Question 1

Assuming diminishing returns,

Accepted Answer

A) the increase in output growth from an increase in the saving rate rises over time,and that,other things the same,rich countries should grow faster than poor ones. 
B) the increase in output growth from an increase in the saving rate falls over time,and that,other things the same,rich countries should grow faster than poor ones. 
C) the increase in output growth from an increase in the saving rate rises over time,and that,other things the same,poor countries should grow faster than rich ones. 
D) the increase in output growth from an increase in the saving rate falls over time,and that,other things the same,poor countries should grow faster than rich ones. 
A) the increase in output growth from an increase in the saving rate rises over time,and that,other things the same,rich countries should grow faster than poor ones. 
B) the increase in output growth from an increase in the saving rate falls over time,and that,other things the same,rich countries should grow faster than poor ones. 
C) the increase in output growth from an increase in the saving rate rises over time,and that,other things the same,poor countries should grow faster than rich ones. 
D) the increase in output growth from an increase in the saving rate falls over time,and that,other things the same,poor countries should grow faster than rich ones. D

Question 2

Figure 25-1.On the horizontal axis,K/L represents capital (K)per worker (L).On the vertical axis,Y/L represents output (Y)per worker (L).  
-Refer to Figure 25-1.The shape of the curve is consistent with which of the following statements about the economy to which the curve applies?

Accepted Answer

A) In the long run,a higher saving rate leads to a higher level of productivity. 
B) In the long run,a higher saving rate leads to a higher level of income. 
C) In the long run,a higher saving rate leads to neither a higher growth rate of productivity nor a higher growth rate of income. 
D) All of the above are correct. 
A) In the long run,a higher saving rate leads to a higher level of productivity. 
B) In the long run,a higher saving rate leads to a higher level of income. 
C) In the long run,a higher saving rate leads to neither a higher growth rate of productivity nor a higher growth rate of income. 
D) All of the above are correct. D

Question 3

Other things the same,higher population growth

Accepted Answer

A) raises the amount of physical capital per worker and there is some evidence that it raises the pace of technological progress. 
B) raises the amount of physical capital per worker,but there is some evidence that it reduces the pace of technological progress. 
C) reduces the amount of physical capital per worker,but there is some evidence that it raises the pace of technological progress. 
D) reduces the amount of physical capital per worker and there is some evidence that it reduces the pace of technological progress. 
A) raises the amount of physical capital per worker and there is some evidence that it raises the pace of technological progress. 
B) raises the amount of physical capital per worker,but there is some evidence that it reduces the pace of technological progress. 
C) reduces the amount of physical capital per worker,but there is some evidence that it raises the pace of technological progress. 
D) reduces the amount of physical capital per worker and there is some evidence that it reduces the pace of technological progress. C

Question 4

Country A and country B both increase their capital stock by one unit.Output in country A increases by 12 while output in country B increases by 15.Other things the same,diminishing returns implies that country A is

Accepted Answer

A) richer than Country B.If Country A adds another unit of capital,output will increase by more than 12 units. 
B) richer than Country B.If Country A adds another unit of capital,output will increase by less than 12 units. 
C) poorer than Country B.If Country A adds another unit of capital,output will increase by more than 12 units. 
D) poorer than Country B.If Country A adds another unit of capital,output will increase by less than 12 units. 
A) richer than Country B.If Country A adds another unit of capital,output will increase by more than 12 units. 
B) richer than Country B.If Country A adds another unit of capital,output will increase by less than 12 units. 
C) poorer than Country B.If Country A adds another unit of capital,output will increase by more than 12 units. 
D) poorer than Country B.If Country A adds another unit of capital,output will increase by less than 12 units.

Question 5

Foreign saving is used for domestic investment when foreigners engage in

Accepted Answer

A) foreign direct investment. 
B) foreign portfolio investment. 
C) either foreign direct investment or foreign portfolio investment. 
D) None of the above is correct. 
A) foreign direct investment. 
B) foreign portfolio investment. 
C) either foreign direct investment or foreign portfolio investment. 
D) None of the above is correct.

Question 6

All else equal,which of the following would tend to cause real GDP per person to rise?

Accepted Answer

A) a change from outward-oriented policies to inward-oriented policies 
B) an increase in investment in human capital 
C) a weakening of property rights 
D) All of the above are correct. 
A) a change from outward-oriented policies to inward-oriented policies 
B) an increase in investment in human capital 
C) a weakening of property rights 
D) All of the above are correct.

Question 7

Government corruption

Accepted Answer

A) impedes the coordinating power of markets and discourages investment. 
B) impedes the coordinating power of markets but does not discourage investment. 
C) does not impede the coordinating power of markets,but does discourage investment. 
D) can neither impede the coordinating power of markets nor discourage investment. 
A) impedes the coordinating power of markets and discourages investment. 
B) impedes the coordinating power of markets but does not discourage investment. 
C) does not impede the coordinating power of markets,but does discourage investment. 
D) can neither impede the coordinating power of markets nor discourage investment.

Question 8

Suppose that an American opens and operates a candy factory in Finland.This is an example of

Accepted Answer

A) foreign direct investment.American saving is used to finance Finish investment. 
B) foreign direct investment.American saving is used to finance American investment. 
C) foreign portfolio investment.American saving is used to finance Finish investment. 
D) foreign portfolio investment.American saving is used to finance American investment. 
A) foreign direct investment.American saving is used to finance Finish investment. 
B) foreign direct investment.American saving is used to finance American investment. 
C) foreign portfolio investment.American saving is used to finance Finish investment. 
D) foreign portfolio investment.American saving is used to finance American investment.

Question 9

Other things the same,a country that increases its savings rate will have

Accepted Answer

A) higher future capital and higher future real GDP per person. 
B) higher future capital but not higher future real GDP per person. 
C) higher future real GDP per person but not higher future capital. 
D) neither higher future capital nor higher future real GDP per person. 
A) higher future capital and higher future real GDP per person. 
B) higher future capital but not higher future real GDP per person. 
C) higher future real GDP per person but not higher future capital. 
D) neither higher future capital nor higher future real GDP per person.

Question 10

All else equal,if there are diminishing returns,then if a country raised its capital by 100 units last year and by 100 units this year,

Accepted Answer

A) the increase in output was greater for this year than last year. 
B) the increase in output was greater last year than this year. 
C) the increase in output is the same in both years. 
D) None of the above is necessarily correct. 
A) the increase in output was greater for this year than last year. 
B) the increase in output was greater last year than this year. 
C) the increase in output is the same in both years. 
D) None of the above is necessarily correct.

Question 11

Other things the same,if a country raises its saving rate,then in the long run

Accepted Answer

A) both the level and growth rate of real GDP are unchanged. 
B) the level of real GDP is higher but the growth rate of real GDP is unchanged. 
C) both the level and growth rate of real GDP are higher. 
D) None of the above are correct. 
A) both the level and growth rate of real GDP are unchanged. 
B) the level of real GDP is higher but the growth rate of real GDP is unchanged. 
C) both the level and growth rate of real GDP are higher. 
D) None of the above are correct.

Question 12

Electronics firms may be able to get patents on their ideas.Doing so makes their ideas

Accepted Answer

A) private goods rather than public goods.This gives people more incentive to engage in research. 
B) private goods rather than public goods.This gives people less incentive to engage in research. 
C) public goods rather than private goods.This gives people more incentive to engage in research. 
D) public goods rather than private goods.This gives people more incentive to engage in private research. 
A) private goods rather than public goods.This gives people more incentive to engage in research. 
B) private goods rather than public goods.This gives people less incentive to engage in research. 
C) public goods rather than private goods.This gives people more incentive to engage in research. 
D) public goods rather than private goods.This gives people more incentive to engage in private research.

Question 13

Other things equal,relatively poor countries tend to grow

Accepted Answer

A) slower than relatively rich countries;this is called the poverty trap. 
B) slower than relatively rich countries;this is called the fall-behind effect. 
C) faster than relatively rich countries;this is called the catch-up effect. 
D) faster than relatively rich countries;this is called the constant-returns-to-scale effect. 
A) slower than relatively rich countries;this is called the poverty trap. 
B) slower than relatively rich countries;this is called the fall-behind effect. 
C) faster than relatively rich countries;this is called the catch-up effect. 
D) faster than relatively rich countries;this is called the constant-returns-to-scale effect.

Question 14

Consider three imaginary countries.In Aire,saving amounts to $4,000 and consumption amounts to $12,000;in Bovina,saving amounts to $3,000 and consumption amounts to $24,000;and in Cartar,saving amounts to $10,000 and consumption amounts to $50,000.The saving rate is

Accepted Answer

A) higher in Aire than in Cartar,and it is higher in Cartar than in Bovina. 
B) higher in Cartar than in Aire,and it is higher in Aire than in Bovina. 
C) higher in Cartar than in Bovina,and it is the same in Bovina and Aire. 
D) higher in Aire than in Bovina,and it is the same in Aire and Cartar. 
A) higher in Aire than in Cartar,and it is higher in Cartar than in Bovina. 
B) higher in Cartar than in Aire,and it is higher in Aire than in Bovina. 
C) higher in Cartar than in Bovina,and it is the same in Bovina and Aire. 
D) higher in Aire than in Bovina,and it is the same in Aire and Cartar.

Question 15

In the long run,an increase in the saving rate

Accepted Answer

A) doesn't change the level of productivity or income. 
B) raises the levels of both productivity and income. 
C) raises the level of productivity but not the level of income. 
D) raises the level of income but not the level of productivity. 
A) doesn't change the level of productivity or income. 
B) raises the levels of both productivity and income. 
C) raises the level of productivity but not the level of income. 
D) raises the level of income but not the level of productivity.

Question 16

Suppose that there are diminishing returns to capital.Suppose also that two countries are the same except one has less capital and so less real GDP per person.Suppose that both increase their saving rate from 3 percent to 4 percent.In the long run

Accepted Answer

A) both countries will have permanently higher growth rates of real GDP per person,and the growth rate will be higher in the country with more capital. 
B) both countries will have permanently higher growth rates of real GDP per person,and the growth rate will be higher in the country with less capital. 
C) both countries will have higher levels of real GDP per person,and the temporary increase in growth in the level of real GDP per person will have been greater in the country with more capital. 
D) both countries will have higher levels of real GDP per person,and the temporary increase in growth in the level of real GDP per person will have been greater in the country with less capital. 
A) both countries will have permanently higher growth rates of real GDP per person,and the growth rate will be higher in the country with more capital. 
B) both countries will have permanently higher growth rates of real GDP per person,and the growth rate will be higher in the country with less capital. 
C) both countries will have higher levels of real GDP per person,and the temporary increase in growth in the level of real GDP per person will have been greater in the country with more capital. 
D) both countries will have higher levels of real GDP per person,and the temporary increase in growth in the level of real GDP per person will have been greater in the country with less capital.

Question 17

Senator Smith says that in order to help poor countries develop,the United States should: 1.Prevent U.S.corporations from investing in poor countries because they take profits that the poor countries should have;2.Not import goods from poor countries that use child labor;3.Work to promote political stability in poor countries;and 4.Reduce poor countries' reliance on market forces in their economies.How many of these ideas are likely to help poor countries grow?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 18

Suppose that a new government is elected in Eurnesia.The new government takes steps toward improving the court system and reducing government corruption.The citizens of Eurnesia find these efforts credible and outsiders believe these changes will be effective and long lasting.These changes will probably

Accepted Answer

A) raise real GDP per person and productivity in Eurnesia. 
B) raise real GDP per person but not productivity in Eurnesia. 
C) raise productivity but not real GDP per person in Eurnesia. 
D) raise neither productivity nor real GDP per person in Eurnesia. 
A) raise real GDP per person and productivity in Eurnesia. 
B) raise real GDP per person but not productivity in Eurnesia. 
C) raise productivity but not real GDP per person in Eurnesia. 
D) raise neither productivity nor real GDP per person in Eurnesia.

Question 19

Which of the following is an example of the "brain drain?"

Accepted Answer

A) A country's most highly educated workers emigrate to rich countries. 
B) A country has such a poor educational system that human capital falls over time. 
C) The population of a country grows so fast that the educational system can't keep up. 
D) A country steals patented technology from another country. 
A) A country's most highly educated workers emigrate to rich countries. 
B) A country has such a poor educational system that human capital falls over time. 
C) The population of a country grows so fast that the educational system can't keep up. 
D) A country steals patented technology from another country.

Question 20

Countries that pursued outward-oriented policies in the 20th century

Accepted Answer

A) experienced lower rates of economic growth than did countries that pursued inward-oriented policies. 
B) experienced higher levels of political instability than did countries that pursued inward-oriented policies. 
C) include Singapore,South Korea,and Taiwan. 
D) All of the above are correct. 
A) experienced lower rates of economic growth than did countries that pursued inward-oriented policies. 
B) experienced higher levels of political instability than did countries that pursued inward-oriented policies. 
C) include Singapore,South Korea,and Taiwan. 
D) All of the above are correct.

Exam 12: Production and Growth: Economic Growth and Public Policy

Assuming diminishing returns,

Figure 25-1.On the horizontal axis,K/L represents capital (K)per worker (L).On the vertical axis,Y/L represents output (Y)per worker (L). -Refer to Figure 25-1.The shape of the curve is consistent with which of the following statements about the economy to which the curve applies?

Other things the same,higher population growth

Country A and country B both increase their capital stock by one unit.Output in country A increases by 12 while output in country B increases by 15.Other things the same,diminishing returns implies that country A is

Foreign saving is used for domestic investment when foreigners engage in

All else equal,which of the following would tend to cause real GDP per person to rise?

Government corruption

Suppose that an American opens and operates a candy factory in Finland.This is an example of

Other things the same,a country that increases its savings rate will have

All else equal,if there are diminishing returns,then if a country raised its capital by 100 units last year and by 100 units this year,

Other things the same,if a country raises its saving rate,then in the long run

Electronics firms may be able to get patents on their ideas.Doing so makes their ideas

Other things equal,relatively poor countries tend to grow

Consider three imaginary countries.In Aire,saving amounts to $4,000 and consumption amounts to $12,000;in Bovina,saving amounts to $3,000 and consumption amounts to $24,000;and in Cartar,saving amounts to $10,000 and consumption amounts to $50,000.The saving rate is

In the long run,an increase in the saving rate

Suppose that there are diminishing returns to capital.Suppose also that two countries are the same except one has less capital and so less real GDP per person.Suppose that both increase their saving rate from 3 percent to 4 percent.In the long run

Which of the following is an example of the "brain drain?"

Countries that pursued outward-oriented policies in the 20th century

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A

Application International Trade: Part B