Deck 9: Economic Growth

Question 1

If a country experiences a real GDP growth rate of 6 percent, real GDP will double in

A)10 years.
B)17.5 years.
C)14 years.
D)11.67 years.
E)16.67 years.

Answer 1

D

Question 2

China's growth rate has_{--------------------}that of most other countries,_{--------------------}

A)topped: but its real GDP per person declined in 2008-09
B)equalled; and its real GDP per person declined in 2008-09
C)lagged; and its real GDP is close to other Asian economies
D)lagged; but its real GDP per person is higher than other Asian economies
E)topped; but its real GDP per person is still lower than other industrialized countries

Answer 2

topped; but its real GDP per person is still lower than other industrialized countries

Question 3

The economic growth rate is measured as the

A)annual percentage change of the population.
B)amount of population.
C)annual percentage change of real GDP.
D)amount of real GDP.
E)annual percentage change of employment.

Answer 3

C

Question 4

Which of the following are important for countries to promote with property rights and incentives
If economic growth is to occur?
I)specialization
Ii)saving and investment
Iii)increases in human capital iv)discovery of new technology

A)i, ii and iv only.
B)i, ii, iii and iv.
C)ii and iii.
D)iii and iv.
E)ii and iv.

Question 5

The presence of an incentive system that encourages growth

A)means that the government must be a democracy.
B)guarantees that growth will occur.
C)creates the right conditions for growth to occur.
D)existed even in hunter-gatherer societies.
E)cannot exist in poor countries.

Question 6

Economic growth in Cuba has been slow; what can best explain the slow growth?

A)labor productivity is low.
B)too much competition within the economy
C)lack of incentive mechanisms and economic freedom
D)lack of economic resources
E)a non-democratic form of government

Question 7

The new growth theory asserts that

A)technology improves slowly while population grows rapidly.
B)a discovery can be used by only one person, the discoverer.
C)eventually people earn only a subsistence living.
D)the population growth rate will increase when real GDP per person increases.
E)production processes can be replicated at many different firms in the economy.

Question 8

A technological change_{--------------------}and a change in the capital stock _{--------------------}

A)shifts the productivity curve; creates a movement along the productivity curve
B)shifts the productivity curve; shifts the productivity curve
C)does not change the productivity curve; shifts the productivity curve
D)creates a movement along the productivity curve; shifts the productivity curve
E)does not change the productivity curve; creates a movement along the productivity curve

Question 9

A key element of the classical growth theory is that

A)an increase in population leads to increase in labor supply and a decline in real GDP per person.
B)market forces drive economic growth.
C)economic growth can be sustained as long as government intervention does not occur.
D)low taxes promote economic growth.
E)increases in technology drive economic growth.

Question 10

The new growth theory's comparison of the economy to a perpetual motion machine implies that

A)technology changes just happen.
B)the economy will forever create and destroy jobs.
C)overpopulation will eventually overtake the resources of the planet.
D)permanent growth is not possible.
E)labor productivity has no influence on the economy.

Question 11

The classical theory was developed in the late 18th and early 19th centuries

A)during a time of population decline.
B)and can not be explained using the modern tool of the productivity function.
C)and therefore is not accepted today.
D)and has proponents today who fear population growth and overpopulation.
E)and still applies to the most developed nations today, though not to the less developed nations.

Question 12

The population in the current year is 31.5 million and the real GDP is $814 million. The previous Year's statistics were a population of 31 million and a real GDP of $800 million. The change in the standard of living, measured by growth in real GDP per person, is

A)0 percent.
B)0.13 percent.
C)6 percent.
D)1.6 percent.
E)7.75 percent.

Question 13

Economic freedom means that

A)the rule of law does not apply.
B)some goods and services are free.
C)people are able to make personal choices and their property is protected.
D)firms are regulated by the government.
E)the nation's government is a democracy.

Question 14

If Turkey wants to promote faster economic growth, it will need to

A)restrict economic freedom so the government has better control of markets.
B)promote incentive systems to encourage saving, research and development, increased trade and improved education.
C)restrict international trade to protects its own workers.
D)promote government intervention to help markets determine incentives.
E)restrict property rights so that individuals can better share inventions.

Question 15

The table above gives information about the economy of France.

-The growth rate of real GDP per person in 1998 is ___________-percent.

A)2.7
B)3.1
C)4.0
D)1.9
E)0.4

Question 16

Economic freedom

A)is not important for nations to grow.
B)must come from a democratic government.
C)is harmed by having too many property rights.
D)is founded, in part, on the rule of law.
E)is created when the nation imposes many regulations on businesses.

Question 17

Using the data in the table above, the growth rate of real GDP has

A)increased from year to year.
B)increased more rapidly from year to year.
C)slowed from year to year.
D)remained constant from year to year.
E)probably changed, but more information is needed about the price level to determine by how much it has changed.

Question 18

Retirement savings accounts, such as IRAs, help increase economic growth because

A)they encourage international trade.
B)savings finances investment.
C)people have an incentive to work harder and longer hours to save for the future.
D)government invests them.
E)they keep the interest rates high.

Question 19

The quantity of real GDP produced by one hour of labor is defined as

A)labor productivity.
B)the growth rate of technology.
C)economic growth.
D)real GDP per person.
E)the advance in technology.

Question 20

The productivity curve shifts upward when

A)hours of labor increase.
B)technology advances.
C)human capital decreases.
D)hours of labor decrease.
E)physical capital increases.

Question 21

A country will likely experience an increase in poverty if

A)its real GDP growth rate decreases or slows over time.
B)its population decreases over time.
C)it does not receive foreign aid.
D)its real GDP per person growth rate increases over time.
E)its inflation rate decreases or slows over time.

Question 22

A key reason why some countries are growing very slowly is

A)they lack economic freedom.
B)they lack a democratic government.
C)their inflation rate is too high.
D)they are too poor, so there is no saving.
E)there is too much competition within their economies.

Question 23

This year, real GDP per person in Country A is eight times real GDP per person in Country B. If country B's real GDP per person grows at a rate of 5 percent, about how many years will it take for country B to reach the level of real GDP per person in Country A in this year?

A)56 years
B)28 years
C)14 years
D)42 years
E)It will never reach Country A's level of GDP per person.

Question 24

In explaining economic growth, new growth theory stresses the role played by

A)women in the workforce.
B)the government in directing the nation's investments.
C)population moderation.
D)human choices.
E)the participation rate of elderly workers.

Question 25

During 2008, Swaziland had a real GDP growth rate of 1.8 percent and a real GDP growth rate per person of -1.3 percent. These rates indicate that in Swaziland

A)there was an error when calculating the growth rates because the growth rate of real GDP per person cannot be negative.
B)poverty levels are declining.
C)the population growth rate was negative.
D)real GDP grew more rapidly than did the population.
E)the population grew at a faster rate than real GDP.

Question 26

Suppose India wants to measure how much the standard of living has changed over the last decade. Which piece of data should India use?

A)real GDP per person
B)wages
C)inflation
D)real GDP
E)population

Question 27

Labor productivity is calculated as

A)(real GDP ÷ aggregate hours × number of workers)× 100.
B)(real GDP ÷ aggregate hours × number of workers).
C)(real GDP ÷ aggregate hours).
D)(real GDP ÷ number of workers × ratio of capital per worker).
E)(real GDP ÷ technology level).

Question 28

A government policy that taxes saving in order to discourage saving and encourage spending will_{--------------------}
.

A)create a greater incentive for people to specialize
B)speed economic growth
C)strengthen people's property rights
D)slow economic growth
E)increase the growth rate of capital

Question 29

Labor productivity equals _{--------------------}

A)aggregate hours × labor productivity
B)real GDP ÷ aggregate hours
C)aggregate hours ÷ labor productivity
D)aggregate hours ÷ real GDP
E)real GDP × aggregate hours

Question 30

According to classical growth theory, if labor productivity increases,

A)the population grows but more slowly than real GDP so that people's incomes are permanently higher.
B)people save more, which increases the capital per hour even more, and so economic growth continues indefinitely.
C)the population grows and eventually real GDP returns to the subsistence level.
D)the pursuit of profit causes further increases in capital per hour and technology and economic growth continues indefinitely.
E)the growth rate of real GDP per person permanently increases.

Question 31

Economic freedom requires

A)that the government be a democracy.
B)that there are no regulations and restrictions set on businesses and households by the government.
C)freedom to bribe government officials.
D)the rule of law and the ability to enforce the laws.
E)strong labor unions.

Question 32

Labor productivity is defined as

A)real GDP per hour of labor.
B)total output multiplied by total hours of labor.
C)total real GDP.
D)hours of work per person.
E)real GDP per person.

Question 33

The growth rate of real GDP per person equals the

A)population growth rate plus the growth rate of real GDP then divided by the initial level of real GDP.
B)growth rate of real GDP minus the growth rate of the population.
C)the economic growth rate per person divided by the change in the population growth rate.
D)population growth rate plus the growth rate of real GDP.
E)change in the economic growth rate divided by the change in the population growth rate.

Question 34

Economic freedom is a precondition for economic growth. Which of the following is a characteristic of economic freedom?
I. A democratic form of government
ii. Property rights must be protected.
Iii. The government must support and pay for inventions and innovations.

A)i only
B)ii only
C)Both ii and iii
D)Both i and iii
E)Both i and ii

Question 35

Which of the following are predicted by the classical growth theory?
i.Population growth will end economic growth.
ii.Real GDP per person will return to subsistence level.
iii.Technology drives persistent economic growth.

A)i and iii
B)i only
C)ii only
D)i and ii
E)i, ii and iii

Question 36

For economic freedom to exist,

A)copyright laws must be abolished and markets supervised by the government.
B)democracy must exist.
C)human capital must be given away free.
D)property rights must be protected and markets must be free.
E)money must be free.

Question 37

Which of the following are required for economic growth?
i)more goods and services produced per hour of work
ii)an increase in the average hours of labor per person
iii)an increase in prices

A)i and ii
B)i only
C)ii only
D)i and iii
E)ii and iii

Question 38

The new growth theory asserts that profits are

A)permanent, because physical activities can be replicated.
B)an illusion, since costs are never fully covered.
C)temporary, because the discoveries that lead to profits are eventually used by all.
D)permanent, because they are derived from discoveries.
E)not an essential component determining whether the economy grows or not.

Question 39

If Country A's real GDP grows at a rate of 14 percent per year, about how many years will it take for Country A's real GDP to double?

A)30
B)14
C)10
D)5
E)7

Question 40

Belgium's real GDP per person is $33,000 and Austria's is $34,700. The population growth rate in Belgium is 0.13 percent and the growth rate of real GDP is 3.0 percent. The population growth rat In Austria is 0.08 percent and the growth rate of real GDP is 3.3 percent. If these growth rates continue, how many years will it take for Belgium's real GDP per person to equal Austria's real GDP per person?

A)Just over 24 years
B)Over 230 years
C)Belgium's standard of living will never equal Austria's.
D)Just over 23 years
E)Just over 21 years

Question 41

According to classical growth theory, when real GDP per person_______the population grows.

A)exceeds capital per hour of labor
B)is constant
C)exceeds the subsistence real income
D)is less than capital per hour of labor
E)is less than the subsistence real income

Question 42

In the figure above, according to the classical model of economic growth, in the long run the real wage rate equals _{--------------------}and the quantity of labor is_{--------------------} billions of hours per year.

A)$35; 300
B)$35; 200
C)$25; 300
D)$25; 200
E)More information is needed to answer the question.

Question 43

If real GDP is $1,200 billion, the population is 60 million, and aggregate hours are 80 billion, labor productivity is

A)$5.00 an hour.
B)$150 an hour.
C)$15.00 an hour.
D)$20,000.
E)$6.67 an hour.

Question 44

If real GDP increases by 6 percent and at the same time the population increases by 2 percent, then real GDP per person grows by real GDP per person grows by

A)3 percent.
B)2 percent.
C)6 percent.
D)8 percent.
E)4 percent.

Question 45

The classical growth theory asserts that

A)population growth leads to more growth in technology.
B)economic growth will continue indefinitely.
C)population growth will lead to people earning only a subsistence level of income.
D)population growth increases a nation's economic growth.
E)economic growth and population growth complement each other.

Question 46

According to the data in the table above,

A)real GDP grew more slowly than population between year 1 and year 2.
B)real GDP grew more rapidly than population between year 1 and year 2.
C)the standard of living worsened between year 1 and year 2.
D)the standard of living improved between year 1 and year 2.
E)as measured by real GDP per person, the standard of living remained the same between year 1 and year 2.

Question 47

If an economy's growth rate of real GDP is 3 percent per year and the growth rate of the population
Is 2.5 percent per year, the growth rate of real GDP per person is

A)[(3 - 2.5)÷ 2.5] × 100 = 20 percent per year.
B)3 - 2.5 = 0.5 percent per year.
C)3 + 2.5 = 5.5 percent per year.
D)2.5 - 3 = -0.5 percent per year.
E)[(2.5 - 3)÷ 3] × 100 = 16.6 percent per year.

Question 48

The shape of the productivity curve reflects the

A)change in labor productivity as human capital increases.
B)effects of capital accumulation.
C)effects of population growth.
D)effects of technological progress.
E)law of diminishing marginal returns.

Question 49

Which of the following lists gives factors that increase labor productivity?

A)saving and investment in physical capital, expansion of human capital, and discovery of new technologies
B)labor force increases and wage increases
C)saving and investment in physical capital, and wage increases
D)expansion of human capital, population growth, and discovery of new technologies
E)expansion of human capital, labor force increases, and discovery of new technologies

Question 50

Last year, in a nation far to the South, real GDP was $90 million and 900,000 workers were employed. This year real GDP is $100 million, 950,000 workers are employed, and the number of hours each worker works per year did not change. Hence, labor productivity

A)cannot be compared between the two years because both real GDP and the number of workers increased.
B)has increased.
C)has decreased.
D)has remained constant.
E)might have changed, but more information is needed to determine if it changed.

Question 51

Human capital is acquired

A)only through on-the-job training.
B)through schooling, job training, and experience.
C)only in school.
D)only at birth, that is, it's people's inborn talents.
E)only through job experience.

Question 52

A key reason why some nations show little or no growth is

A)overpopulation that overuses limited resources.
B)too much international trade so that all economic growth spills over to foreigners.
C)lack of incentives to undertake actions toward growth.
D)too much private property not directed by the government.
E)patents in rich nations that keep technology only for the rich.

Question 53

Classical growth theory predicts that in the long run there will be

A)sustained increases in economic growth.
B)negative economic growth.
C)positive economic growth.
D)sustained increases in the productivity growth rate.
E)zero economic growth.

Question 54

The law of diminishing marginal returns states that

A)output decreases at a constant rate as more capital is added.
B)output increases at a constant rate as more capital is added.
C)as both labor and capital are increased, output does not change.
D)output increases at a decreasing rate as more capital is added.
E)as both labor and capital are increased, output increases at a decreasing rate.

Question 55

Workers in the United States are_{--------------------}productive than workers in China because _{--------------------}

A)more; workers in the United States have more capital per worker.
B)less; there are fewer workers in the United States.
C)more; there are more college-educated workers in the United States.
D)less; the labor force participation rate is lower in the United States.
E)equally as; China's real GDP per person equals the U.S. real GDP per person.

Question 56

A central theme of the new growth theory is that

A)humans can work harder than previously thought.
B)the economy doesn't experience diminishing returns.
C)firms don't really experience profit.
D)firms don't experience diminishing returns.
E)the government is more efficient than private markets.

Question 57

In recent years, Taiwan has experienced increases in savings and investment. As a result of the higher investment and saving, we expect
i.increases in physical capital.
ii)increases in the inflation rate.
iii)advances in technology.

A)i and iii
B)ii and iii
C)i and ii
D)i, ii and iii
E)ii only

Question 58

According to the new growth theory, which of the following promote economic growth?
I)discoveries that bring profit
Ii)choices that expand human capital
Iii)random events that create technology change

A)i and ii
B)i, ii and iii
C)i only
D)i and iii
E)ii only

Question 59

If the level of technology rises, GDP per hour of labor

A)decreases for a given level of capital per hour of labor.
B)increases for any level of capital per hour of labor.
C)does not change because GDP increases only when capital or labor increases.
D)increases because the level of capital per hour of labor increases.
E)decreases because the level of capital per hour of labor decreases.

Question 60

Real GDP is $700 billion, average hours worked per week is 42 and aggregate hours 150 billion hours. What is the economy's labor productivity?

A)$3.75 per hour
B)$16.67 per hour
C)$46.67 per hour
D)$4.50 per hour
E)$1.80 per hour

Question 61

Thomas Malthus was an economist who contributed to the _{--------------------}theory of growth.

A)Keynesian
B)classical
C)socialist
D)new growth
E)neoclassical

Question 62

According to the new growth theory,_{--------------------}is the factor that motivates technological change.

A)random chance
B)diminishing returns
C)the replication of activities
D)profit
E)decisions about how much human capital to acquire

Question 63

Economic growth is a sustained expansion of production possibilities measured as the increase in_{--------------------}over a given
period.
Over a given period.

A)the standard of living
B)population
C)real GDP
D)capital per person
E)real GDP per person

Question 64

Classical growth theory predicts that increases in

A)resources permanently increase labor productivity.
B)real GDP per person are permanent and sustainable.
C)resources permanently increase real GDP per person.
D)competition increase economic growth.
E)real GDP per person are temporary and not sustainable.

Question 65

The growth rate of real GDP equals

A)[(real GDP in current year - real GDP in previous year)÷ real GDP in current year] × 100.
B)[(employment in the current year - employment in previous year)/employment in previous year] × 100.
C)(real GDP in current year - real GDP in previous year)× 100.
D)[(real GDP in current year - real GDP in previous year)÷ real GDP in previous year] × 100.
E)[(real GDP in previous year - real GDP in current year)÷ real GDP in previous year] × 100.

Question 66

Which of the following statements is likely to be made by someone who believes in the new growth theory?

A)Choices made by human capital are likely to be inefficient.
B)Competition will encourage discoveries of new ideas leading to greater economic growth.
C)Economic growth will eventually slow.
D)Although technological changes increase real GDP, these changes are random and unexplainable.
E)Population growth will limit long-run gains in real GDP per person.

Question 67

If real GDP was $13.1 trillion in 2010 and $13.3 in 2011. What is the growth rate?

A)-1.5 percent
B)15.0 percent
C)1.5 percent
D)2.1 percent
E)$0.2 trillion

Question 68

East Asian economies have grown

A)rapidly because they virtually eliminated international trade.
B)rapidly because of high saving rates.
C)slowly because of low saving rates.
D)rapidly despite a lack of property rights.
E)slowly because of a lack of property rights.

Question 69

A nation's annual growth rate of real GDP per person is 2 percent. Its standard of living will

A)fall because of its population growth.
B)double in 35 years.
C)double in 50 years.
D)not change because its population is growing.
E)double in 10 years.

Question 70

If real GDP in year 1 is $72 million and real GDP in year 2 is $87 million, then the growth rate of real GDP is

A)$15 million.
B)20.8 percent.
C)83 percent.
D)15 percent.
E)17 percent.

Question 71

According to the new growth theory, real GDP per person grows because

A)the labor force participation rate increases.
B)the government subsidizes firms' research and development.
C)the population increases.
D)people make choices in pursuit of profits.
E)the retirement age increases.

Question 72

In growth theory, the change in a country's standard of living is measured by the change in

A)the nation's capital stock.
B)real GDP per person.
C)employment.
D)wages per person.
E)real GDP.

Question 73

The Malthusian theory

A)is also called the classical growth theory and predicts that we will run out of resources.
B)predicts that the real GDP per person will continue to increase as long as technology increases.
C)is also called the neoclassical growth theory.
D)shows that the production function will shift upward continuously.
E)claims that the subsistence wage will increase over time.

Question 74

Property rights assure people that

A)the government will provide a minimum standard of living.
B)the government will not confiscate their income or savings.
C)international trade will be limited.
D)economic growth will enhance government involvement in the economy.
E)the factors of production and goods are owned jointly by the government and the people.

Question 75

Which of the following is NOT a necessary precondition for economic growth?

A)economic freedom
B)democracy
C)free markets
D)property rights
E)ALL of the above are necessary preconditions.

Question 76

Growth in physical capital depends most directly upon the

A)number of firms in the nation.
B)speed of population growth.
C)amount of saving and investment.
D)amount of government expenditures.
E)level of human capital.

Question 77

The following government policies will help achieve faster economic growth EXCEPT

A)increasing saving.
B)improving the quality of education.
C)discouraging saving and encouraging spending.
D)encouraging research and development.
E)establishing and protecting property rights.

Question 78

The new growth theory

A)asserts that economic growth can be rapid but can only persist for a limited period of time.
B)corrects for poor estimates of population growth.
C)applies to only very poor, less-developed nations.
D)explains the source of technological advances.
E)eliminates technological advances from the growth picture.

Question 79

The Rule of 70 states that the level of a variable will double in

A)the number of years equal to 70 multiplied by the variable's annual growth rate expressed as a decimal.
B)the number of years equal to 70 divided by the variable's annual growth rate.
C)the number of years equal to the variable's annual rate of growth divided by 70.
D)70 years.
E)the number of years equal to the variable's annual growth rate minus 70.

Question 80

Saving

A)is very low in most East Asian nations.
B)has no impact on economic growth.
C)finances investment which brings capital accumulation.
D)slows growth because it decreases consumption.
E)is important for a country to gain the benefits of international trade.