Deck 17: Growth and the

Question 1

Which of the following is most important if the living standards of people residing in a country are going to improve?

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

Answer 1

B

Question 2

An industrially advanced country (IAC) is defined as a country with a GDP per capita among the top ____ countries in the world.

A) 5
B) 10
C) 20
D) 27

Answer 2

D

Question 3

Which of the following represents a problem with using per capita GDP to compare standard of living between less-developed and industrially advanced countries? ​

A) ​GDP per capita does not take into account differences in population between countries.
B) ​GDP is particularly difficult to measure in industrially advanced countries because a much larger percentage of economic activity occurs outside of officially measured market activity than in less-developed countries.
C) ​GDP per capita will overstate the prevailing standard of living for the average person in countries with extreme levels of income inequality.
D) ​None of the above are correct.

Answer 3

C

Question 4

Compared to IACs, LDCs are often characterized by:

A) higher life expectancy.
B) higher adult literacy rates.
C) higher daily calorie supply.
D) lower per capita energy consumption.

Question 5

According to the classification in the text, which of the following is not an industrially advanced country (IAC)?

A) Singapore.
B) Hong Kong.
C) United Arab Emirates.
D) Ireland.

Question 6

GDP per capita is a relatively good measurement of:

A) the distribution of income.
B) purchasing power.
C) household production.
D) the standard of living.

Question 7

The economies of most less-developed countries (LDCs) are based on:

A) agriculture.
B) manufacturing.
C) services.
D) oil.

Question 8

What is the economic criterion most often used to compare living standards across countries?

A) Real GDP growth.
B) Unemployment rate.
C) Incidence of AIDS.
D) Rate of population growth.
E) Real per capita GDP.

Question 9

Which of the following distinguishes industrially advanced countries from less-developed countries?

A) GDP per capita.
B) Educational attainment of the workforce.
C) Extent to which capital is technologically advanced.
D) All of the above.

Question 10

Which of the following is a problem when comparing GDPs per capita between nations?

A) GDP per capita fails to measure income distribution.
B) Fluctuations in exchange rates affect differences in GDP per capita.
C) GDP per capita is subject to greater measurement errors for LDCs compared to IACs.
D) All of these.

Question 11

If a country's population growth rate exceeds the growth rate in its GDP, which of the following is true?

A) Per capita GDP is rising.
B) Per capita GDP is not changing.
C) Per capita GDP is falling.
D) None of the above.

Question 12

If real GDP is increasing more rapidly than population:

A) population must be declining.
B) the country will have to export more than it imports.
C) the general level of prices must be increasing.
D) per capita real GDP will be increasing.

Question 13

When per capita real GDP is increasing, real output is growing:

A) more rapidly than prices.
B) more rapidly than population.
C) less rapidly than prices.
D) less rapidly than population.

Question 14

International comparisons of per capita GDP may not reflect the standard of living because __________. ​

A) ​currency exchange rates may not fully account for differences in purchasing power, and thus people in a country with high per capita GDP may have a lower standard of living because of high local prices for food, housing, or other necessities.
B) ​people in some countries enjoy poverty and do not mind a lack of access to medicine, education, nutritious food, and safe drinking water.
C) ​markets do not exist in less-developed countries.
D) ​None of the answers above are correct.

Question 15

According to the classification in the text, which of the following is not an industrially advanced country (IAC)?

A) United Arab Emirates.
B) Israel.
C) Greece.
D) All of the above are IACs.
E) None of the above are IACs.

Question 16

Which of the following is not a characteristic of less-developed countries?

A) High rates of illiteracy.
B) High unemployment.
C) Over half of the labor force in agriculture.
D) Low savings and investment rates.
E) Low infant mortality rates.

Question 17

The poorest regions in the world, as measured by GDP per capita, are:

A) Latin America and the Caribbean.
B) the Middle East and North Africa.
C) Sub-Saharan Africa and South Asia.
D) Australia and New Zealand.

Question 18

The number of the countries of the world classified as a less developed country (LDC) is about:

A) 50.
B) 75.
C) 100.
D) 150.
E) 300.

Question 19

Which of the following is not evidence of the lower standard of living among less-developed countries?

A) High per capita real GDP.
B) High percentage of households headed by females.
C) High infant mortality rate.
D) Low life expectancy.
E) High birth rate.

Question 20

Compared to IACs, LDCs are often characterized by:

A) lower life expectancy.
B) lower adult literacy.
C) lower per capita energy consumption.
D) All of these.

Question 21

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

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) do all of these.

Question 22

Which of the following provides the best explanation of why low-income countries generally remain poor?

A) Their political environment and policies often discourage productive activity and reduce the potential gains from specialization and exchange.
B) They are oppressed by developed nations that benefit from the cheap goods available from countries with low wage rates.
C) They are poorly endowed with natural resources, which are essential for long-term rapid growth.
D) When the average income level is low, workers have little incentive to earn higher incomes.

Question 23

Which of the following would be most likely to improve the standard of living of people in less-developed nations?

A) The development of strong labor unions.
B) An increase in foreign investment.
C) An increase in the share of the population under 15 years of age.
D) Higher tariffs and the imposition of other restraints designed to restrict international trade.

Question 24

In order to achieve a high economic freedom rating, a country must:

A) provide secure protection of privately owned property and evenhanded enforcement of contracts.
B) refrain from creating barriers that limit domestic and international trade.
C) rely more fully on markets rather than governments to allocate goods and resources.
D) do all of these.

Question 25

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

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.

Question 26

Which of the following is true?

A) Nations achieve high rates of economic growth primarily because of their natural resource endowments.
B) Human and physical capital investments are largely irrelevant to economic growth.
C) Poor nations grow slowly because they do not have access to modern technology.
D) A favorable political environment attracts more investment in human and physical capital.

Question 27

An outward shift of an economy's production possibilities curve is caused by:

A) an increase in capital.
B) an increase in labor.
C) an advance in technology.
D) all of these.

Question 28

Which of the following helps low-income countries grow rapidly relative to high-income countries?

A) Low-income countries are in a better position to save a larger share of their income.
B) Low-income countries can employ technologies and practices that have been successful in high-income countries.
C) Low-income countries generally have legal systems that protect property rights and enforce contracts in a more evenhanded manner.
D) Low-income countries generally have more favorable weather conditions.

Question 29

Which of the following is not a characteristic of most less-developed countries?

A) Inadequate human capital.
B) Inadequate capital goods.
C) High population growth rate.
D) Inadequate water supplies.
E) High productivity.

Question 30

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

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

Question 31

Economic development encompasses which of the following measures?

A) Economic growth.
B) The political environment.
C) Education.
D) All of these.

Question 32

The recent growth records of Japan and Hong Kong during the last 50 years indicate that a nation can grow rapidly without:

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

Question 33

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

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 34

Which of the following factors would be most likely to encourage investment and capital formation in a less-developed nation?

A) High and variable rates of inflation.
B) Tariffs and quotas that restrict international trade.
C) A legal system that provides for secure property rights and evenhanded enforcement of contracts.
D) High marginal tax rates.

Question 35

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

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 36

Real GDP per capita and other alternative measures of the quality of life are:

A) independent.
B) directly correlated.
C) poorly correlated.
D) inversely related.

Question 37

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

A) The development of strong labor unions.
B) A sharp increase in the legal minimum wage.
C) An increase in expenditures on education and capital investment.
D) Rapid growth rate of the money supply.

Question 38

Which of the following is not a common characteristic of IACs?

A) Market-based economies.
B) Large stocks of technologically advanced capital.
C) Well-educated labor.
D) Low per capita energy consumption.

Question 39

Investment in both physical and human capital enhances economic growth because it:

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 40

Which of the following would be most likely to encourage capital formation in a less-developed country?

A) The expectation of sustained high inflation.
B) The expectation that property rights will be highly secure in the years ahead.
C) The imposition of high tariffs and other restraints limiting imports.
D) Higher personal and corporate tax rates.

Question 41

Which of the following is correct?

A) Economic development is more quantitative than economic growth.
B) A country cannot achieve economic growth with a limited base of natural resources.
C) Infrastructure is capital provided by the private sector.
D) All of the above are true.
E) All of the above are false.

Question 42

If an economy's population grows at 3 percent and real GDP grows at 3 percent, then:

A) per capita real GDP is declining.
B) the economy's standard of living is increasing.
C) per capita real GDP is negative.
D) per capita real GDP is constant.
E) the economy is experiencing unemployment.

Question 43

Which of the following characterizes the IACs?

A) High per capita GDP growth and high population growth.
B) Low per capita GDP growth and low population growth.
C) Low per capital GDP growth and high savings rate.
D) Low human capital investment.

Question 44

Which of the following statements is true?

A) There is no single correct strategy for economic growth and development.
B) In general, GDP per capita is highly correlated with alternative quality of life measures.
C) The World Bank is affiliated with the United Nations and makes long-term low-interest loans to LDCs.
D) All of these.

Question 45

Which of the following is infrastructure?

A) Highways.
B) Bridges.
C) Airports.
D) All of these.

Question 46

Which of the following is infrastructure?

A) Schools.
B) Roads.
C) Public health and sanitation services.
D) All of these.

Question 47

Economic growth and development in LDCs are low because many of them lack:

A) saving.
B) infrastructure.
C) a political environment favorable to growth.
D) All of these.

Question 48

Exhibit 17-1 Nation of Padia
Exhibit 17-1 shows the production possibility curve of the nation of Padia. Based only on this information, the point which would produce the highest rate of growth would be:

A) I
B) II
C) III
D) IV
E) V

Question 49

To grow and prosper, less-developed countries must not:

A) invest in human capital.
B) build a strong infrastructure.
C) shift resources out of the production of consumer goods and into the production of capital goods.
D) shift resources out of the production of capital goods and into the production of consumer goods
E) improve the quality of the water supply

Question 50

Domestic law and order, the infrastructure, and the climate of international trade are all aspects of a country's:

A) natural resources endowment.
B) human resources investment.
C) capital investment.
D) political environment.

Question 51

Which of the following is a characteristic of an LDC?

A) Capital flight.
B) Vicious circle of poverty.
C) Lack of entrepreneurs.
D) All of these.

Question 52

Which of the following is a true statement?

A) The LDC classification is of the questionable accuracy.
B) GDP per capita ignores the degree of income distribution.
C) GDP per capita is affected by exchange rate changes.
D) GDP per capita does not account for the difference in the cost of living among nations.
E) All of these are true.

Question 53

Which of the following is not generally considered to be an ingredient for economic growth?

A) Investment in human capital.
B) Political instability.
C) High savings rate and investment in capital.
D) Growth in technology.
E) Investment in infrastructure.

Question 54

The "Four Tigers" of East Asia are the newly industrialized countries of Taiwan, South Korea, Hong Kong, and:

A) Japan.
B) Singapore.
C) the Philippines.
D) Vietnam.

Question 55

Which of the following is infrastructure?

A) IBM computer plant.
B) Training and education.
C) Services of doctors.
D) None of these.

Question 56

If an economy's population grows at 3 percent and GDP grows at 4 percent, then:

A) per capita real GDP is declining.
B) the economy's standard of living is decreasing.
C) per capita real GDP is negative.
D) per capita real GDP is growing.
E) the economy is experiencing unemployment.

Question 57

If an economy's population grows at 3 percent and real GDP grows at 2 percent, then:

A) per capita real GDP is declining.
B) the economy's standard of living is increasing.
C) per capita real GDP is negative.
D) per capita real GDP is growing.
E) the economy is experiencing unemployment.

Question 58

Which of the following statements is true?

A) A less developed country (LDC) is a country with a low GDP per capita, low levels of capital, and uneducated workers.
B) The vicious circle of poverty exists because GDP must rise before people can save and invest.
C) LDCs are characterized by rapid population growth and low levels of investment in human capital.
D) All of these.

Question 59

Which of the following can be a barrier to an LDC's economic growth and development?

A) Low population growth.
B) A low level of human capital.
C) Faster capital accumulation.
D) More infrastructure.

Question 60

Economic development encompasses which of the following measures?

A) Distribution of income.
B) Legal system.
C) Transportation structures.
D) All of these.

Question 61

Which of the following is not an example of a country's infrastructure?

A) Transportation system.
B) Communications system.
C) Political system.
D) Educational system.
E) Energy system.

Question 62

Which of the following statements draws a false conclusion?

A) Life expectancy in an average African country is lower than in an average European country; therefore Europeans can expect to outlive Africans.
B) Nations that currently produce no capital goods, and whose inhabitants are hungry, risk famine with internally funded capital investments.
C) Some African nations have substantially more food and capital investment than others; therefore, their standard of living is higher.
D) Population reduction policies, if effective, can improve the nation's wealth by increasing real per capita GDP.
E) The vicious circle of poverty argument states that poverty precludes capital investment and that no capital investment perpetuates poverty.

Question 63

Which of the following does not hinder economic development?

A) Lack of education
B) Poor agricultural productivity
C) Low investment in human capital
D) Lack of technology
E) Good nutrition

Question 64

Which of the following best defines the vicious circle of poverty?

A) Countries are poor because they cannot afford to save and invest.
B) Countries are poor because of high population growth.
C) Countries are poor because of lack of education and training for workers.
D) Countries are poor because of poor international credit.

Question 65

Which of the following is infrastructure?

A) Police.
B) Training and education.
C) Highways.
D) All of the above.
E) None of the above.

Question 66

Less-developed countries are poor for all of the following reasons except one. Which one?

A) They do not produce many goods and services.
B) Labor productivity is low.
C) Investment funds tend to flow abroad
D) Investment in human capital is very low.
E) The labor force is too small.

Question 67

Which of the following does not hinder economic development?

A) Low birth rates.
B) Low GDP that limits saving and investment.
C) Lack of knowledge.
D) Lack of technology.
E) Lack of physical capital.

Question 68

If a country's real GDP is growing at 5 percent and the population is also growing at 5 percent, its:

A) per capita real GDP grows at an increasing rate.
B) per capita real GDP grows at a constant rate.
C) population growth will eventually exceed real GDP.
D) per capita real GDP decreases at a constant rate.
E) per capita real GDP does not change.

Question 69

If a country's population grows at the same rate as its real GDP, then real per capita GDP:

A) grows at an increasing rate.
B) grows at a constant rate.
C) doesn't change.
D) decreases at a decreasing rate.
E) decreases at a constant rate.

Question 70

The vicious circle of poverty makes it difficult for an LDC to:

A) establish political institutions.
B) control inflation.
C) save and invest.
D) fix its exchange rate.

Question 71

Which of the following best describes the vicious cycle of poverty?​

A) ​Rich countries eventually decline because its citizens become lazy.
B) ​Poor countries eventually improve through investment in education, infrastructure, and capital accumulation.
C) ​Rich countries stay rich through continued high levels of investment in education, infrastructure, and capital accumulation.
D) ​Poor countries stay poor because they cannot afford to invest in education, infrastructure, and capital accumulation.

Question 72

In order for Ethiopia to increase its future economic growth, it must choose a point that is:

A) below its production possibilities curve.
B) further along on its production possibilities curve toward the capital goods axis.
C) further along on its production possibilities curve toward the consumption goods axis.
D) further along on its production possibilities curve away from the population axis.
E) above its production possibilities curve.

Question 73

The vicious circle of poverty refers to the fact that in LDCs,

A) low living standards lead to declines in population growth.
B) too much spending leads to periods of recession.
C) people are poor because too much is spent on capital goods.
D) there are not enough people in the under-15 age groups.
E) poverty leads to low investment in capital goods.

Question 74

"Countries are poor because they cannot afford to save and invest" is called the:

A) vicious circle of poverty.
B) savings-investment trap.
C) LDC trap.
D) cycle of insufficient credit.

Question 75

The nation of Exland is considered a less-developed country and has the following characteristics. Which one is not typical of a less-developed country?

A) High illiteracy.
B) High unemployment.
C) Rapid growth of technology.
D) Low growth in technology.
E) Rapid population growth.

Question 76

There is a significant positive relationship between ________ and __________.

A) natural resource commodity exports, high levels of per capita GDP
B) investment in capital, high levels of per capita GDP
C) high levels of illiteracy, high levels of per capita GDP
D) limited government recognition of land tenure and property ownership, high levels of per capita GDP

Question 77

Which of the following statements explains the vicious circle of poverty?

A) By investing in education and infrastructure at the same time, the country can overcome the problems of poverty.
B) Poverty arises out of the lack of investment, but countries cannot invest because they are poor.
C) A nation can shift its production possibilities curve inward by shifting more resources into the production of capital goods.
D) A nation can shift its production possibilities curve outward by shifting more resources into the production of consumer goods.
E) There are dual economies in the world: Some are meant to be rich and others are meant to be poor.

Question 78

Which of the following is not a problem for less-developed countries?

A) Poor health and nutrition.
B) Shortages of labor.
C) High unemployment rates.
D) Low labor productivity.
E) low life expectancy

Question 79

__________ generally results in increases in per-capita GDP.

A) Civil war
B) High levels of inequality in the distribution of land ownership
C) Investment in human capital
D) A stock of natural resources

Question 80

Of the following choices, which is the best example of a nation's economic infrastructure?

A) Natural resources.
B) Highway system.
C) Government.
D) Religious and cultural beliefs.
E) Population growth rate.