Question 1

A 7 percent growth rate will bring about a doubling of real GDP in about how many years?

Accepted Answer

A) 1 
B) 7 
C) 10 
D) 70 
A) 1 
B) 7 
C) 10 
D) 70

Question 2

For a country to double its per capita income every twenty years,it would have to sustain an annual economic growth rate equal to

Accepted Answer

A) 1.75 percent. 
B) 2 percent. 
C) 3.5 percent. 
D) 4 percent. 
A) 1.75 percent. 
B) 2 percent. 
C) 3.5 percent. 
D) 4 percent.

Question 3

How do high marginal tax rates influence the growth and prosperity of countries? What type of tax policy is needed to foster economic efficiency and growth?

Accepted Answer

Economic theory suggests that marginal t

Question 4

High income countries with larger governments as a share of GDP have generally

Accepted Answer

A) grown less rapidly than their counterparts with smaller governments. 
B) experienced less deadweight losses resulting from taxes and/or government borrowing. 
C) seen the government decrease in size as real GDP rises. 
D) been able to be more economically efficient. 
A) grown less rapidly than their counterparts with smaller governments. 
B) experienced less deadweight losses resulting from taxes and/or government borrowing. 
C) seen the government decrease in size as real GDP rises. 
D) been able to be more economically efficient.

Question 5

Which of the following is true?

Accepted Answer

A) In a competitive capital market,private investors have a strong incentive to evaluate projects carefully and allocate their funds toward those projects expected to yield the highest rates of return. 
B) In a competitive environment,profitable investment projects will tend to increase the wealth of the nation. 
C) When investment funds are allocated by governments (rather than capital markets),political clout rather than the expected rate of return will generally determine which projects are undertaken. 
D) All of the above are correct. 
A) In a competitive capital market,private investors have a strong incentive to evaluate projects carefully and allocate their funds toward those projects expected to yield the highest rates of return. 
B) In a competitive environment,profitable investment projects will tend to increase the wealth of the nation. 
C) When investment funds are allocated by governments (rather than capital markets),political clout rather than the expected rate of return will generally determine which projects are undertaken. 
D) All of the above are correct.

Question 6

Country A and country B initially have the same per capita income.Suppose that A sustains an annual growth rate of 3.5 percent,while the annual growth rate of country B is 1.75 percent.The "rule of 70" indicates that after forty years,the per capita income of country A will be approximately ____ that of country B.

Accepted Answer

A) one-half 
B) 70 percent greater than 
C) twice 
D) four times 
A) one-half 
B) 70 percent greater than 
C) twice 
D) four times

Question 7

Which of the following is most important if a country is going to grow rapidly and achieve a high level of per capita income?

Accepted Answer

A) an abundance of natural resources 
B) a warm moist climate 
C) a small population relative to the geographic size of the country 
D) institutions and policies that encourage people to engage in productive activities 
A) an abundance of natural resources 
B) a warm moist climate 
C) a small population relative to the geographic size of the country 
D) institutions and policies that encourage people to engage in productive activities

Question 8

Frequently,politicians enact restrictive trade policies to protect domestic industries.How does economic theory predict this will affect the efficiency of economic organization?

Accepted Answer

When an economy is protected from intern

Question 9

Obstacles that restrict trade,either domestic or international,will

Accepted Answer

A) reduce output,income,and the general living standard of the populace. 
B) help people achieve higher income levels. 
C) help promote high rates of economic growth. 
D) encourage domestic business firms to expand output so they can achieve larger gains from the adoption of mass production techniques. 
A) reduce output,income,and the general living standard of the populace. 
B) help people achieve higher income levels. 
C) help promote high rates of economic growth. 
D) encourage domestic business firms to expand output so they can achieve larger gains from the adoption of mass production techniques.

Question 10

When the residents of a nation are free to trade with foreigners,domestic producers will be able to

Accepted Answer

A) export more goods for which they are a high-cost supplier. 
B) supply a larger quantity of goods they can produce at a relatively low cost. 
C) charge higher prices then would otherwise be the case. 
D) survive in the marketplace even if they do not produce efficiently. 
A) export more goods for which they are a high-cost supplier. 
B) supply a larger quantity of goods they can produce at a relatively low cost. 
C) charge higher prices then would otherwise be the case. 
D) survive in the marketplace even if they do not produce efficiently.

Question 11

Which of the following will discourage investment?

Accepted Answer

A) well-defined property rights 
B) monetary instability 
C) a low and steady rate of inflation 
D) low tax rates 
A) well-defined property rights 
B) monetary instability 
C) a low and steady rate of inflation 
D) low tax rates

Question 12

Individuals are more likely to engage in productive activities when institutions and policies

Accepted Answer

A) create a fair and unbiased judicial system. 
B) result in high and variable rates of inflation. 
C) transfer a large share of income through the political process. 
D) are used to centrally plan the economy. 
A) create a fair and unbiased judicial system. 
B) result in high and variable rates of inflation. 
C) transfer a large share of income through the political process. 
D) are used to centrally plan the economy.

Question 13

Trade is a source of economic growth and prosperity because it

Accepted Answer

A) moves goods,services,and resources from people who value them less to people who value them more. 
B) helps trading partners achieve larger outputs through division of labor,specialization,and adoption of methods of mass production. 
C) serves as a zero-sum game in which the gains to one trading partner are offset by losses to the other trading partner. 
D) both a and b,but not c. 
A) moves goods,services,and resources from people who value them less to people who value them more. 
B) helps trading partners achieve larger outputs through division of labor,specialization,and adoption of methods of mass production. 
C) serves as a zero-sum game in which the gains to one trading partner are offset by losses to the other trading partner. 
D) both a and b,but not c.

Question 14

In a market economy,what determines whether an entrepreneur will continue in business or terminate the production of a new product?

Accepted Answer

A) government regulations 
B) licensing by industrial development agencies 
C) the profit or loss of the business 
D) the taxes paid to the government relative to the subsidies received 
A) government regulations 
B) licensing by industrial development agencies 
C) the profit or loss of the business 
D) the taxes paid to the government relative to the subsidies received

Question 15

How do high tariffs and other restraints on international trade affect the prosperity of a nation?

Accepted Answer

A) They increase domestic employment and thereby promote the growth of real GDP. 
B) They prevent the nation from fully realizing potential gains from specialization,exchange,and competition,thereby reducing economic growth. 
C) They tend to reduce rent-seeking and lobbying by producers and thereby promote economic growth. 
D) Both a and c are correct. 
A) They increase domestic employment and thereby promote the growth of real GDP. 
B) They prevent the nation from fully realizing potential gains from specialization,exchange,and competition,thereby reducing economic growth. 
C) They tend to reduce rent-seeking and lobbying by producers and thereby promote economic growth. 
D) Both a and c are correct.

Question 16

Which of the following is true?

Accepted Answer

A) Marginal tax rates that take a large share of income will enhance the incentive of individuals to invest and engage in productive activities. 
B) High tax rates will tend to drive investment funds and highly productive citizens to other countries where tax rates are lower. 
C) As marginal tax rates increase,individuals get to keep a larger share of their earnings. 
D) Countries can gain by imposing higher tariffs and other barriers that will restrain international trade. 
A) Marginal tax rates that take a large share of income will enhance the incentive of individuals to invest and engage in productive activities. 
B) High tax rates will tend to drive investment funds and highly productive citizens to other countries where tax rates are lower. 
C) As marginal tax rates increase,individuals get to keep a larger share of their earnings. 
D) Countries can gain by imposing higher tariffs and other barriers that will restrain international trade.

Question 17

When a country's inflation rate varies substantially from year-to-year and is therefore difficult to predict,this will

Accepted Answer

A) reduce the volume of trade and the gains derived from it. 
B) reduce the risk accompanying investment. 
C) encourage entrepreneurs to innovate and develop better products. 
D) increase the level of foreign investment in the country. 
A) reduce the volume of trade and the gains derived from it. 
B) reduce the risk accompanying investment. 
C) encourage entrepreneurs to innovate and develop better products. 
D) increase the level of foreign investment in the country.

Question 18

The poor economic performance of countries located in tropical areas is due to

Accepted Answer

A) their hot climate. 
B) poor institutional quality in these countries. 
C) a lack of natural resources. 
D) not enough foreign aid. 
A) their hot climate. 
B) poor institutional quality in these countries. 
C) a lack of natural resources. 
D) not enough foreign aid.

Question 19

The successful introduction and adoption of a new product or process is called

Accepted Answer

A) invention. 
B) innovation. 
C) economies of scale. 
D) economic growth. 
A) invention. 
B) innovation. 
C) economies of scale. 
D) economic growth.

Question 20

Which of the following is a driving force underlying economic growth?

Accepted Answer

A) trade restrictions that protect domestic businesses from competition with foreign producers 
B) regulations that require businesses to obtain permission from the government before starting a new business 
C) tax increases that expand the revenues of the government 
D) entrepreneurial discovery and production of improved products 
A) trade restrictions that protect domestic businesses from competition with foreign producers 
B) regulations that require businesses to obtain permission from the government before starting a new business 
C) tax increases that expand the revenues of the government 
D) entrepreneurial discovery and production of improved products

Exam 16: Creating an Environment for Growth and Prosperity

A 7 percent growth rate will bring about a doubling of real GDP in about how many years?

For a country to double its per capita income every twenty years,it would have to sustain an annual economic growth rate equal to

How do high marginal tax rates influence the growth and prosperity of countries? What type of tax policy is needed to foster economic efficiency and growth?

High income countries with larger governments as a share of GDP have generally

Which of the following is true?

Which of the following is most important if a country is going to grow rapidly and achieve a high level of per capita income?

Frequently,politicians enact restrictive trade policies to protect domestic industries.How does economic theory predict this will affect the efficiency of economic organization?

Obstacles that restrict trade,either domestic or international,will

When the residents of a nation are free to trade with foreigners,domestic producers will be able to

Which of the following will discourage investment?

Individuals are more likely to engage in productive activities when institutions and policies

Trade is a source of economic growth and prosperity because it

In a market economy,what determines whether an entrepreneur will continue in business or terminate the production of a new product?

How do high tariffs and other restraints on international trade affect the prosperity of a nation?

Which of the following is true?

When a country's inflation rate varies substantially from year-to-year and is therefore difficult to predict,this will

The poor economic performance of countries located in tropical areas is due to

The successful introduction and adoption of a new product or process is called

Which of the following is a driving force underlying economic growth?

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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