 
B) I is false;II is true. 
C) Both I and II are true. 
D) Both I and II are false.

Question 19

The major sources of economic growth are

Accepted Answer

A) gains from trade,entrepreneurial discovery,and investment. 
B) high taxes,an expansion in the size of government,and restrictions on investments by foreigners. 
C) rapid expansion in the supply of money,trade restrictions,and government licensing of business activities. 
D) free and open elections and politicians who are willing to place the general welfare of the populace above their political ambitions. 
A) gains from trade,entrepreneurial discovery,and investment. 
B) high taxes,an expansion in the size of government,and restrictions on investments by foreigners. 
C) rapid expansion in the supply of money,trade restrictions,and government licensing of business activities. 
D) free and open elections and politicians who are willing to place the general welfare of the populace above their political ambitions.

Question 20

An increase in real per capita income will generally lead to

Accepted Answer

A) a cleaner environment and more time for recreation. 
B) a reduction in life expectancy because working conditions are less desirable. 
C) an increase in the number of hours worked by residents. 
D) an increase in real GDP that is less rapid than the increase in population 
A) a cleaner environment and more time for recreation. 
B) a reduction in life expectancy because working conditions are less desirable. 
C) an increase in the number of hours worked by residents. 
D) an increase in real GDP that is less rapid than the increase in population

Exam 16: Creating an Environment for Growth and Prosperity

Why do political instability and insecure property rights retard economic growth?

Which of the following is most likely to help the residents of a nation produce more goods and services and achieve higher income levels?

Private ownership and competitive markets are important for economic growth because they provide individuals with a strong incentive to

Which of the following is most important for the achievement of long-term economic growth and a high level of per capita income?

Which of the following is most important if the living standards of people residing in a country are going to improve?

Which of the following would be most likely to improve the standard of living of a less-developed country?

Which of the following did Thomas Malthus believe would deter sustained increases in the growth of income per capita?

In a country that is experiencing economic growth at 7 percent per year,per capita income will double in approximately

Which of the following is true?

(I)A monetary policy that results in price stability will encourage the realization of gains from trade and thereby help promote economic growth. (II)High tariffs and restrictive quotas will encourage rapid economic growth.

Which of the following is most likely to help promote the efficient use of resources and rapid economic growth?

Economic growth is important because expansion in the output of goods and services

During the past 200 years,income per person has

In recent years,wireless cellular telephones have been replacing land-line phone service.This is an example of

Institutions that encourage productive activities and discourage counterproductive ones,will tend to promote

Some low-income countries generally remain poor because

The major sources of economic growth are

An increase in real per capita income will generally lead to

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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