Deck 6: Introduction to Economic Growth

Question 1

Annual growth in industrialized countries is usually measured in terms of

A) consumer spending.
B) new net investment.
C) income distribution.
D) real GDP.

Answer 1

D

Question 2

The money used to buy equipment and buildings is called

A) physical capital.
B) human capital.
C) financial capital.
D) depreciation.

Answer 2

C

Question 3

The percentage of national income that flows into savings each year is

A) the average propensity to save.
B) the rate of growth.
C) the accumulated profits of businesses.
D) the government budget deficit.

Answer 3

A

Question 4

What two things do the rate of growth of the economy depend on?

A) The amount saved out of national income and the amount invested.
B) The amount of GDP produced per dollar of investment and the rate of depreciation.
C) The amount saved out of national income and the amount of GDP produced per investment dollar.
D) The amount saved out of national income and the rate of interest.

Question 5

According to conservatives, what are the two ways to increase the rate of economic growth?

A) Increase savings and increase consumption.
B) Increase savings and increase gross investment.
C) Increase savings and increase the productivity of capital.
D) Increase savings and reduce taxes on wealthy investors.

Question 6

According to conservatives, which policy should government implement to encourage economic growth?

A) Cut taxes on low income individuals to increase consumer spending.
B) Cut taxes on the middle class to encourage consumer spending and saving.
C) Cut taxes on the wealthy who are more likely to save.
D) Increase taxes on the middle class to discourage excess consumer spending.

Question 7

According to conservatives, which of the following will be most likely to increase the productivity of capital?

A) More research and development of new technology by government.
B) More research and development of new technology by business.
C) Increasing the level of gross investment.
D) Increasing the rate of depreciation.

Question 8

The possibility that there would be sufficient money for investment from savings and a very low rate of investment

A) is predicted by Say's Law.
B) will not occur according to Say's Law.
C) has never occurred.
D) will occur if profit rates are too high.

Question 9

A higher rate of national saving

A) is always a good thing.
B) is beneficial during an expansion at full employment.
C) is not helpful during a recession.
D) is beneficial as long as it is accompanied by increased consumer spending.

Question 10

A high level of consumer spending

A) is always a good thing.
B) is especially beneficial during a recession.
C) is not helpful during an expansion at full employment.
D) is beneficial as long as it is accompanied by increased consumer saving.

Question 11

A high rate of military spending by the government

A) is beneficial to the economy during a period of full employment.
B) tends to increase investment and consumer goods during a period of full employment.
C) will tend to put the economy into a recession.
D) will tend to reduce the rate of capital investment over a long period of time.

Question 12

Between 1950 and 1999 the annual rate of GDP growth in the US

A) has been between 1 and 3%
B) has been at least 5%
C) has been between 3% and 5%
D) has been around 10% per year.

Question 13

During the 1970s and 1980s

A) the U.S. economy experienced a "golden age" of economic prosperity.
B) the United States began to compete effectively with, and in some cases outcompeted, European and Japanese corporations.
C) the United States produced over 80% of the world's manufactured goods.
D) the United States went through a long period of relative stagnation.