Deck 17: Economic Growth Resources Technology Ideas and Institutions

Question 1

According to Mancur Olson, transfer-promoting policies are more likely to be lobbied for instead of growth-promoting policies when a country has a relatively large number of special-interest groups.

Answer 1

True

Question 2

When a country's GDP is higher one year than it was the previous year, absolute real economic growth has occurred.

Answer 2

False

Question 3

Technology is defined as "the humanly devised constraints that shape human interaction."

Answer 3

False

Question 4

According to some economists, economic growth can be promoted by certain institutions which promote the discovery of new ideas.

Question 5

In the production function Real GDP = T (L, K), the T represents the tax coefficient.

Question 6

The knowledge and skills a person acquires through education, training, and experience is termed human capital.

Question 7

According to economist Benjamin Friedman, sustained economic growth can make people more willing to work toward improving the environment and reducing poverty.

Question 8

Property rights are a tangible factor in producing economic growth.

Question 9

In the production function, the variable H represents hunger.

Question 10

The term economic growth can be used in reference to absolute real economic growth or to per- capita real economic growth.

Question 11

The concept that economic growth can do more than just give us more goods and services goes back to Adam Smith.

Question 12

Changes in the tax treatment of capital returns can result in a change in the amount of capital employed in the production process.

Question 13

The term human capital refers to education, training and experience.

Question 14

In the production function, the variable K represents human capital.

Question 15

The relation between technology and the quantity of factor inputs to Real GDP is specified by the production function.

Question 16

Economists Barro and McCleary's research regarding the impact of religious beliefs on economic growth noted that a belief in hell matters more to economic growth than the belief in heaven.

Question 17

If the annual growth rate in Real GDP is 4 percent, then it will take 25 years for the economy to double in size.

Question 18

Production functions used in economic growth theory are always limited to two inputs: labor and capital.

Question 19

When income taxes fall, the supply of labor curve shifts rightward, ultimately leading to the LRAS curve shifting leftward.

Question 20

In the production function Real GDP = T (L, K), the T stands for tax coefficient.

Question 21

The economist credited with pioneering the "new growth theory" is

A)Milton Friedman.
B)Jia-Tzu Weng.
C)Paul Romer.
D)Julian Simon.

Question 22

If an economy can increase its steady annual growth rate from 1 percent to 1.5 percent, this reduces the time it takes for the economy to double in size by approximately __________ years.

A)5
B)8
C)33
D)17
E)23

Question 23

If an economy's steady annual growth rate falls from 3.5 percent to 2.5 percent, this adds __________ years to the time it takes for the economy to double in size.

A)24.0
B)8.0
C)5.3
D)11.4

Question 24

Neoclassical growth theory emphasized how __________ contribute to growth.

A)the resources labor and capital
B)technological changes
C)government policies
D)factors limiting population growth

Question 25

Compare a property rights system in which people are allowed to keep one-third of the monetary rewards of their labor with a system in which they keep two-thirds. We should expect more entrepreneurship under the __________ system and faster real economic growth under the __________ system.

A)former; former
B)former; latter
C)latter; former
D)latter; latter

Question 26

In 1961, President Kennedy committed the United States to a manned lunar mission by the end of the decade. Few thought it could actually be done, but of course it did, with five months to spare. This story illustrates the __________ growth theory argument that technological change __________.

A)new; can be deliberately accelerated
B)new; relies on government policy
C)neoclassical; can be deliberately accelerated
D)neoclassical; relies on government policy

Question 27

Meta-ideas involve

A)the methods of producing ideas.
B)persuading others of the validity of one's ideas.
C)putting ideas in a form capable of approval in a "yes" or "no" vote.
D)the expression of ideas in mathematical form.

Question 28

Suppose the population of a country falls, but its Real GDP remains constant. As a result, there is __________ economic growth.

A)both absolute economic growth and per-capita real
B)absolute economic growth, but not per-capita real
C)per-capita real economic growth, but not absolute
D)neither absolute economic growth nor per-capita real

Question 29

Compare a property rights system in which people are allowed to keep one-third of the monetary rewards of their labor with a system in which they keep two-thirds. An economist would expect that more people to decide to go to work under the __________ system and that many of those already working would decide to work more under the __________ system.

A)former; former
B)former; latter
C)latter; former
D)latter; latter

Question 30

An increase in nominal GDP

A)is absolute real economic growth.
B)is per capita real economic growth.
C)is both per capita and absolute real economic growth.
D)does not necessarily mean either absolute or per capita real economic growth.

Question 31

The range of laws, rules, and regulations that define the allowed forms of use and transfer of resources is called the __________ structure of the economy.

A)monetary
B)property rights
C)microeconomic
D)macroeconomic

Question 32

Stan Laurel and Oliver Hardy acted separately in comedy shorts for the Hal Roach Studio for over a decade without greatly distinguishing themselves from hundreds of other screen comedians. Then in 1927, Roach writer-director Leo McCarey tried them out as a comedy team in one more routine short. Only then was the fantastic chemistry between "the fiddle and the bow" realized. The rest is immortality. This story relates to the "new growth theory" idea of

A)employee involvement.
B)rearranging.
C)exogeneity.
D)objects and ideas.

Question 33

"Absolute real economic growth" is defined as an increase in __________ from one period to the next.

A)GDP
B)Real GDP
C)Real GDP per person
D)the inflation rate

Question 34

An economy growing at a steady rate of 1.8 percent per year doubles in size approximately every __________ years.

A)56
B)39
C)32
D)18

Question 35

An economy doubles in size every 20 years if it maintains a steady annual growth rate of about __________ percent.

A)4.0
B)2.8
C)3.5
D)2.0

Question 36

Technological advances make it possible to

A)produce goods without using any resources.
B)obtain the same output by using more resources.
C)obtain the same output by using fewer resources.
D)lower labor productivity.

Question 37

An economy growing at a steady rate of 2.6 percent per year doubles in size approximately every __________ years.

A)50
B)27
C)38
D)43

Question 38

Neoclassical growth theory does not emphasize how __________ contribute to growth.

A)the quantity of capital
B)technological changes
C)the quantity of labor
D)factors limiting population growth
E)a and c

Question 39

Real GDP in a small country is worth $8 billion. The population of the country is 200,000. What is per capita Real GDP?

A)$30,000
B)$40,000
C)$60,000
D)$300,000

Question 40

A useful rule of thumb called the "Rule of 70" states that if something grows at a constant rate of Z percent per year, it doubles in size approximately every __________ years.

A)70 - Z
B)70/Z
C)Z/70
D)70 × (Z/100)

Question 41

Per-capita real economic growth refers to an increase from one period to the next in

A)per-capita GDP.
B)GDP.
C)Real GDP.
D)per-capita Real GDP.
E)none of the above

Question 42

Two Harvard economists, Robert Barro and Rachel McCleary, have researched the role that ________________ plays in economic growth.

A)religion
B)meta-ideas
C)technology
D)human resource development

Question 43

According to new growth theory, technological advances can be promoted

A)from within the economy.
B)if only the right fiscal and monetary policies are in place.
C)in a few rare cases.
D)through industrial policy.
E)none of the above

Question 44

New growth theory holds that technology is __________ and that the more resources that go to develop technology, the __________ technology that is produced.

A)exogenous; more and better
B)exogenous; less
C)endogenous; more and better
D)endogenous; less

Question 45

According to Paul Romer, one way to produce more ideas and knowledge is by

A)investing in research and development.
B)giving the federal government more control over the direction of research.
C)giving businesses less control over federal research monies.
D)a, b and c

Question 46

The Real GDP of country X doubled in 20 years. It follows that the annual growth rate in country X during this time period was

A)4.0 percent.
B)5.0 percent.
C)2.8 percent.
D)3.5 percent.

Question 47

New growth theory puts emphasis on

A)ideas.
B)experimenting with new ways of doing things.
C)rearranging resources in ways that are more valuable.
D)b and c
E)a, b, and c

Question 48

_______________________ specifies the relation between technology and the factor inputs to output.

A)Neoclassical growth theory
B)Meta-ideas
C)The LRAS curve
D)A production function

Question 49

Absolute real economic growth is an increase in __________ from one period to the next.

A)GDP
B)Real GDP
C)per-capita Real GDP
D)per-capita GDP
E)none of the above

Question 50

Research by Harvard economists Barro and McCleary revealed that church attendance and economic growth have a(n) _______________ relationship. They also found that specific religious beliefs (in heaven, hell, and afterlife) and economic growth have a(n) ___________ relationship.

A)inverse; inverse
B)direct; direct
C)inverse; direct
D)direct; inverse

Question 51

A production function specifies the relation between ____________ and the ___________ to ____________________.

A)technology; output; Real GDP
B)technology; the factor inputs; Real GDP
C)price; quantity; Real GDP
D)Real GDP; the factor inputs; the price level

Question 52

New growth theory holds technology to be __________; neoclassical growth theory holds technology to be __________.

A)exogenous; endogenous
B)endogenous; endogenous
C)endogenous; exogenous
D)exogenous; exogenous

Question 53

Country X experiences an increase in Real GDP and an increase in per-capita Real GDP. It follows that

A)the residents of country X are happier than they used to be.
B)the benefits of economic growth outweigh the costs of economic growth.
C)the costs of economic growth outweigh the benefits of economic growth.
D)all the residents of country X are "richer" in terms of goods and services than they used to be.
E)none of the above

Question 54

__________ rights refer to the range of laws, rules, and regulations that define rights for the use and transfer of resources.

A)Individual
B)Constitutional
C)Property
D)Economic
E)none of the above

Question 55

If Real GDP is $6 billion and the population is 300,000, per-capita Real GDP is

A)$30,000.
B)$20,000.
C)$33,333.
D)$39,434.

Question 56

The Real GDP of country X doubled in 10 years. It follows that

A)the per-capita Real GDP doubled during this time, too.
B)the per-capita Real GDP remained stable during this time.
C)the per-capita Real GDP fell during this time.
D)disposable income also doubled during this time.
E)none of the above

Question 57

Neoclassical growth theory placed emphasis on two resources:

A)capital and entrepreneurship.
B)natural resources and capital.
C)capital and labor.
D)labor and entrepreneurship.
E)labor and natural resources.

Question 58

According to new growth theory, discovering and implementing new __________ is what causes economic growth.

A)ways of managing personnel
B)manufacturing techniques
C)ideas
D)resource sources
E)none of the above

Question 59

If a country's economic growth rate is 4 percent a year, approximately how many years will it take to double its Real GDP?

A)22.2
B)25.0
C)15.6
D)17.5
E)8.8

Question 60

In contrast to neoclassical growth theory, new growth theory lays more emphasis on

A)intangibles than tangibles.
B)tangibles than intangibles.
C)changes in the money supply than changes in taxes.
D)fiscal policy than monetary policy.
E)objects than ideas.

Question 61

Exhibit 17-1
Production Function
Real GDP = T (L, K), such that Real GDP = T(L + K)
Assume that the technology coefficient is equal to 0.40.
Refer to Exhibit 17-1. If this production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, and labor rises from 6 units to 7 units it would cause a

A)shift upward in the production function to a higher level of Real GDP.
B)shift downward in the production function to a lower level of Real GDP.
C)movement down along the same production function to a lower level of Real GDP.
D)movement up along the same production function to a higher level of Real GDP.

Question 62

When a production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, a rise in capital________________________, and a rise in the technology coefficient __________________.

A)shifts the production function upward; also shifts the production function upward
B)shifts the production function downward; shifts the production function upward
C)moves us up along a given production function; shifts the production function upward
D)shifts the production function upward; moves us up along a given production function

Question 63

Exhibit 17-1
Production Function
Real GDP = T (L, K), such that Real GDP = T(L + K)
Assume that the technology coefficient is equal to 0.40.
Refer to Exhibit 17-1. If there are 20 units of capital and 16 units of labor, ________ units of output (Real GDP) will be produced.

A)36
B)​5.6
C)4
D)14.4

Question 64

When a production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, a rise in labor ________________________which shifts the LRAS curve ____________ resulting in ______________________.

A)shifts the production function up; rightward; economic growth
B)shifts the production function down; leftward; a shrinking economy
C)moves us up along a given production function; rightward; economic growth
D)moves us down along a given production function; leftward; a shrinking economy

Question 65

When interest rates in a given economy are reduced, it causes firms to employ __________ capital goods. In terms of the production function (graphed with labor on the horizontal axis and Real GDP on the vertical axis), this then causes ____________________ .

A)more; the production function to shift upward
B)less; the production function to shift downward
C)more; a movement up along a given production function
D)more; a movement down along a given production function

Question 66

Exhibit 17-1
Production Function
Real GDP = T (L, K), such that Real GDP = T(L + K)
Assume that the technology coefficient is equal to 0.40.
Refer to Exhibit 17-1. If this production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, and the technology coefficient rises from 0.40 to 0.50, it would cause a

A)shift upward in the production function to a higher level of Real GDP.
B)shift downward in the production function to a lower level of Real GDP.
C)movement down along the same production function to a lower level of Real GDP.
D)movement up along the same production function to a higher level of Real GDP.

Question 67

Exhibit 17-2


Refer to Exhibit 17-2. Assume that the starting point is always point 1. Which of the production function graphs shown, (a) or (b), represents an increase in the quantity of labor, and which represents an increase in the quantity of capital, respectively?

A)(a); (a)
B)(b); (a)
C)(a); (b)
D)(b); (b)

Question 68

In the production function Real GDP = T (L, K, NR, H), the T represents the _____________ coefficient, the L represents ________________, the K represents _______________, the NR represents natural resources, and the H represents ________________.

A)tax; labor; capital; humanity
B)technology; labor; knowledge; humanity
C)technology; labor; capital; human capital
D)trade; labor; knowledge; human capital

Question 69

Exhibit 17-2


Refer to Exhibit 17-2. Assume that the starting point is always point 1. Which of the production function graphs shown, (a) or (b), represents an increase in the quantity of labor, and which represents an increase in the technology coefficient, respectively?

A)(a); (b)
B)(b); (a)
C)(a); (a)
D)(b); (b)

Question 70

Exhibit 17-1
Production Function
Real GDP = T (L, K), such that Real GDP = T(L + K)
Assume that the technology coefficient is equal to 0.40.
Refer to Exhibit 17-1. If this production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, the resulting graph would be

A)upward sloping.
B)downward sloping.
C)vertical.
D)horizontal.

Question 71

Exhibit 17-1
Production Function
Real GDP = T (L, K), such that Real GDP = T(L + K)
Assume that the technology coefficient is equal to 0.40.
Refer to Exhibit 17-1. If there are 4 units of capital and 6 units of labor, ________ units of output (Real GDP) will be produced.

A)10
B)5
C)4
D)20

Question 72

In the production function Real GDP = T (L, K), the T represents the _____________ coefficient, the L represents ________________ and the K represents _______________.

A)tax; labor; capital
B)technology; labor; capital
C)technology; labor; knowledge
D)technology; livestock; knowledge

Question 73

When a production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, a rise in labor ________________________, and a rise in the technology coefficient __________________.

A)shifts the production function upward; also shifts the production function upward
B)moves us up along a given production function; shifts the production function upward
C)shifts the production function downward; shifts the production function upward
D)shifts the production function upward; moves us up along a given production function

Question 74

When interest rates fall in a given economy, it causes firms to borrow __________ funds used for purchasing capital goods. The result will be a(n) ___________ in the level of capital employed in the economy. In terms of the production function (graphed with labor on the horizontal axis and Real GDP on the vertical axis), this then causes ____________________ which makes the LRAS curve shift ____________ resulting in ______________________.

A)more; increase; the production function to shift upward; rightward; economic growth
B)less; decrease; the production function to shift downward; leftward; a shrinking economy
C)more; increase; a movement up along a given production function; rightward; economic growth
D)more; increase; a movement down along a given production function; leftward; a shrinking economy

Question 75

Suppose that the production function for an economy is graphed with Real GDP on the vertical axis and labor on the horizontal axis. When the level of capital in this economy rises, it causes ____________________which shifts the LRAS curve ____________ resulting in ______________________.

A)a movement down along a given production function; leftward; a shrinking economy
B)the production function to shift downward; leftward; a shrinking economy
C)a movement up along a given production function; rightward; economic growth
D)the production function to shift upward; rightward; economic growth

Question 76

Examples of physical capital include _______________________. Examples of human capital include ______________________________.

A)knowledge one picks up through education and training; factories and computers
B)machines and factories; chairs and desks
C)knowledge one picks up through education and experience; factories and machines
D)machines and factories; knowledge one picks up through education and training

Question 77

When taxes on the return to capital in a given economy are reduced, it causes firms to employ __________ capital goods. In terms of the production function (graphed with labor on the horizontal axis and Real GDP on the vertical axis), this then causes ____________________ which makes the LRAS curve shift ____________ resulting in ______________________.

A)less; the production function to shift downward; leftward; a shrinking economy
B)more; the production function to shift upward; rightward; economic growth
C)more; a movement up along a given production function; rightward; economic growth
D)more; a movement down along a given production function; leftward; a shrinking economy

Question 78

Exhibit 17-1
Production Function
Real GDP = T (L, K), such that Real GDP = T(L + K)
Assume that the technology coefficient is equal to 0.40.
Refer to Exhibit 17-1. If this production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, and capital rises from 4 units to 6 units it would cause a

A)shift upward in the production function to a higher level of Real GDP.
B)shift downward in the production function to a lower level of Real GDP.
C)movement down along the same production function to a lower level of Real GDP.
D)movement up along the same production function to a higher level of Real GDP.

Question 79

When a production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, a rise in labor ________________________, and a rise in capital __________________.

A)shifts the production function upward; also shifts the production function upward
B)shifts the production function downward; shifts the production function upward
C)moves us up along a given production function; shifts the production function upward
D)shifts the production function upward; moves us up along a given production function

Question 80

When income taxes are lowered in a given economy, it causes the supply of labor curve to shift __________which ___________ the equilibrium quantity of labor employed. In terms of the production function (graphed with labor on the horizontal axis and Real GDP on the vertical axis) this then causes _______________, which makes the LRAS curve shift ____________ resulting in ______________________.

A)rightward; raises; the production function to shift upward; rightward; economic growth
B)leftward; lowers; the production function to shift downward; leftward; a shrinking economy
C)rightward; raises; a movement up along a given production function; rightward; economic growth
D)rightward; raises; a movement down along a given production function; leftward; a shrinking economy