Question 1

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 2

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 3

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

Question 4

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 5

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 6

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 7

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 8

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 9

When the markets of an economy are more competitive, economic growth

Accepted Answer

A)  is harmed by the resulting low rates of profit for industry. 
B)  is enhanced because producers have a stronger incentive to provide goods efficiently. 
C)  will be slower because prices do not rise as rapidly. 
D)  is unaffected. 
A)  is harmed by the resulting low rates of profit for industry. 
B)  is enhanced because producers have a stronger incentive to provide goods efficiently. 
C)  will be slower because prices do not rise as rapidly. 
D)  is unaffected.

Question 10

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 11

Which of the following is most likely to be a major source of growth in per capita GDP?

Accepted Answer

A)  a high investment/GDP ratio 
B)  a high rate of inflation 
C)  rapid population growth 
D)  rapid growth in the money supply 
A)  a high investment/GDP ratio 
B)  a high rate of inflation 
C)  rapid population growth 
D)  rapid growth in the money supply

Question 12

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

Accepted Answer

A)  investment in physical and human capital 
B)  improvements in technology 
C)  institutional and policy arrangements consistent with economic efficiency 
D)  All of the above. 
A)  investment in physical and human capital 
B)  improvements in technology 
C)  institutional and policy arrangements consistent with economic efficiency 
D)  All of the above.

Question 13

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 14

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

Question 15

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 16

(I) 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. (II) Profitable projects will tend to increase both the wealth of the investor and of the nation.

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 17

The most important factor for producing long-run economic growth is

Accepted Answer

A)  abundant natural resources. 
B)  foreign aid. 
C)  good policies and institutions. 
D)  slow population growth. 
A)  abundant natural resources. 
B)  foreign aid. 
C)  good policies and institutions. 
D)  slow population growth.

Question 18

The recent growth records of Japan and Hong Kong during the last fifty years indicate that a nation can grow rapidly without

Accepted Answer

A)  securely defined property rights. 
B)  adopting modern technology. 
C)  significant capital formation. 
D)  abundant domestic natural resources. 
A)  securely defined property rights. 
B)  adopting modern technology. 
C)  significant capital formation. 
D)  abundant domestic natural resources.

Question 19

If the per capita income of a country is growing at 2 percent per year, approximately how long will it take for that income to double?

Accepted Answer

A)  twenty years 
B)  twenty-five years 
C)  thirty-five years 
D)  seventy years 
A)  twenty years 
B)  twenty-five years 
C)  thirty-five years 
D)  seventy years

Question 20

To move up the income ladder and achieve high-income status, countries must

Accepted Answer

A)  have sustained economic growth. 
B)  restrict international trade. 
C)  encourage the production of consumption goods rather than investment goods. 
D)  maintain high inflation. 
A)  have sustained economic growth. 
B)  restrict international trade. 
C)  encourage the production of consumption goods rather than investment goods. 
D)  maintain high inflation.

Exam 16: Creating an Environment for Growth and Prosperity

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

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

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

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?

Which of the following will discourage investment?

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

When the markets of an economy are more competitive, economic growth

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 major source of growth in per capita GDP?

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

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

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

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

The most important factor for producing long-run economic growth is

The recent growth records of Japan and Hong Kong during the last fifty years indicate that a nation can grow rapidly without

If the per capita income of a country is growing at 2 percent per year, approximately how long will it take for that income to double?

To move up the income ladder and achieve high-income status, countries must

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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