Deck 11: Economic Growth and the Wealth of Nations

Question 1

If you earn a subsistence-level income,much of your time is spent acquiring:

A) luxury items, such as expensive cars and a nice house.
B) tax cuts, which will raise your take-home pay.
C) education and training, to better improve your earnings.
D) entertainment and consumer electronics.
E) basic necessities such as food, clothing, and shelter.

Answer 1

basic necessities such as food, clothing, and shelter.

Question 2

In 1350,average world income was roughly:

A) $628.
B) $816.
C) $554.
D) $1,019.
E) $778.

Answer 2

$816.

Question 3

Which of the following statements best describes the average standard of living for much of human history,prior to the Industrial Revolution?

A) There were no rich people; everyone earned the same income.
B) Average income around the world was basically unchanged for centuries.
C) Total income around the world was basically unchanged for centuries.
D) There were no class differences across nations.
E) The vast majority of people were wealthy, with only a few earning subsistence wages.

Answer 3

Average income around the world was basically unchanged for centuries.

Question 4

Average world income began to increase rapidly during:

A) the Enlightenment.
B) the Dark Ages.
C) the Second World War.
D) the War of the Ring.
E) the Industrial Revolution.

Question 5

In 2000,annual real per capita gross domestic product (GDP) in the United States was around ___________,whereas in China,it was around ___________.

A) $5,200; $44,000
B) $36,000; $18,000
C) $44,000; $5,200
D) $72,000; $12,000
E) $44,000; $9,000

Question 6

Real per capita gross domestic product (GDP) is defined as:

A) the market value of all final goods and services consumed in a country.
B) the average number of goods produced in a country.
C) the average level of income in a country.
D) the median level of income in a country.
E) the total level of income in a country.

Question 7

Average income in Western Europe in 1600 was roughly:

A) $1,400.
B) $1,555.
C) $1,200.
D) $4,100.
E) $1,368.

Question 8

Average world income began to rapidly rise during the Industrial Revolution because:

A) population growth outpaced the pace of technological innovation.
B) governments in Western Europe sharply cut taxes.
C) the United States gained its independence from Great Britain.
D) the pace of technological innovation outpaced population growth.
E) there were few wars during that time period.

Question 9

According to the textbook,which of the following countries is not considered a "wealthy nation"?

A) Denmark
B) Israel
C) Germany
D) Liberia
E) the United States

Question 10

An increase in the amount of household wealth in an economy would ___________ the average standard of living and would ___________ the spending power experienced by the typical person.

A) raise; have little effect on
B) raise; improve
C) raise; reduce
D) have no effect on; improve
E) lower; reduce

Question 11

According to the World Bank,the 31 wealthiest countries in the world tended to have much lower rates of ___________ and much higher rates of ___________ when compared to the 40 poorest countries.

A) adult literacy; cell phone subscriptions
B) access to water; access to sanitation
C) infant mortality; adult literacy
D) Internet users; life expectancy
E) educational achievement; life expectancy

Question 12

Residents of wealthy countries tend to have longer life expectancies because:

A) the residents of wealthier countries tend to work harder than those in poor countries.
B) the government meets all health care needs in wealthy countries.
C) higher per capita real gross domestic product (GDP) growth rates allow for more spending on health care.
D) consumers in wealthy countries face lower health care costs.
E) the residents of poor countries have no desire to consume health care.

Question 13

Economic growth is defined as:

A) the percent change of gross domestic product (GDP).
B) the percent change of real GDP.
C) the percent change of real per capita GDP.
D) the percent change of per capita GDP.
E) the percent change of population.

Question 14

Long-run per capita world income growth was basically flat until around what year?

A) 1500
B) 1600
C) 1700
D) 1800
E) 1900

Question 15

In 2000,annual real per capita gross domestic product (GDP) in Western Europe was around ___________,whereas in India,it was around ___________.

A) $2,900; $31,000
B) $46,000; $4,200
C) $28,000; $20,000
D) $75,000; $5,600
E) $31,000; $2,900

Question 16

Per capita real gross domestic product (GDP) is higher in the United States than in Mexico.Based on that,we could predict the United States to have a higher rate of ___________ and a lower rate of ___________.

A) infant mortality; life expectancy
B) Internet users; automobile ownership
C) educational achievement; physicians per capita
D) Internet users; infant mortality
E) cellular phone use; personal computer use

Question 17

Residents of poor countries tend to have higher rates of infant mortality because:

A) residents of wealthy countries have all their health care provided by the government.
B) residents of poor countries tend to have fewer children than do residents in wealthy countries.
C) consumers in poor countries face higher tax rates and have less to spend on health care.
D) lower per capita real gross domestic product (GDP) growth rates allow for less spending on health care.
E) mothers in poor countries tend to wait until they are much older before having children.

Question 18

Higher rates of economic growth are negatively correlated with:

A) better education.
B) better health care.
C) shorter life expectancy.
D) the number of physicians per capita.
E) adult literacy.

Question 19

In 1800,the average income of U.S.citizens was roughly:

A) $100.
B) $1,400.
C) $19,600.
D) $2,000.
E) $1,750.

Question 20

Residents of poor countries tend to have fewer automobiles per capita because:

A) lower per capita real gross domestic product (GDP) growth rates allow for less spending on automobiles.
B) residents of poor countries tend to live on farms, where cars are unnecessary.
C) residents of wealthy countries have automobiles provided to them by the government.
D) tax rates are higher in poor countries, which leaves less money to spend on cars.
E) residents of poor countries generally prefer to walk.

Question 21

The percent change in nominal gross domestic product (GDP) minus the percent change in prices and the rate of population growth equals:

A) real per capita GDP.
B) the percent change in real GDP.
C) the percent change in per capita GDP.
D) the percent change in per capita real GDP.
E) real GDP.

Question 22

Nominal gross domestic product (GDP) is a poor measure of economic growth because:

A) it does not count investment by private businesses.
B) it overstates the importance of consumer spending.
C) it does not include government spending.
D) it ignores imports and exports.
E) it does not consider changes in prices or population growth.

Question 23

The two factors that must be subtracted from the percent change in nominal gross domestic product (GDP) to yield the percent change in per capita real GDP are:

A) the percent change in prices and the rate of investment.
B) the percent change in prices and the rate of population growth.
C) the rate of investment and the rate of savings.
D) the rate of population growth and the rate of savings.
E) the rate of investment and the rate of population growth.

Question 24

Change in per capita real gross domestic product (GDP) is the best measure of economic growth because:

A) it adjusts changes in nominal GDP for changes in the price level and population growth.
B) it ignores changes in the price level used to compute nominal GDP.
C) it includes government spending, whereas nominal GDP does not.
D) it includes all economic activity, including sales of illegal goods and services, which nominal GDP ignores.
E) it does not consider changes in the population, which are not relevant to GDP anyway.

Question 25

From 2011 to 2012,U.S.real GDP increased by 2.2% and the U.S.population grew by 1%.Therefore,per capita real GDP in the United States increased by:

A) 2.8%.
B) 1.2%.
C) 3.8%.
D) 1.8%.
E) 5.4%.

Question 26

Annual real per capita gross domestic product (GDP) in the United States was roughly $44,000 in 2000.If it grew by 3% the following year,by 2001 the annual real per capita GDP would be:

A) $57,200.
B) $42,718.
C) $33,846.
D) $45,320.
E) $1,320.

Question 27

In 2011,Canada's gross domestic product (GDP) was roughly $1.396 trillion.Given that Canada's population was roughly 33.4 million people,per capita GDP in Canada in 2011 was roughly:

A) $4,180.
B) $417,960.
C) $0.23.
D) $41,796.
E) $23,000.

Question 28

From 2011 to 2012,nominal gross domestic product (GDP) in the United States increased by:

A) 8.3%.
B) 1%.
C) 4.0%.
D) 2.8%.
E) 5.4%.

Question 29

If an economy experiences economic growth,does that mean that everyone in that economy will be better off?

A) No, it means that the average person is better off.
B) Yes, that is the definition of economic growth.
C) Yes, but only if there is little immigration during that time period.
D) No, economic growth is not correlated with standards of living.
E) Yes, but only if nominal gross domestic product (GDP) increases.

Question 30

Access to lifesaving medicine is very limited in parts of Africa; as a result,over 10% of children do not reach the age of five.What effect would an increase in medical aid to African children have on overall economic growth for the continent?

A) Economic growth would not be affected; medical aid does not contribute to gross domestic product (GDP).
B) Economic growth would decrease because there would be more people to feed but no additional resources.
C) Economic growth would not be affected because children do not contribute to economic growth.
D) Economic growth would increase because the health and productivity of the labor supply would increase.
E) Economic growth would increase because more children would survive, which represents a technological advance.

Question 31

From 2009 to 2010,nominal gross domestic product (GDP) in the United States grew by 3.8%.Given that prices increased by 1% and per capita real GDP grew by 1.8%,we know that the population grew by:

A) 2%.
B) 1.8%.
C) 1%.
D) 4.8%.
E) 5.8%.

Question 32

In 2012,U.S.gross domestic product (GDP) was roughly:

A) $15.6 trillion.
B) $1.56 trillion.
C) $156 trillion.
D) $156 billion.
E) $156 million.

Question 33

From 2009 to 2010,nominal gross domestic product (GDP) in the United States grew by 3.8%.Given that prices increased by 1% and the population grew by 1%,we know that per capita real GDP grew by:

A) 3.8%.
B) 1.8%.
C) 2.8%.
D) 4.8%.
E) 5.8%.

Question 34

The two factors that must be added to the percent change in per capita real gross domestic product (GDP) to yield the percent change in nominal GDP are:

A) the percent change in prices and the rate of investment.
B) the rate of investment and the rate of savings.
C) the percent change in prices and the rate of population growth.
D) the rate of population growth and the rate of savings.
E) the rate of investment and the rate of population growth.

Question 35

In 2010,U.S.gross domestic product (GDP) was roughly $14.6 trillion.Given that the U.S.population was roughly 308 million people,per capita GDP in the United States in 2010 was roughly:

A) $4,760.
B) $0.22.
C) $47,403.
D) $22,000.
E) $475,990.

Question 36

Average income in Western Europe in 1600 was roughly $1,400 per year,while in Latin America,it was less than half that.Which of the following best explains this difference in average income?

A) Western Europe had fewer resources than Latin America.
B) Western Europe had never been invaded or colonized, whereas Latin America had.
C) Western Europe had more advanced technology than Latin America.
D) Western Europe had lower taxes than Latin America.
E) Western Europe had a better climate than Latin America.

Question 37

The percent change in real per capita gross domestic product (GDP) equals:

A) the percent change in nominal GDP.
B) the percent change in nominal GDP minus the rate of population growth.
C) the percent change in nominal GDP minus the rate of population growth minus the percent change in prices.
D) the rate of population growth minus the percent change in prices.
E) the rate of population growth.

Question 38

Economic growth equals the percent change in nominal gross domestic product (GDP) minus:

A) the percent change in prices and the rate of population growth.
B) the percent change in prices.
C) the rate of population growth.
D) the percent change in prices and the federal budget deficit.
E) the rate of population growth and the percent change in investment.

Question 39

From 2011 to 2012,real gross domestic product (GDP) in the United States increased by:

A) 2.8%.
B) 1%.
C) 3.8%.
D) 2.2%.
E) 5.4%.

Question 40

Access to lifesaving medicine is very limited in parts of Africa; as a result,over 10% of children do not reach the age of five.What effect would this have on economic growth in Africa?

A) It would have no effect on economic growth because children do not contribute to economic growth.
B) It would slow economic growth because worker health and labor productivity would grow more slowly.
C) It would have no effect on economic growth because adults are less susceptible to illness.
D) It would increase economic growth because more money would be spent on medical research.
E) It would slow economic growth because fewer adults would be employed as teachers.

Question 41

From 2009 to 2010,per capita real gross domestic product (GDP) in the United States grew by 1.8%.Given that prices increased by 1% and the population grew by 1%,we know that nominal GDP grew by:

A) 4.8%.
B) 1.8%.
C) 2.8%.
D) 3.8%.
E) 5.8%.

Question 42

Annual real per capita gross domestic product (GDP) in China was roughly $5,200 in 2000.If it grew by 10% the following year,by 2001 the annual real per capita GDP would be:

A) $520.
B) $5,720.
C) $5,252.
D) $10,520.
E) $6,125.

Question 43

If your income increases at a rate of 2% per year,how long will it take to double your income?

A) 10 years
B) 25 years
C) 35 years
D) 50 years
E) 75 years

Question 44

From 2009 to 2010,nominal gross domestic product (GDP) in the United States grew by 3.8%.Given that the population grew by 1% and per capita real GDP grew by 1.8%,we know that prices increased by:

A) 2%.
B) 1.8%.
C) 4.8%.
D) 1%.
E) 5.8%.

Question 45

When computing economic growth,changes in nominal gross domestic product (GDP) must be adjusted to reflect population growth because:

A) holding real GDP constant, an increase in the population actually lowers average standards of living.
B) an increase in population will tend to reduce nominal GDP.
C) changes in population tend to have no effect on standards of living.
D) holding real GDP constant, an increase in the population actually raises average standards of living.
E) an increase in the population will tend to decrease average prices.

Question 46

James has worked for the same company his entire life.His current income is $100,000 per year.When he was originally hired,he made $50,000 per year.The company has given James a consistent raise of 2% every year.How long has James been with the company?

A) 10 years
B) 25 years
C) 35 years
D) 50 years
E) 75 years

Question 47

In 2007,per capita real gross domestic product (GDP) in Brazil was $9,893.92.By 2008,it had increased to $10,525.58.At what rate did Brazil's economy grow in that time?

A) 6.00%
B) 5.38%
C) 6.38%
D) 7.27%
E) 2.34%

Question 48

In the Republic of Yemen,per capita real gross domestic product (GDP) in 2004 was $2,109.27.By 2005,it had increased to $2,203.05.At what rate did Yemen's economy grow in that time?

A) 4.26%
B) 4.45%
C) 9.38%
D) 1.21%
E) 8.44%

Question 49

In 2005,per capita real gross domestic product (GDP) in Angola was $3,328.10.By 2006,it had increased to $4,034.31.At what rate did Angola's economy grow in that time?

A) 8.20%
B) 21.22%
C) 17.51%
D) 7.06%
E) 10.12%

Question 50

If you attempted to determine if the standard of living of a country has increased by looking only at changes in its nominal gross domestic product (GDP),what would you be missing?

A) The fact that nominal GDP includes all economic activity, including sales of used goods and illegal goods
B) The fact that nominal GDP only considers changes in the price level but ignores changes in population
C) The fact that an increase in nominal GDP normally means that standards of living are falling, not rising
D) The fact that, in the long run, nominal GDP is the best measure of overall economic growth
E) The fact that an increase in nominal GDP does not necessarily mean that standards of living are rising, due to changes in prices and the population

Question 51

Annual real per capita gross domestic product (GDP) in Western Europe was roughly $31,000 in 2000.If it grew by 4% the following year,by 2001 the annual real per capita GDP would be:

A) $57,800.
B) $35,910.
C) $43,400.
D) $31,400.
E) $32,240.

Question 52

When computing economic growth,changes in nominal gross domestic product (GDP) must be adjusted to reflect changes in the price level because:

A) prices are nearly impossible to measure by government economists.
B) an increase in prices will decrease nominal GDP without any actual economic growth.
C) an increase in prices will increase nominal GDP without any actual economic growth.
D) changes in prices are primarily determined by the government.
E) changes in prices are largely irrelevant for consumers.

Question 53

In 2010,per capita real gross domestic product (GDP) in Germany was $40,197.67.By 2011,it had increased to $43,741.55.At what rate did Germany's economy grow in that time?

A) 5.53%
B) 6.7%
C) 3.54%
D) 8.1%
E) 8.82%

Question 54

In 2010,per capita real gross domestic product (GDP) in the United States was roughly $46,000.In 2011,per capita real GDP in the United States was roughly $48,400.Therefore,between 2010 and 2011,the rate of economic growth in the United States was:

A) 2.5%.
B) 2.4%.
C) 4.9%.
D) 5.2%.
E) 0.5%.

Question 55

Annual real per capita gross domestic product (GDP) in India was roughly $2,900 in 2000.If it grew by 8% the following year,by 2001 the annual real per capita GDP would be:

A) $3,132.
B) $2,908.
C) $5,220.
D) $6,080.
E) $4,760.

Question 56

In 2011,per capita real gross domestic product (GDP) in Mexico was roughly $10,100.If Mexico experienced economic growth of 4.8% in 2012,per capita real GDP would increase to:

A) $10,585.
B) $10,148.
C) $21,042.
D) $485.
E) $15,353.

Question 57

In 1998,per capita real gross domestic product (GDP) in Thailand was $4,444.19.By 1999,it had increased to $4,695.22.At what rate did Thailand's economy grow in that time?

A) 12.22%
B) 5.65%
C) 5.35%
D) 7.87%
E) 4.98%

Question 58

In 2009,per capita real gross domestic product (GDP) in Croatia was $10,059.68.By 2010,it had increased to $10,257.71.At what rate did Croatia's economy grow in that time?

A) 1.97%
B) 1.93%
C) 2.08%
D) 4.54%
E) 3.33%

Question 59

In 2010,real gross domestic product (GDP) in the United States was roughly $14.6 trillion.In 2011,real GDP in the United States was roughly $15.1 trillion.Therefore,between 2010 and 2011,real GDP grew by:

A) 4.3%.
B) 3.4%.
C) 3.3%.
D) 4.5%.
E) 0.5%.

Question 60

From 2009 to 2010,nominal gross domestic product (GDP) in the United States increased by 3.8%.Does this mean that the U.S.economy actually grew during that time period?

A) Yes, because that is what nominal GDP measures.
B) Yes, because nominal GDP takes into account changes in prices and the population.
C) No, because nominal GDP only considers changes in prices, not population growth.
D) No, because nominal GDP only considers population growth, not changes in prices.
E) No, because that number ignores changes in prices and population growth.

Question 61

In 1950,Nicaragua and Brazil had roughly the same-sized economies.Now,Brazil's economy is almost five times as large as Nicaragua's.This is likely because:

A) Brazil had almost no trade with other countries.
B) Nicaragua had higher taxes and government spending.
C) Brazil had better resources and technology.
D) Nicaragua had many more government regulations.
E) Brazil had no public school system and used private schools instead.

Question 62

From 2009 to 2010 per capita real gross domestic product (GDP) in the United States grew by 1.8%.At that rate,according to the Rule of 70,in roughly how many years will per capita real GDP double?

A) 29 years
B) 68 years
C) 72 years
D) 39 years
E) 18 years

Question 63

The inputs used to produce goods and services are also known as:

A) costs.
B) resources.
C) output.
D) prices.
E) institutions.

Question 64

Saudi Arabia is an oil-rich country in the Middle East.Much of the country is covered by desert,meaning that the nation's food production is very low.Much of its food must be imported from other countries.Does this mean that Saudi Arabia has a very small endowment of natural resources?

A) No, because Saudi Arabia has lots of petroleum, a fossil fuel, which is also considered a natural resource.
B) No, because very few people live in Saudi Arabia, so they have no use for large amounts of food production.
C) Yes, because it has very little land for growing food.
D) Yes, because it also lacks forests and rivers.
E) No, because Saudi Arabia irrigates much of its desert land for food production.

Question 65

From 2006 to 2010,per capita real gross domestic product (GDP) in Poland grew an average of 4.71% per year.At that rate,according to the Rule of 70,in roughly how many years will the Polish economy double in size?

A) 7.6 years
B) 14.9 years
C) 12.1 years
D) 8.8 years
E) 8.4 years

Question 66

Which of the following are the three major categories of resources?

A) physical capital, technology, institutions
B) land, labor, technology
C) institutions, human capital, land
D) natural resources, physical capital, human capital
E) labor, physical capital, technology

Question 67

Resources are:

A) the output that firms produce.
B) inputs used to produce goods and services.
C) the technology that firms use to make things.
D) the institutions that encourage efficiency.
E) the cost of producing goods and services.

Question 68

Japan is a nation of over 6,800 islands,none of which is very large.The largest island,Honshu,is roughly the same size as the state of Montana in the western United States.Does this mean that Japan is destined to have low economic growth and standards of living?

A) Yes, if Japan cannot grow enough food, it will never prosper.
B) No, as long as Japan keeps its taxes low, it will prosper.
C) No, Japan is rich in other resources and has advanced levels of technology.
D) Yes, Japan also lacks institutions like private property rights.
E) Yes, having so little land means there is no room to produce goods and services.

Question 69

From 2006 to 2010,per capita real gross domestic product (GDP) in the Philippines grew an average of 3.16% per year.At that rate,according to the Rule of 70,in roughly how many years will the Filipino economy double in size?

A) 21 years
B) 12 years
C) 22 years
D) 45 years
E) 33 years

Question 70

An example of physical capital is:

A) exhaust from a smokestack.
B) a factory.
C) dog food.
D) a pillow.
E) pants.

Question 71

From 2006 to 2010,per capita real gross domestic product (GDP) in Croatia grew an average of 1.08% per year.At that rate,according to the Rule of 70,in roughly how many years will the Croatian economy double in size?

A) 65 years
B) 29 years
C) 69 years
D) 51 years
E) 34 years

Question 72

We know that resources are important for economic growth.Which of the following statements about resources is true?

A) All resources are ultimately human made, because without their use by people, resources would have no value.
B) Very few resources are truly scarce; in fact, most exist in abundance.
C) Resources can be natural, like mineral deposits or forests, or human made, like machinery and factories.
D) All countries have the same endowments of resources.
E) Most countries do a very poor job of exploiting the resources they have.

Question 73

An increase in ________________ would lead to an increase in long-run economic growth.

A) consumer spending and borrowing
B) government taxes and fees
C) resources and technology
D) imports and exports
E) prices and interest rates

Question 74

From 2006 to 2010,per capita real gross domestic product (GDP) in Ethiopia grew an average of 7.99% per year.At that rate,according to the Rule of 70,in roughly how many years will the Ethiopian economy double in size?

A) 6.2 years
B) 7.8 years
C) 8.8 years
D) 5.5 years
E) 10.1 years

Question 75

From 2006 to 2010,per capita real gross domestic product (GDP) in China grew an average of 10.62% per year.At that rate,according to the Rule of 70,in roughly how many years will Chinese per capita real GDP double in size,beginning in 2006?

A) 7.4 years
B) 5.9 years
C) 8.1 years
D) 6.6 years
E) 9.9 years

Question 76

A(n) _____________ in the amount of resources will tend to _____________ economic growth.

A) increase; increase
B) increase; have no effect on
C) decrease; have no effect on
D) increase; decrease
E) decrease; increase

Question 77

From 2006 to 2010,per capita real gross domestic product (GDP) in Egypt grew an average of 4.8% per year.At that rate,according to the Rule of 70,in roughly how many years will the Egyptian economy double in size?

A) 3 years
B) 15 years
C) 65 years
D) 22 years
E) 35 years

Question 78

From 2006 to 2010,per capita real gross domestic product (GDP) in Japan grew an average of 0.46% per year.At that rate,according to the Rule of 70,in roughly how many years will the Japanese economy double in size?

A) 71 years
B) 128 years
C) 35 years
D) 225 years
E) 152 years

Question 79

From 2006 to 2010,per capita real gross domestic product (GDP) in India grew an average of 7.11% per year.At that rate,according to the Rule of 70,in roughly how many years will the Indian economy double in size?

A) 4.9 years
B) 9.8 years
C) 6.9 years
D) 7.1 years
E) 5.5 years

Question 80

Which of the following would be classified as a natural resource?

A) obtaining a college degree
B) a factory
C) coal
D) a loaf of bread
E) wireless networking equipment