Question 1

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 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

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.

Question 4

Economic growth is likely to be faster when

Accepted Answer

A)  higher tax rates are imposed on high income individuals in order to provide greater cash payments to the poor. 
B)  domestic markets are opened to foreign sellers and foreign investors. 
C)  the supply of money is increased rapidly so individuals have more money to spend. 
D)  dramatic changes in political and legal institutions occur often. 
A)  higher tax rates are imposed on high income individuals in order to provide greater cash payments to the poor. 
B)  domestic markets are opened to foreign sellers and foreign investors. 
C)  the supply of money is increased rapidly so individuals have more money to spend. 
D)  dramatic changes in political and legal institutions occur often.

Question 5

When the government is heavily involved in the regulation of business activity, entrepreneurs will be encourage to spend more time and resources on

Accepted Answer

A)  research and the development of better products. 
B)  keeping their production costs low. 
C)  rent seeking. 
D)  productive activities and less on political lobbying. 
A)  research and the development of better products. 
B)  keeping their production costs low. 
C)  rent seeking. 
D)  productive activities and less on political lobbying.

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

Economic growth will

Accepted Answer

A)  reduce the future real GDP of an economy. 
B)  expand the production possibilities of an economy. 
C)  increase an economy's nominal income, but not its real income. 
D)  increase real output, but the real income level of the country will decline. 
A)  reduce the future real GDP of an economy. 
B)  expand the production possibilities of an economy. 
C)  increase an economy's nominal income, but not its real income. 
D)  increase real output, but the real income level of the country will decline.

Question 8

(I) Policies such as price controls, licensing restrictions, and high taxes that reduce the volume of exchange will retard economic progress. (II) Political instability, regulation, and high rates of taxation have undermined private ownership rights in many countries, reducing economic prosperity.

Accepted Answer

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

Question 9

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

Question 10

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

Accepted Answer

A)  price controls in order to keep the price of food low 
B)  expansionary monetary policies designed to increase the rate of inflation 
C)  increasing marginal tax rates in order to increase government subsidies and transfers 
D)  elimination of price controls and trade restraints and establishment of a monetary policy consistent with long-run price stability (a low rate of inflation) 
A)  price controls in order to keep the price of food low 
B)  expansionary monetary policies designed to increase the rate of inflation 
C)  increasing marginal tax rates in order to increase government subsidies and transfers 
D)  elimination of price controls and trade restraints and establishment of a monetary policy consistent with long-run price stability (a low rate of inflation)

Question 11

Monetary and price instability will

Accepted Answer

A)  make it easier for both individuals and businesses to plan wisely for the future. 
B)  generate uncertainty, and encourage investors and businesses to move their activities to countries with a more stable monetary environment. 
C)  encourage businesses to invest and expand their future output. 
D)  encourage domestic citizens to increase their rate of saving. 
A)  make it easier for both individuals and businesses to plan wisely for the future. 
B)  generate uncertainty, and encourage investors and businesses to move their activities to countries with a more stable monetary environment. 
C)  encourage businesses to invest and expand their future output. 
D)  encourage domestic citizens to increase their rate of saving.

Question 12

In 1960 the per capita GDP of Hong Kong was substantially less than that of Argentina and Venezuela. By 2005, the per capita income of Hong Kong was more than three times the figures for Venezuela and Argentina. This dramatic change occurred because

Accepted Answer

A)  Venezuela and Argentina lacked the natural resources of Hong Kong. 
B)  the United States provided aid to Hong Kong but not to Argentina and Venezuela. 
C)  Hong Kong was able to achieve and sustain a high rate of economic growth while the growth rates of Argentina and Venezuela were exceedingly low. 
D)  Hong Kong was a developed country in 1960, but Argentina and Venezuela were not. 
A)  Venezuela and Argentina lacked the natural resources of Hong Kong. 
B)  the United States provided aid to Hong Kong but not to Argentina and Venezuela. 
C)  Hong Kong was able to achieve and sustain a high rate of economic growth while the growth rates of Argentina and Venezuela were exceedingly low. 
D)  Hong Kong was a developed country in 1960, but Argentina and Venezuela were not.

Question 13

When the money supply is expanding and prices rise rapidly, economic growth

Accepted Answer

A)  is slowed by the resulting unpredictability of the future level of prices. 
B)  is enhanced as economic activity grows more rapidly. 
C)  is enhanced because profits are higher so that capital investment is greater. 
D)  is enhanced because existing debt is reduced in value, so people are willing to buy more goods. 
A)  is slowed by the resulting unpredictability of the future level of prices. 
B)  is enhanced as economic activity grows more rapidly. 
C)  is enhanced because profits are higher so that capital investment is greater. 
D)  is enhanced because existing debt is reduced in value, so people are willing to buy more goods.

Question 14

Which of the following did Thomas Malthus believe would make sustained economic growth and the achievement of high income levels impossible?

Accepted Answer

A)  rapid growth of government spending 
B)  the expansion of political democracy 
C)  the expansion of communism to the developed world 
D)  growth of population 
A)  rapid growth of government spending 
B)  the expansion of political democracy 
C)  the expansion of communism to the developed world 
D)  growth of population

Question 15

In a market economy, what must an entrepreneur do in order to be successful?

Accepted Answer

A)  purchase resources at lower prices than rivals 
B)  produce a good that can be sold for more than its production cost 
C)  obtain large subsidies from the government 
D)  hire workers at low wage rates 
A)  purchase resources at lower prices than rivals 
B)  produce a good that can be sold for more than its production cost 
C)  obtain large subsidies from the government 
D)  hire workers at low wage rates

Question 16

(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 17

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 18

Which of the following will tend to retard the growth and prosperity of a country?

Accepted Answer

A)  imposition of price controls and regulations that restrain domestic and international trade 
B)  an expansionary monetary policy that leads to high rates of inflation 
C)  high marginal tax rates 
D)  all of the above 
A)  imposition of price controls and regulations that restrain domestic and international trade 
B)  an expansionary monetary policy that leads to high rates of inflation 
C)  high marginal tax rates 
D)  all of the above

Question 19

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

Accepted Answer

A)  create a fair and unbiased judicial system. 
B)  provide for monetary stability. 
C)  restrict the ability of government to transfer wealth through taxation and regulation. 
D)  All of the above. 
A)  create a fair and unbiased judicial system. 
B)  provide for monetary stability. 
C)  restrict the ability of government to transfer wealth through taxation and regulation. 
D)  All of the above.

Question 20

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.

Exam 16: Creating an Environment for Growth and Prosperity

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

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

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

Economic growth is likely to be faster when

When the government is heavily involved in the regulation of business activity, entrepreneurs will be encourage to spend more time and resources on

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

Economic growth will

(I) Policies such as price controls, licensing restrictions, and high taxes that reduce the volume of exchange will retard economic progress. (II) Political instability, regulation, and high rates of taxation have undermined private ownership rights in many countries, reducing economic prosperity.

An increase in real per capita income will generally lead to

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

Monetary and price instability will

In 1960 the per capita GDP of Hong Kong was substantially less than that of Argentina and Venezuela. By 2005, the per capita income of Hong Kong was more than three times the figures for Venezuela and Argentina. This dramatic change occurred because

When the money supply is expanding and prices rise rapidly, economic growth

Which of the following did Thomas Malthus believe would make sustained economic growth and the achievement of high income levels impossible?

In a market economy, what must an entrepreneur do in order to be successful?

(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?

Which of the following will tend to retard the growth and prosperity of a country?

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

The "rule of 70" is a simple rule

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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