Question 1

Which of the following is true for the world as a whole?

Accepted Answer

A)  During the past 200 years, the income per person of the world has increased sharply, but there has been little change in the years of life expectancy at birth. 
B)  During the past 200 years, the years of life expectancy at birth has increased sharply, but there has been little change in the world's income per person. 
C)  During the 800 years between 1000 and 1800, the increases in both world income per person and life expectancy at birth were small, but both of these indicators have increased sharply during the past 200 years. 
D)  Both income per person and life expectancy rose steadily during 1000-1800, but neither of these indicators have increased much during the past 200 years as the population of the world has become larger and larger. 
A)  During the past 200 years, the income per person of the world has increased sharply, but there has been little change in the years of life expectancy at birth. 
B)  During the past 200 years, the years of life expectancy at birth has increased sharply, but there has been little change in the world's income per person. 
C)  During the 800 years between 1000 and 1800, the increases in both world income per person and life expectancy at birth were small, but both of these indicators have increased sharply during the past 200 years. 
D)  Both income per person and life expectancy rose steadily during 1000-1800, but neither of these indicators have increased much during the past 200 years as the population of the world has become larger and larger.

Question 2

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 3

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 4

Which of the following is true?

Accepted Answer

A)  in recent decades, the rich countries of the world have consistently grown more rapidly than poor countries. 
B)  no LDC was able to achieve a more rapid growth rate than the United States during the 1980 through 2005 period. 
C)  during recent decades, most LDCs have stagnated economically. 
D)  during 1980 through 2005, the fastest growing countries in the world were mostly LDCs. 
A)  in recent decades, the rich countries of the world have consistently grown more rapidly than poor countries. 
B)  no LDC was able to achieve a more rapid growth rate than the United States during the 1980 through 2005 period. 
C)  during recent decades, most LDCs have stagnated economically. 
D)  during 1980 through 2005, the fastest growing countries in the world were mostly LDCs.

Question 5

Which of the following is true of sub-Saharan Africa?

Accepted Answer

A)  The poverty rate in the region is low. 
B)  The region has received more foreign aid than any other area of the world. 
C)  Most of the countries in the region rank among the freest economies in the world. 
D)  The poverty rate in the region is the lowest of any region in the world, and the rate has declined sharply during the past quarter of a century. 
A)  The poverty rate in the region is low. 
B)  The region has received more foreign aid than any other area of the world. 
C)  Most of the countries in the region rank among the freest economies in the world. 
D)  The poverty rate in the region is the lowest of any region in the world, and the rate has declined sharply during the past quarter of a century.

Question 6

The rule of 70 is

Accepted Answer

A)  a formula used to determine the number of years it takes for something to double at a given growth rate. 
B)  a theory explaining why countries tended to grow more rapidly during the 1970s. 
C)  the principle, that for growth, a country needs government spending of at least 70 percent of GDP. 
D)  a formula to compute the change in GDP that will occur as investment rises. 
A)  a formula used to determine the number of years it takes for something to double at a given growth rate. 
B)  a theory explaining why countries tended to grow more rapidly during the 1970s. 
C)  the principle, that for growth, a country needs government spending of at least 70 percent of GDP. 
D)  a formula to compute the change in GDP that will occur as investment rises.

Question 7

When a country's real GDP is increasing at a faster rate than its population,

Accepted Answer

A)  per capita GDP will be rising. 
B)  per capita GDP will be falling. 
C)  per capita GDP will remain constant. 
D)  none of the above. 
A)  per capita GDP will be rising. 
B)  per capita GDP will be falling. 
C)  per capita GDP will remain constant. 
D)  none of the above.

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

(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 10

Which of the following goods are available at highly economical prices because the use of mass production techniques substantially reduces their per unit production costs?

Accepted Answer

A)  automobiles 
B)  DVD players 
C)  microwave ovens 
D)  all of the above 
A)  automobiles 
B)  DVD players 
C)  microwave ovens 
D)  all of the above

Question 11

Most economists believe that the poor economic performance of countries located in tropical areas is primarily the result of

Accepted Answer

A)  the hot climate that saps the energy of people in tropical countries. 
B)  the poor institutional quality in most tropical countries. 
C)  the lack of natural resources in most tropical countries. 
D)  the failure of rich countries to provide foreign aid to tropical countries. 
A)  the hot climate that saps the energy of people in tropical countries. 
B)  the poor institutional quality in most tropical countries. 
C)  the lack of natural resources in most tropical countries. 
D)  the failure of rich countries to provide foreign aid to tropical countries.

Question 12

When competition is present and private ownership rights are clearly defined and securely enforced,

Accepted Answer

A)  production and trade are encouraged and plunder (taking from others) is discouraged. 
B)  people get ahead by helping others in exchange for income. 
C)  employers will have to provide prospective employees with at least as good a deal as they could get elsewhere. 
D)  all of the above are correct. 
A)  production and trade are encouraged and plunder (taking from others) is discouraged. 
B)  people get ahead by helping others in exchange for income. 
C)  employers will have to provide prospective employees with at least as good a deal as they could get elsewhere. 
D)  all of the above are correct.

Question 13

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 14

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 15

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 16

(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 17

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 18

Investment in both physical and human capital tends to enhance economic growth because it generally

Accepted Answer

A)  increases consumption during the current period. 
B)  makes it possible for individuals to produce more goods and services per hour worked. 
C)  encourages firms to expand output by employing more low productivity workers. 
D)  encourages workers to unionize and thereby fight for higher wages. 
A)  increases consumption during the current period. 
B)  makes it possible for individuals to produce more goods and services per hour worked. 
C)  encourages firms to expand output by employing more low productivity workers. 
D)  encourages workers to unionize and thereby fight for higher wages.

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)  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 20

Which of the following is an important ingredient of efficient economic organization?

Accepted Answer

A)  high marginal tax rates 
B)  competitive markets 
C)  rapid increases in the money supply 
D)  imposition of high tariffs that will protect domestic producers from the ravages of foreign competition 
A)  high marginal tax rates 
B)  competitive markets 
C)  rapid increases in the money supply 
D)  imposition of high tariffs that will protect domestic producers from the ravages of foreign competition

Exam 16: Creating an Environment for Growth and Prosperity

Which of the following is true for the world as a whole?

Obstacles that restrict trade, either domestic or international, will

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 is true?

Which of the following is true of sub-Saharan Africa?

The rule of 70 is

When a country's real GDP is increasing at a faster rate than its population,

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

Which of the following goods are available at highly economical prices because the use of mass production techniques substantially reduces their per unit production costs?

Most economists believe that the poor economic performance of countries located in tropical areas is primarily the result of

When competition is present and private ownership rights are clearly defined and securely enforced,

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

The major sources of economic growth are

Which of the following is true?

Investment in both physical and human capital tends to enhance economic growth because it generally

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

Which of the following is an important ingredient of efficient economic organization?

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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