Question 1

Which of the following would be most likely to cause the per capita income of less-developed countries to rise?

Accepted Answer

A)  development of strong labor unions 
B)  more rapid population growth 
C)  investment expenditures that enhance the human capital of labor force participants 
D)  an international minimum wage law 
A)  development of strong labor unions 
B)  more rapid population growth 
C)  investment expenditures that enhance the human capital of labor force participants 
D)  an international minimum wage law C

Question 2

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 B

Question 3

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. D

Question 4

If a nation is going to achieve and sustain a high rate of economic growth, it must

Accepted Answer

A)  prohibit low-wage foreign producers from supplying goods to the domestic market. 
B)  have an abundant domestic supply of low cost energy resources. 
C)  have a mechanism capable of attracting savings and channeling them into wealth-creating projects. 
D)  impose regulations that will limit the intensity of competition among domestic firms. 
A)  prohibit low-wage foreign producers from supplying goods to the domestic market. 
B)  have an abundant domestic supply of low cost energy resources. 
C)  have a mechanism capable of attracting savings and channeling them into wealth-creating projects. 
D)  impose regulations that will limit the intensity of competition among domestic firms.

Question 5

If the per capita income of a country is growing at 3.5 percent per year, approximately how long will it take for that income to double?

Accepted Answer

A)  20 years 
B)  25 years 
C)  35 years 
D)  70 years 
A)  20 years 
B)  25 years 
C)  35 years 
D)  70 years

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

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 8

Which of the following is a true statement with regard to competitive markets?

Accepted Answer

A)  Self-interested individuals do not promote the general welfare in competitive markets, only in regulated markets. 
B)  Competition promotes prosperity best when price controls are implemented. 
C)  Policies that make it easy to enter and exit business promote competition and economic progress. 
D)  All of the above are correct. 
A)  Self-interested individuals do not promote the general welfare in competitive markets, only in regulated markets. 
B)  Competition promotes prosperity best when price controls are implemented. 
C)  Policies that make it easy to enter and exit business promote competition and economic progress. 
D)  All of the above are correct.

Question 9

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 10

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

Question 11

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 12

Which of the following policies would be most likely to reduce the efficiency of a country's economic organization?

Accepted Answer

A)  a legal structure that establishes secure property rights 
B)  imposition of tariffs and other barriers limiting international trade 
C)  competitive markets 
D)  a stable monetary system 
A)  a legal structure that establishes secure property rights 
B)  imposition of tariffs and other barriers limiting international trade 
C)  competitive markets 
D)  a stable monetary system

Question 13

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 14

Which of the following is not a government policy that can enhance economic growth?

Accepted Answer

A)  having free international trade 
B)  keeping marginal tax rates low 
C)  adopting regulations fixing interest rates at low levels 
D)  protecting and enforcing private property rights and contracts 
A)  having free international trade 
B)  keeping marginal tax rates low 
C)  adopting regulations fixing interest rates at low levels 
D)  protecting and enforcing private property rights and contracts

Question 15

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 16

The English economist, Thomas Malthus, believed that sustained growth of income per person would be impossible because of

Accepted Answer

A)  rapid growth of capital formation if population increased above the subsistence level. 
B)  rapid growth of population if income increased above the subsistence level. 
C)  rapid growth of government if income increased above the subsistence level. 
D)  political democracy if income increased above the subsistence level. 
A)  rapid growth of capital formation if population increased above the subsistence level. 
B)  rapid growth of population if income increased above the subsistence level. 
C)  rapid growth of government if income increased above the subsistence level. 
D)  political democracy if income increased above the subsistence level.

Question 17

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 18

Which of the following is true?

Accepted Answer

A)  Tax rates do not influence economic growth. 
B)  Countries with high marginal tax rates have generally had higher rates of economic growth than those with low tax rates. 
C)  Countries with low marginal tax rates have generally had higher rates of economic growth than those with high tax rates. 
D)  Countries that impose high marginal tax rates at low-income thresholds generally have high rates of economic growth. 
A)  Tax rates do not influence economic growth. 
B)  Countries with high marginal tax rates have generally had higher rates of economic growth than those with low tax rates. 
C)  Countries with low marginal tax rates have generally had higher rates of economic growth than those with high tax rates. 
D)  Countries that impose high marginal tax rates at low-income thresholds generally have high rates of economic growth.

Question 19

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 20

Which of the following is not one of the major sources of economic growth?

Accepted Answer

A)  a large government sector 
B)  investment in physical and human capital 
C)  advancements in technology 
D)  institutions and policies that improve economic efficiency 
A)  a large government sector 
B)  investment in physical and human capital 
C)  advancements in technology 
D)  institutions and policies that improve economic efficiency

Exam 16: Creating an Environment for Growth and Prosperity

Which of the following would be most likely to cause the per capita income of less-developed countries to rise?

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

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

If a nation is going to achieve and sustain a high rate of economic growth, it must

If the per capita income of a country is growing at 3.5 percent per year, approximately how long will it take for that income to double?

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

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

Which of the following is a true statement with regard to competitive markets?

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

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

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

Which of the following policies would be most likely to reduce the efficiency of a country's economic organization?

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

Which of the following is not a government policy that can enhance economic growth?

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

The English economist, Thomas Malthus, believed that sustained growth of income per person would be impossible because of

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

Which of the following is true?

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 not one of the major sources of economic growth?

The Economic Approach

A : Some Tools of the Economist

B : Some Tools of the Economist

A : Supply, Demand, and the Market Process

B : Supply, Demand, and the Market Process

A : Supply and Demand: Applications and Extensions

B : Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

A : Taking the Nations Economic Pulse

B : Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

A : an Introduction to Basic Macroeconomic Markets

B : an 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

A : Money and the Banking System

B : Money 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

A : Costs and the Supply of Goods

B : Costs and the Supply of Goods

A : Price Takers and the Competitive Process

B : Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A : Price-Searcher Markets With High Entry Barriers

B : Price-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

Special Topic 1 : Government Spending and Taxation

Special Topic 2 : The Economics of Social Security

Special Topic 3 : The Stock Market: Its Function, Performance, and Potential as an Investment Opportunity

Special Topic 4 : Great Debates in Economics: Keynes Versus Hayek

Special Topic 5 : The Crisis of 2008: Causes and Lessons for the Future

Special Topic 6 : Lessons from the Great Depression

Special Topic 7 : Lessons from Japan and Canada

Special Topic 8 : The Federal Budget and the National Debt

Special Topic 9 : The Economics of Healthcare

Special Topic 10 : Education: Problems and Performance

Special Topic 11 : Earnings Differences Between Men and Women

Special Topic 12 : Do Labor Unions Increase the Wages of Workers?

Special Topic 13 : The Question of Resource Exhaustion

Special Topic 14 : Difficult Environmental Cases and the Role of Government

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