Deck 1: Economic Growth: an Introduction to Scarcity and Choice

Question 1

It is always better for the economy to experience economic growth.

Answer 1

False

Question 2

The four primary resources are land, labor, capital, and entrepreneurship.

Answer 2

True

Question 3

It pays to increase the production of capital goods if the marginal cost of the production decision exceeds the marginal benefit.

Answer 3

False

Question 4

The economic decisions that influence growth are those that increase capital and improve technology.

Question 5

Productivity growth rates in Japan and Europe are greater than the productivity growth rate in the United States.

Question 6

Per capita GDP in Japan exceeds per capita GDP in Europe because Japanese employees work more hours.

Question 7

The production possibilities curve shows the maximum combinations of goods and services that can be produced by an economy when unemployment is below the natural rate.

Question 8

Technological improvement allows more output to be obtained from a given level of inputs, thereby shifting the production possibilities curve to the right.

Question 9

The growth of labor productivity is caused by the growth of capital relative to labor and by technological and efficiency improvements.

Question 10

According to Gwartney, economic freedom causes prosperity

Question 11

The use of information technology (IT) capital services grew at almost 20 percent per year from 1995 to 1999.

Question 12

Since 1973, the growth rate of per capita GDP in the U.S. has been lower than it was in previous periods.

Question 13

Creative destruction leads to a decrease in economic growth

Question 14

The decline in the growth of capital intensity in the United States has been caused largely by a rapid increase in labor inputs in addition to slow growth in capital inputs.

Question 15

As resources are transferred from production of trucks to the production of computers, marginal cost of computers decreases.

Question 16

Increases in resources, technological improvement, and efficiency improvement are all potential sources of economic growth.

Question 17

All points on or below the production possibilities curve are attainable.

Question 18

The best combination of goods and services is being produced when marginal cost and marginal benefit are equal.

Question 19

Productivity per hour in Japan is almost twice as large as productivity per hour in the United States.

Question 20

Growth based on capital accumulation can be more costly than growth based on efficiency improvement.

Question 21

Which of the following was authored by Adam Smith?

A) Declaration of Independence
B) Principles of Economics
C) The Wealth of Nations
D) The Academic Scribblers

Question 22

The best technology for producing popcorn and tractors is the one that requires the most resources to produce a given combination of popcorn and tractors.

Question 23

Which statement is False?

A) Brazil has been successful at closing its economic gap with the United States.
B) The growth rates of per capita GDP in the U.S. and in Japan have slowed in the years since 1973.
C) China's per capita GDP growth has dramatically increased since 1973.
D) Since 1990, the U.S. has gained a growth advantage over Japan.

Question 24

Capital resources consist of:

A) land and physical capital.
B) physical and human capital.
C) land and human capital.
D) labor and human capital.

Question 25

Which of the following statements does NOT describe China's economic growth over the last 20 years:

A) Millions have escaped absolute poverty in China over the last 20 years.
B) More people managed to escape dire poverty during this period than in any other 20-year period in history.
C) Despite growth, people in China had less to eat and had fewer of life's necessities in 1991 than in 1978.
D) Adjusted for inflation, per capita GDP increased over three times from 1978 to 1995.

Question 26

The economy in the U.S.:

A) has recently been growing at a slower rate than it has since 1820.
B) has recently been growing at a faster rate that it has since 1820.
C) has recently had a much higher growth rate than Japan and Korea.
D) has recently experienced annual growth rates of over 5 percent.

Question 27

Economic stagnation has become a concern because:

A) growth rates in industrialized countries have declined significantly over the 1973 - 1990 time period.
B) Third World countries have experienced extremely high growth rates since 1972.
C) growth rates in Third World countries have declined significantly over the 1973 - 1990 time period.
D) growth rates in all countries have stagnated since 1972.

Question 28

Efforts and services of people in production of goods and services are:

A) land.
B) labor.
C) capital.
D) human capital.

Question 29

Adam Smiths view of the political economy in 1776 was in direct contrast to the view set forth by Thomas Jefferson in the Declaration of Independence.

Question 30

A production possibilities curve shows:

A) the maximum combinations of two goods or services that can be produced when resources are fully used and the best technology is employed.
B) the minimum combinations of two goods or services that can be produced when resources are fully used and the best technology is employed.
C) the maximum combinations of two goods or services that can be produced when the unemployment rate in the economy is not above 6 percent.
D) the maximum combinations of two goods or services that can be produced when the economy is at the trough of the business cycle.

Question 31

The four primary resources are:

A) land, labor, stocks, and bonds.
B) land, labor, capital, and entrepreneurship.
C) land, capital, equipment, and facilities.
D) land, labor, productivity, and entrepreneurship.

Question 32

Man-made, durable items used in the production processes are:

A) land.
B) labor.
C) capital.
D) equipment.

Question 33

Resources found in nature, such as land, water, forests, mineral deposits, and air are called:

A) land resources.
B) labor resources.
C) capital resources.
D) natural resources.

Question 34

The U.S. growth rates for the 1990-99 period has:

A) increased compared to 1973-90 period.
B) decreased compared to 1973-90 period.
C) has remained the same as that of 1973-90 period.
D) has stagnated at low rates.

Question 35

According to some economists, low taxes, free markets and price stability promote economic growth.

Question 36

Technology catch up offers an advantage to today's developing countries.

Question 37

In an economy that produces only popcorn and tractors, which statement best describes the opportunity cost of an additional tractor?

A) The purchase price of the new tractor.
B) The value of the popcorn that must be given up so that the tractor may be produced.
C) The purchase price of one unit of popcorn.
D) The value of the tractor gained minus the value of the popcorn given up.

Question 38

The large investment in human capital by East Asian countries may be one reason they have experienced rapid income growth.

Question 39

New technology on its own is sufficient to achieve economic growth

Question 40

Correlations between high levels of economic freedom and high standards of living prove that economic freedom causes prosperity.

Question 41

Which of the following statements is correct?

A) It is desirable to invest in more capital goods for future economic growth only if the marginal benefit of the investment exceeds the marginal cost.
B) The marginal benefit of capital goods will increase as more capital goods are produced.
C) In order to produce capital goods, more consumption goods must be produced in the present.
D) As additional units of capital goods are produced, the marginal productivity of capital will increase, because labor will have more capital with which to work.

Question 42

A point outside the production possibilities curve refers to a combination that would be:

A) attainable to produce.
B) efficient to produce.
C) inefficient to produce.
D) unattainable to produce.

Question 43

If an economy is currently producing at the point where marginal benefit and marginal cost are equal, we know that:

A) the best technology is not being used.
B) the economy should change its allocation of resources.
C) unemployment exists in the economy.
D) the best combination of goods and services is being produced.

Question 44

Through war, many of the factories in country 1 are destroyed and many of its people are killed. As a result, the country's

A) production possibilities frontier (PPF) after the war has probably shifted to the right compared to its PPF prior to the war.
B) PPF after the war is probably the same PPF as before the war.
C) PPF after the war has probably shifted to the left compared to its PPF prior to the war
D) ability to produce goods and services has increased

Question 45

The increase in the growth rate of capital intensity in the 1990s was due in large part to:

A) a rapid growth in the labor supply.
B) a slower growth in the labor supply.
C) a rapid growth in agricultural technology capital.
D) a rapid growth in use of information technology capital.

Question 46

In a world of scarcity:

A) if we want to produce more of one good, we have to produce less of something else.
B) there is no limit to what can be produced.
C) the marginal cost of additional units of a good declines as more of the good is produced.
D) we can have it all!

Question 47

If society wishes to increase living standards while minimizing sacrifices of present consumption, it should encourage:

A) growth in the labor supply.
B) growth in capital.
C) decreases in capital.
D) technological improvement.

Question 48

A change in the best technology that allows more to be produced with a given amount of resources is referred to as:

A) technological gain.
B) technical efficiency change.
C) technological growth.
D) technological improvement.

Question 49

If the economy moves from a point inside its production possibilities curve to a point on its production possibilities curve, there has been:

A) Efficiency improvement.
B) Technological improvement.
C) Efficiency growth.
D) Technological growth.

Question 50

During 1970s and 1980s, a period of rapid scientific advances:

A) technical change grew at an unprecedented rate in the manufacturing sector.
B) technical change all but disappeared from the U.S. economy.
C) there were positive changes in technical efficiency in the manufacturing sector.
D) labor productivity growth in the manufacturing sector was greater than it was during the 1960s.

Question 51

A change from the use of less than the best to the best technology is referred to as:

A) efficiency progress.
B) efficiency change.
C) efficiency improvement.
D) efficiency growth.

Question 52

The best technology is:

A) the technology that is cutting-edge technology.
B) the technology that will maximize a business's average cost of production.
C) the technology that is the most diffused throughout the economy.
D) the technology that requires the fewest resources to produce a good.

Question 53

Which of the following would result in an outward shift of the production possibilities curve?

A) Efficiency improvement.
B) A decrease in capital.
C) Technological improvement.
D) A decrease in land.

Question 54

Japanese per capita GDP is close to that of the United States' because:

A) hourly productivity in Japan exceeds that of the U.S.
B) the average hours worked in the U.S. exceed the average hours worked in Japan.
C) the average hours worked in Japan exceed the average hours worked in the U.S.
D) the Japanese government has pursued a policy of balancing the budget.

Question 55

Which of the following could not result in an increase in labor productivity?

A) A new economic institution.
B) An increase in the capital stock.
C) Growth in the supply of labor.
D) Widespread use of a new electronic pocket secretary that tells you how to arrange your daily activities in the most efficient manner.

Question 56

Which of the following are used to explain the low levels of productivity growth that have persisted in the service sector during the 1980s?

A) measurement error.
B) a lack of competitive pressures.
C) It is difficult to measure output in service industries.
D) All of above.

Question 57

Expert economists believe that the capital intensity effect on productivity in the "new economy" is mainly tied to the:

A) increases in production of "new goods".
B) increases in labor intensity.
C) increases in capital services from IT assets.
D) increases in land intensity.

Question 58

Which of the following statements about economic growth is False?

A) Greater economic growth means sacrificing in the present for the future.
B) Greater economic growth is always desirable.
C) Capital accumulation can result in economic growth.
D) Labor force growth can increase GDP, but not usually enough to increase living standards.

Question 59

If the United States wants productivity to increase it should:

A) increase educational quality.
B) invest less in capital.
C) produce more consumer goods.
D) decrease the rate of growth in the labor supply.

Question 60

Some people feel that continuing low levels of productivity growth in the U.S. economy is a result of:

A) measurement error.
B) increased foreign competition.
C) a decrease in prices.
D) an increase in the return that could be earned from research and development.

Question 61

Use the following diagram to answer the following questions.

Refer to Consumption Goods. Production at which of the above points would result in the greatest long-term growth in GDP?

A) A.
B) B.
C) C.
D) D.

Question 62

Use the following diagram to answer the following questions.

Refer to Housing. As we move down the production possibilities curve from point A to point C, there will be:

A) an increase in both the marginal cost and marginal benefit of cars.
B) a decrease in both the marginal cost and marginal benefit of cars.
C) a decrease in the marginal cost of cars and an increase in the marginal benefit of cars.
D) an increase in the marginal cost of cars and a decrease in the marginal benefit of cars.

Question 63

Use the following diagram to answer the following questions.

Refer to Housing. The best technology is being used at:

A) point A.
B) point D.
C) any point beyond the production possibilities curve.
D) none of the points shown represent use of the best technology.

Question 64

As a result of free trade, the power of monopolies has declined in Small Land. This is an example of:

A) the effect of technological diffusion.
B) the catch-up effect.
C) the structural change effect.
D) the foreign trade effect.

Question 65

A robot on an assembly line would be an example of:

A) land.
B) labor.
C) capital.
D) equipment.

Question 66

A PPF can:

A) shift outward but not inward.
B) shift inward or outward.
C) shift inward but not outward.
D) shift neither inward nor outward.

Question 67

Suppose the economy is producing at a point on its production possibilities curve where the marginal benefit of an additional unit of housing is $70,000 while the marginal cost of an additional unit of housing is $78,000. In this instance:

A) the production of housing should decrease.
B) the production of housing should increase.
C) the production of housing should not be changed.
D) the production of housing should be increased only if there are homeless people.

Question 68

Use the following diagram to answer the following questions.

Refer to Housing. The sacrifice of moving from point B to point A is:

A) 850 units of housing.
B) 75 units of housing.
C) 100 units of cars.
D) 200 units of cars.

Question 69

According to Gwartney, which of the following does not promote growth

A) protectionism.
B) free markets.
C) low taxes.
D) monetary stability.

Question 70

Use the following diagram to answer the following questions.

Refer to Consumption Goods. Suppose the marginal benefit of moving from point B to point C is $500 while the marginal cost is $350. We know that:

A) the economy should produce additional capital goods.
B) the economy should produce additional consumption goods.
C) the economy should stay at point B.
D) the economy should move from point B to point A.

Question 71

Productivity growth rates in Japan and Europe exceed those in the United States because:

A) Japanese and European workers are more productive than their American counterparts.
B) capital intensity has increased faster in Europe and Japan.
C) managers of Japanese and European firms are more efficient than managers of firms in the United States.
D) employment has grown slowly in the United States.

Question 72

Which of the following is an example of capital?

A) 100 shares of Intel stock.
B) A $1,000 government bond.
C) A $100 dollar bill.
D) A computer used by a secretary.

Question 73

The process by which new technologies come on in waves and eliminate old ones is called

A) efficiency improvement.
B) entrepreneurship.
C) capital intensity.
D) creative destruction.

Question 74

Oil deposits found on the north slope in Alaska would be an example of:

A) land.
B) labor.
C) capital.
D) natural resources.

Question 75

Suppose the economy is producing at a point on its production possibilities curve where the marginal benefit of an additional unit of capital is $45. The marginal cost of an additional unit of capital is $30. In this instance:

A) the production of capital should decrease.
B) the production of capital should increase.
C) the production of capital should not be changed.
D) the production of capital should be decreased if many people in society are unemployed.

Question 76

Sheila currently does economic consulting for a firm. When she uses her skills to prepare a consulting report she is acting as:

A) land in the production process.
B) labor in the production process.
C) capital in the production process.
D) human input into the production process.

Question 77

The management department's secretary has just gotten a new computer that allows him to do reports in less time. This is an example of:

A) efficiency progress.
B) efficiency change.
C) efficiency improvement.
D) efficiency growth.

Question 78

Use the following diagram to answer the following questions.

Refer to Housing. A point at which the economy might be technically inefficient would be:

A) A.
B) B.
C) C.
D) D.

Question 79

Engines Incorporated has just developed a revolutionary engine that will allow trucks to haul their loads across the country without stopping for fuel. This is an example of:

A) technological improvement.
B) technological progress.
C) technical efficiency change.
D) technological growth.

Question 80

The ratio of capital to labor in production is referred to as?

A) labor intensity
B) technical progress.
C) capital intensity.
D) technological diffusion