Deck 7: Economic Growth

Question 1

The key indicator of a country's living standard and economic well-being is:

A)the interest rate.
B)nominal GDP per person.
C)real GDP.
D)real GDP per person.

Answer 1

real GDP per person.

Question 2

Government policies that increase the long-term economic growth rate by a small amount result in ______ in average living standards.

A)large increases
B)small increases
C)small decreases
D)no change

Answer 2

large increases

Question 3

If real GDP per person were equal to $2,000 in 1900 and grew at a one percent annual rate, what would be the value of real GDP per person 100 years later?

A)$2,210
B)$4,000
C)$5,410
D)$20,000

Answer 3

$5,410

Question 4

Over the period from 1870 to 2010, the growth of real GDP per capita tended to be more rapid between _____, particularly for _____.

A)1870-1950; Japan
B)1870-1950; the United States
C)1870-1950; Canada
D)1950-2010; Japan

Question 5

Suppose when you are 21 years old, you deposit $1,000 into a bank account that pays annual compound interest, and you do not withdraw from the account until your retirement at the age of 65, 44 years later.How much more will be in your account if the interest rate is 6 percent rather than 4 percent?

A)$880
B)$2,390
C)$5,617
D)$7,369

Question 6

Compound interest is:

A)the payment of interest on the original deposit.
B)the interest rate adjusted for the rate of inflation.
C)the real rate of interest compounded by the rate of inflation.
D)the payment of interest on both the original deposit and all accumulated interest.

Question 7

Compared to the level of real GDP per person in 1870, by 2010, real GDP in the U.S was ______ times larger, while real GDP per person in Japan was _______.

A)12; smaller
B)12; 12 times larger
C)12; 30 times larger
D)30; 12 times larger

Question 8

If an economy maintains a small rate of growth for a long period of time, then the size of the economy:

A)can only increase by a small amount.
B)can increase by a large amount.
C)can never double.
D)will stay nearly constant.

Question 9

Suppose when you are 21 years old, you deposit $1,000 into a bank account that pays annual compound interest, and you do not withdraw from the account until your retirement at the age of 65, 44 years later.How much more will be in your account if the interest rate is 6 percent rather than 5 percent?

A)$440
B)$1,549
C)$4,428
D)$8,557

Question 10

The long-run average annual growth of real GDP per person is the United States is approximately ______ percent.

A)one
B)two
C)five
D)seven

Question 11

Bank C promises to pay a compound annual interest rate of 6 percent, while Bank S pays an 8 percent simple annual interest rate on deposits.If you deposit $1,000 in each bank, after 10 years, your deposit in Bank C equals _____, while your deposit in Bank S equals ______.

A)$1,060; $1,800
B)$1,600; $1,800
C)$1,600; $2,159
D)$1,791; $1,800

Question 12

The rise in average living standards experienced by most industrialized countries:

A)has been continuous over the course of human history.
B)was more rapid before 1870 than after 1870.
C)has been more rapid since 1950 than before 1950.
D)has resulted primarily from an increase in population worldwide.

Question 13

Small differences in annual growth rates of real GDP generate large differences in real GDP over time because of the:

A)importance of average labor productivity.
B)power of compound interest.
C)diminishing returns to capital.
D)limits of economic growth.

Question 14

Bank C promises to pay a compound annual interest rate of 6 percent, while Bank S pays a 10 percent simple annual interest rate on deposits.If you deposit $1,000 in each bank, after 10 years, your deposit in Bank C equals _____, while your deposit in Bank S equals ______.

A)$1,060; $1,100
B)$1,600; $2,000
C)$1,600; $2,594
D)$1,791; $2,000

Question 15

Real GDP per person in both Alpha and Omega is equal to $2,000.Over the next 100 years, real GDP per person grows at a 1 percent annual rate in Alpha and at a 2 percent annual rate in Omega.After 100 years, real GDP per person in Alpha is ______ smaller than real GDP per person in Omega.

A)$2,000
B)$5,410
C)$9,080
D)$11,080

Question 16

Over the period from 1950 to 2010, which country experienced the fastest average annual growth rate of real GDP per person?

A)United States
B)Japan
C)China
D)Canada

Question 17

Real GDP per person in Richland is $20,000, while real GDP per person in Poorland is $10,000.However, Richland's real GDP per person is growing at 1 percent per year, and Poorland's real GDP per person is growing at 3 percent per year.After 50 years, real GDP per person in Richland minus real GDP in Poorland is:

A)positive and greater than $10,000.
B)positive but less than $10,000.
C)zero.
D)negative.

Question 18

Real GDP per person in both Alpha and Omega is equal to $2,000.Over the next 100 years, real GDP per person grows at a 1.5 percent annual rate in Alpha and at a 2.5 percent annual rate in Omega.After 100 years, real GDP per person in Alpha is ______ smaller than real GDP per person in Omega.

A)$2,000
B)$5,410
C)$8,864
D)$14,763

Question 19

Growth in real GDP per capita has:

A)been steady over the course of human history.
B)slowed since the mid-nineteenth century compared to before.
C)been more rapid since the mid-nineteenth century than ever before.
D)increased over the last 150 years only in the United States and Canada.

Question 20

If you left $2,500 on deposit with a bank promising to pay you a 6 percent compound annual rate of interest, then after 50 years your deposit would be worth approximately:

A)$2,800
B)$18,420
C)$46,050
D)$250,750

Question 21

The population of Omega totals one million people, 30 percent of whom are employed.Average output per worker in Alpha is $30,000.Real GDP per person in Alpha totals:

A)$9,000.
B)$21,000.
C)$30,000.
D)$100,000.

Question 22

Real GDP per person can increase:

A)only if the share of the population employed increases.
B)only if the share of the population employed decreases.
C)only if average labor productivity increases.
D)if the share of population employed and/or average labor productivity increases.

Question 23

In Econland, 500,000 of the 2 million people in the country are employed.Average labor productivity in Econland is $15,000 per worker.Real GDP per person in Econland totals:

A)$1,250.
B)$3,750.
C)$11,250.
D)$60,000.

Question 24

Real GDP per person in the United States was $9,864 in 1950.Over the next 48 years, it grew at a compound annual rate of 2.0%.If, instead, real GDP per person had grown at an average compound annual rate 2.5%, then real GDP per capita in the United States in 1998 would have been approximately ______ larger.

A)$2,370
B)$6,751
C)$12,530
D)$25,520

Question 25

Real GDP per person in Richland is $20,000, while real GDP per person in Poorland is $10,000.However, Richland's real GDP per person is growing at 1 percent per year, and Poorland's real GDP per person is growing at 2 percent per year.After 50 years, real GDP per person in Richland minus real GDP in Poorland is:

A)positive and greater than $10,000.
B)positive but less than $10,000.
C)zero.
D)negative.

Question 26

Average labor productivity times the proportion of the population employed equals:

A)real GDP.
B)real GDP per person.
C)real GDP per worker.
D)output per worker.

Question 27

The population of Alpha totals one million people, 40 percent of whom are employed.Average output per worker in Alpha is $20,000.Real GDP per person in Alpha totals:

A)$8,000.
B)$12,000.
C)$20,000.
D)$50,000.

Question 28

Real GDP per person in the Canada was $7,377 in 1950.Over the next 48 years it grew at a compound annual rate of 2.0%.If instead real GDP per person had grown at an average compound annual rate 2.5%, then real GDP per capita in the Canada in 1998 would have been approximately ______ larger.

A)$1,770
B)$5,049
C)$9,370
D)$24,130

Question 29

The key variable in determining changes in a country's standard of living is the:

A)interest rate.
B)inflation rate.
C)unemployment rate.
D)long-run rate of economic growth.

Question 30

If real GDP per person in a country equals $20,000 and 40 percent of the population is employed, then average labor productivity equals:

A)$8,000.
B)$20,000.
C)$40,000.
D)$50,000.

Question 31

Real GDP per person in Northland is $30,000, while real GDP in Southland is $10,000, However, Northland's real GDP per person is growing at 1 percent per year, and Southland's real GDP per person is growing at 3 percent per year.If these growth rates persist indefinitely, then:

A)Northland's real GDP per person will decline until it equals Southland's.
B)Northland's real GDP per person will always be between 1 and 2 percent greater than Southland's.
C)Southland's real GDP per person will always be exactly 2 percent less than Northland's.
D)Southland's real GDP per person will eventually be greater than Northland's.

Question 32

Assume that the share of population employed in all countries is 50 percent.Based on the information in the table, which country has the highest real GDP per capita?

A)Country A
B)Country B
C)Country D
D)Country E

Question 33

Real GDP per person in Westland is $30,000, while real GDP in Eastland is $10,000, Westland's real GDP per person is growing at 3percent per year and Eastland's real GDP per person is growing at 3 percent per year.If these growth rates persist indefinitely, then:

A)Eastland's real GDP per person will rise until it equals Westland's real GDP per person.
B)Westland's real GDP per person will always be at least $20,000 greater than Eastland's.
C)Eastland's real GDP per person will always be exactly $20,000 less than Westland's.
D)Eastland's real GDP per person will eventually be greater than Westland's.

Question 34

In Macroland, 500,000 of the 1 million people in the country are employed.Average labor productivity in Macroland is $20,000 per worker.Real GDP per person in Macroland totals:

A)$1,000.
B)$10,000.
C)$15,000.
D)$40,000.

Question 35

If real GDP per person in a country equals $40,000 and 60 percent of the population is employed, then average labor productivity equals:

A)$24,000.
B)$40,000.
C)$60,000.
D)$66,667.

Question 36

If 50 percent of the population in a country is employed and average labor productivity equals $30,000, then real GDP per person equals:

A)$15,000.
B)$30,000.
C)$50,000.
D)$60,000.

Question 37

In symbolic terms where Y equals real GDP, POP equals total population, and N equals the number of employed workers, Y/POP must equal:

A)Y/N×N/POP.
B)N/Y×POP/N.
C)Y/POP×N/POP
D)N/Y×N/POP

Question 38

If the share of population employed in two countries is the same, average living standards will be higher in the country with:

A)the smaller population.
B)the larger population.
C)higher average labor productivity.
D)lower average labor productivity.

Question 39

A nation's standard of living, as measured by real GDP per person, increases:

A)only if average labor productivity increases.
B)only if the share of population employed increases.
C)only if both average labor productivity and the share of population employed increase.
D)if either average labor productivity and/or the share of population employed increase.

Question 40

Assume that the share of population employed in all countries is 50 percent.Based on the information in the table, which country has the smallest real GDP per capita?

A)Country A
B)Country B
C)Country D
D)Country E

Question 41

The prediction that workers get additional training only when the rewards from the training are expected to exceed the costs of the training (including the opportunity costs) is based on the:

A)principle of comparative advantage.
B)principle of diminishing returns to capital.
C)scarcity principle.
D)cost-benefit principle.

Question 42

Suppose that average labor productivity in Country C is $6,000, and that Countries C and A have the same real GDP per capita.Based on the information in the table, what must be the average labor productivity in Country A?

A)$1,800
B)$2,400
C)$5,000
D)$7,200

Question 43

Fred and Barney fill egg cartons with eggs.Fred just started the job and can fill only 25 cartons an hour.Barney has significant on-the-job experience and can fill 50 cartons an hour.Both Fred and Barney work 50 hours a week.Fred's average weekly productivity is ______ cartons; Barney's average weekly productivity is ______ cartons; and as a team their average weekly productivity is ______ cartons.

A)25; 50; 75
B)25; 50; 37.5
C)1,000; 2,000; 1,500
D)1,250; 2,500; 1,875

Question 44

Mike and Tom debone chicken breasts for Ted's Chicken Co.Mike is new and can only debone 60 chicken breasts per hour, while Tom's experience allows him to debone 120 chicken breasts per hour.Both Mike and Tom work 40 hours per week.Their average hourly productivity as a team is ______ chicken breasts.

A)60
B)75
C)90
D)100

Question 45

Assume that average labor productivity is the same in each country.Based on the information in the table, which country has the smallest real GDP per capita?

A)Country A
B)Country B
C)Country D
D)Country E

Question 46

Suppose that the share of population employed in Country C is 50 percent, and that Countries C and D have the same real GDP per capita.Based on the information in the table, what share of Country D's population must be employed?

A)12.5 percent
B)25.0 percent
C)75.0 percent
D)100.0 percent

Question 47

Which of the following is an example of an investment in human capital?

A)A firm replaces manually controlled production with a computer controlled procedure.
B)A firm pays for workers to take college classes.
C)A chemical firm supports research to develop new chemicals.
D)A firm purchases new equipment for a manufacturing process.

Question 48

One factor that contributed to the growth in the share of population employed in the United States between 1960 and 2010 was increased:

A)labor union participation.
B)female labor force participation.
C)male labor force participation.
D)minimum wages.

Question 49

Human capital is:

A)the factories and machinery used by humans in the production process.
B)the talents, training, and education of workers.
C)the financial resources available to humans for investment.
D)the factories and machinery made by workers.

Question 50

Workers should invest in additional human capital as long as the:

A)marginal benefit exceeds the marginal cost.
B)marginal cost exceeds the marginal benefit.
C)opportunity cost exceeds the marginal benefit.
D)opportunity cost is zero.

Question 51

Long-run increases in living standards, as measured by real GDP per person, are primarily the result of increases in:

A)population.
B)the money supply.
C)government budget surpluses.
D)average labor productivity.

Question 52

Providing workers with on-the-job training will increase:

A)average labor productivity.
B)the share of the population employed.
C)the unemployment rate.
D)the labor force participation rate.

Question 53

In the long run, increases in output per person arise primarily from:

A)increases in female labor force participation.
B)increases in male labor force participation.
C)an increasing proportion of the population retiring
D)increases in average labor productivity.

Question 54

Economists refer to the talents, training, and education of workers as:

A)human capital.
B)physical capital.
C)average labor productivity.
D)labor supply.

Question 55

Fred and Barney fill egg cartons with eggs.Fred just started the job and can fill only 20 cartons an hour.Barney has significant on-the-job experience and can fill 40 cartons an hour.Both Fred and Barney work 40 hours a week.Fred's average weekly productivity is ______ cartons; Barney's average weekly productivity is ______ cartons; and as a team their average weekly productivity is ______ cartons.

A)20; 40; 60
B)20; 40; 30
C)800; 2,000; 1,600
D)800; 1,600; 1,200

Question 56

Assume that average labor productivity is the same in each country.Based on the information in the table, which country has the highest real GDP per capita?

A)Country A
B)Country B
C)Country C
D)Country D

Question 57

Mike and Tom debone chicken breasts for Ted's Chicken Co.Mike is new and can only debone 30 chicken breasts per hour, while Tom's experience allows him to debone 60 chicken breasts per hour.Both Mike and Tom work 40 hours per week.Their average hourly productivity as a team is ______ chicken breasts.

A)30
B)45
C)60
D)90

Question 58

Suppose that the share of population employed in Country B is 50 percent, and that Countries B and C have the same real GDP per capita.Based on the information in the table, what share of Country C's population must be employed?

A)5.0 percent
B)20.0 percent
C)40.0 percent
D)50.0 percent

Question 59

Suppose that average labor productivity in Country C is $5,000, and that Countries C and E have the same real GDP per capita.Based on the information in the table, what must be the average labor productivity in Country E?

A)$1,000
B)$1,500
C)$4,500
D)$6,250

Question 60

Getting a college degree is an example of investing in:

A)human capital.
B)physical capital.
C)technology.
D)research and development.

Question 61

The principle that if the amount of labor and other inputs is held constant, then the greater the amount of capital in use, the less an additional unit of capital adds to production is called the principle of:

A)increasing average capital productivity.
B)diminishing returns to capital.
C)increasing returns to capital.
D)decreasing output per unit of capital.

Question 62

The discovery and utilization of vast, previously unknown oil and mineral deposits in a country will increase:

A)average labor productivity.
B)the share of the population employed.
C)the unemployment rate.
D)the quantity of human capital.

Question 63

Usually an abundance of natural resources ______ average labor productivity.

A)doubles
B)increases
C)decreases
D)has no effect on

Question 64

Jim and Fred are the only two cashiers employed at a retail store.Each of them works the same 40 hours per week and each can check out 30 customers per hour by manually entering the price of each product purchased into the cash register.The store owner replaces the old cash registers with new ones that automatically scan product prices into the register.With the new cash registers, Jim and Fred can each check out 60 customers per hour.Their average labor productivity as a team before the new cash registers were introduced was ______ customers per hour and ______ customers per hour after the new machines were installed.

A)30; 60
B)30; 120
C)60; 120
D)1,200; 2,400

Question 65

Gamma has $30,000 of capital per worker, while Omega has $7,500 of capital per worker.In all other respects, the two countries are the same.According to the principle of diminishing returns to capital, an additional unit of capital will increase output ______ in Gamma compared to Omega, holding other factors constant.

A)more
B)less
C)not at all
D)by the same amount

Question 66

Increasing the capital available to the workforce, holding other factors constant, tends to ______ total output while ______ average labor productivity.

A)increase; decreasing
B)increase; increasing
C)increase; not changing
D)decrease; increasing

Question 67

Diminishing returns to capital is a consequence of firms'incentives to use each piece of capital as productively as possible and illustrates the:

A)principle of comparative advantage.
B)principle of increasing opportunity costs.
C)scarcity principle.
D)cost-benefit principle.

Question 68

Countries with small amounts of capital per worker tend to have ______ levels of real GDP per person and ______ levels of average labor productivity.

A)high; high
B)high; low
C)low; low
D)low; average

Question 69

The principle of diminishing returns to capital states that if the amount of labor and other inputs employed is held constant, then the greater the amount of capital in use the:

A)less is produced.
B)less production is wasted.
C)the more an additional unit of capital adds to production.
D)the less an additional unit of capital adds to production.

Question 70

Betty and Wilma are the only two cashiers employed at a retail store.Each of them works the same 40 hours per week.By manually entering the price of each product purchased into the cash register, Betty can check out 20 customers and Wilma can check out 30 customers per hour.The store owner replaces the old cash registers with new ones that automatically scan product prices into the register.With the new cash registers, Betty and Wilma can each check out 60 customers per hour.Their average labor productivity as a team before the new cash registers were introduced was ______ customers per hour and ______ customers per hour after the new machines were installed.

A)25; 60
B)50; 120
C)50; 60
D)1,000; 2,400

Question 71

Physical capital is:

A)the factories and machinery used to produce other goods and services.
B)the talents, training, and education of workers.
C)the financial resources available for investment.
D)the physical labor of workers.

Question 72

Because of diminishing returns to capital, there is a limit to the increases in average labor productivity that can be gained from additional or improved ______.

A)availability of land and natural resources
B)physical capital
C)imports
D)entrepreneurship

Question 73

When a firm builds a new factory, this is an example of an investment in:

A)human capital.
B)physical capital.
C)the market.
D)research and development.

Question 74

Based on the table below and the principle of diminishing returns to capital, then total packages wrapped when a fourth machine is installed must be less than ______ packages.

A)2,000
B)15,000
C)16,000
D)17,000

Question 75

Based on the table below and the principle of diminishing returns to capital, then total packages wrapped when a fourth machine is installed must be less than ______ packages.

A)3,000
B)4,000
C)12,000
D)15,000

Question 76

Providing a fixed number of workers with additional capital will ______ average labor productivity at a ______ rate.

A)increase; increasing
B)increase; constant
C)increase; decreasing
D)decrease; decreasing

Question 77

Mike and Tom debone chicken breasts for Ted's Chicken Co.Mike is new and can only debone 60 chicken breasts per hour by hand, while Tom's experience allows him to debone 120 chicken breasts per hour by hand.Ted buys one new machine that can debone 100 chicken breasts per hour.Both Mike and Tom work the same 40 hours per week, but one of them is assigned to operate the machine instead of deboning the chicken breasts by hand.To obtain maximum average hourly productivity, ______ is assigned to use the machine and their combined average hourly productivity as a team is ______ chicken breasts.

A)Mike; 80
B)Mike; 110
C)Tom; 80
D)Tom; 110

Question 78

Alpha has $40,000 of capital per worker, while Beta has $5,000 of capital per worker.In all other respects, the two countries are the same.According to the principle of diminishing returns to capital, an additional unit of capital will increase output ______ in Alpha compared to Beta, holding other factors constant.

A)more
B)less
C)not at all
D)by the same amount

Question 79

Which of the following is an example of an investment in physical capital?

A)A firm trains workers to operate new machinery.
B)A firm pays for workers to take college classes.
C)A chemical firm employs chemists to develop new chemicals.
D)A firm purchases new equipment for a manufacturing process.

Question 80

Mike and Tom debone chicken breasts for Ted's Chicken Co.Mike is new and can only debone 30 chicken breasts per hour by hand, while Tom's experience allows him to debone 60 chicken breasts per hour by hand.Ted buys one new machine that can debone 100 chicken breasts per hour.Both Mike and Tom work the same 40 hours per week, but one of them is assigned to operate the machine instead of deboning the chicken breasts by hand.To obtain maximum average hourly productivity, ______ is assigned to use the machine and their combined average hourly productivity as a team is ______ chicken breasts

A)Mike; 65
B)Mike; 80
C)Tom; 65
D)Tom; 80