Deck 26: Production and Growth

Question 1

A production function describes the relationship between the quantity of inputs used in production and the quantity of output from production.

Answer 1

True

Question 2

Technological knowledge enables improved productivity.

Answer 2

True

Question 3

Productivity is a measure of:
Productivity is a measure of:

A) the amount of goods and services produced from each worker in a given year
B) the amount of goods and services produced per person in the country
C) the amount of goods and services produced from each hour of a worker's time
D) the amount of goods and services produced by a country relative to another country

Answer 3

the amount of goods and services produced from each hour of a worker's time

Question 4

The level of GDP is a good gauge of economic prosperity, and the growth of GDP is a good gauge of economic progress.

Question 5

The amount of goods and services produced from each hour of a worker's time is called:

A) output
B) productivity
C) work quality
D) worker efficiency

Question 6

Economists generally agree that government should encourage economic growth by subsidising specific industries that might be important for technological progress.

Question 7

An economy can increase its real rate of economic growth by increasing consumption and debt creation.

Question 8

In which of the following countries has average income not been stagnant for many years?

A) Chad
B) Ethiopia
C) Nigeria
D) Singapore
E) All of the above

Question 9

Compounding refers to:

A) the adjustment made to GDP that is meant to take out the effects of inflation
B) the increase in a growth rate over a period of time
C) the accumulation of a growth rate over a period of time
D) the geometric smoothing of productivity data

Question 10

According to the rule of 70, if a variable grows at the rate of x% per year, then that variable doubles in approximately 70/x years.

Question 11

Workers' productivity depends on technological knowledge and human capital.

Question 12

Australia's annual growth rate of real GDP per person was 2.08 per cent for the period 1950-2000. Which of the following statements is correct?

A) This means that Australia's real GDP per person actually rose exactly 2.08 per cent every year
B) This means that Australia's real GDP per person actually rose less than 2.08 per cent every year
C) This means that Australia's real GDP per person actually rose more than 2.08 per cent every year
D) This does not mean that Australia's real GDP per person actually rose exactly 2.08 per cent every year

Question 13

In some East Asian countries, such as Hong Kong, Singapore and Taiwan, average income has risen about ____ per cent per year in recent decades.

A) -4 per cent
B) 7 per cent
C) -7 per cent
D) 18 per cent

Question 14

Productivity measures the quality of goods and services that a worker can produce for each hour of work.

Question 15

Using the rule of 70, calculate how many years it would take for John's income to double if he were to experience a 4 per cent increase in income per year.

A) 22 years
B) 17.5 years
C) 5.5 years
D) 25 years

Question 16

Consumer spending encourages firms to produce more, and increases economic growth.

Question 17

Japan's growth in average income and rise to economic superpower is due, in part, to improved worker productivity.

Question 18

The rule of 70 refers to the compulsory retirement age of employees, as they are no longer as productive as they once were.

Question 19

Investment in equipment that manufactures goods more productively can create economic growth in an economy.

Question 20

A standard of living in an economy depends on the economy's ability to produce goods and services.

Question 21

The amount that a nation trades with others is determined by:

A) geography
B) the availability of natural sea ports
C) government policy
D) all of the above

Question 22

A capital investment that is owned and operated by a foreign entity is called:

A) indirect foreign investment
B) foreign portfolio investment
C) foreign direct investment
D) foreign financial investment

Question 23

The production function is given as Y = AF(L, K, H, N), where Y is the quantity of output, A is the level of available production technology, L is the quantity of labour, H is the quantity of human capital and N is the quantity of natural resources. This equation provides:

A) a summary for the four determinants of productivity
B) a summary for the four determinants of production
C) a foundation for measuring inflation
D) a measure of the availability of natural resources

Question 24

Reducing the rate of population growth is widely thought to:

A) be one way that less developed countries can try to raise their standard of living
B) not be an effective way for less developed countries to raise their standard of living
C) reduce the standard of living of less developed countries
D) cause a reduction in productivity

Question 25

Although technological knowledge and human capital are closely related, there is an important difference. Which of the following statements is correct?

A) Human capital is the society's understanding about how the world works, whereas technological knowledge is the resources spent transmitting this understanding to the labour force
B) Technological knowledge is the bridge that links physical and natural resources with human capital
C) Technological knowledge is the society's understanding about how the world works, whereas human capital is the resources spent transmitting this understanding to the labour force
D) Technological knowledge is the society's understanding of human capital

Question 26

While Africa should have grown faster than other developing areas because of its relatively low income per head, it has grown more slowly. This was because some of its countries had policies of:

A) higher trade barriers
B) low tax rates
C) excessive saving rates
D) all of the above

Question 27

Human capital is:

A) the stock of equipment and structures that is used to produce goods and services
B) land, rivers and mineral deposits
C) the knowledge and skills that workers acquire through education, training and experience
D) technological knowledge

Question 28

The catch-up effect is the idea that:

A) savings will always 'catch up' with investment spending
B) other countries aid relatively poor countries so as to 'catch them up'
C) it is easier for a country to grow fast if it starts out relatively poor
D) if investment spending is low, increased savings will help investment to 'catch up'

Question 29

The term constant returns to scale refers to:

A) none of the below
B) a situation where increasing all inputs by a multiple results in no change in the output
C) a situation where increasing all inputs by a multiple results in the output being increased by more than that multiple
D) a situation where increasing all inputs by a multiple results in the output being increased by the same multiple

Question 30

An externality:

A) can only be positive
B) is the effect of one person's actions on the wellbeing of a bystander
C) is the external forces that increase the growth of GDP in a country
D) none of the above

Question 31

If Ernest Rutherford died and left $8000 to be invested for a period of 100 years to benefit medical students and scientific research, how often would this money double if it were to earn 5 per cent per year for all years?

A) every 10 years
B) every 14 years
C) every seven years
D) every five years

Question 32

Technological knowledge refers to:

A) the knowledge and skills that workers acquire through education, training and experience
B) an understanding of the best ways to produce goods and services
C) the stock of equipment and structures that are used to produce goods and services
D) all of the above are examples

Question 33

Countries that devote a small share of GDP to investment, such as New Zealand, tend to have:

A) high growth rates
B) stable growth rates
C) low growth rates
D) very cyclical growth rates

Question 34

The word productivity refers to:

A) the quantity of goods and services that a worker can produce in a year
B) the quantity of goods and services that a worker can produce in a day
C) the quantity of goods and services that a worker can produce for each hour of work
D) the quantity of goods and services that a nation produces in a year

Question 35

The growth of real GDP is:

A) a good gauge of productivity
B) a good gauge of economic prosperity
C) a good gauge of economic progress
D) a good gauge of living standard

Question 36

Which of the following would not be considered physical capital?
Which of the following would not be considered physical capital?

A) Construction of a new factory
B) A desk used in an accountant's office
C) A new computer used in a restaurant
D) On-the-job training
E) All of the above are considered physical capital

Question 37

IIn the long run, a higher savings rate leads to:

A) a higher level and growth of productivity and a lower level and growth of income
B) a lower level and growth of productivity and income
C) a higher level of productivity and income, but not higher permanent growth rates in productivity and income

Question 38

Physical capital is:
Physical capital is:

A) the knowledge and skills that workers acquire while using machinery and tools
B) the stock of equipment and structures that are used to produce goods and services
C) education, training and experience
D) land, rivers and mineral deposits

Question 39

A production function shows the relationship between:
A production function shows the relationship between:

A) the quantity of inputs used in production and the quantity of output from production
B) gross domestic product and national income
C) workers as inputs and consumers as buyers
D) production and spending

Question 40

Natural resources:
Natural resources:

A) are inputs provided by nature
B) are inputs such as land, rivers and mineral deposits
C) take two forms - renewable and non-renewable
D) all of the above
E) only B and C

Question 41

Technological progress does not depend on:

A) the quality of the education system
B) the intellectual capabilities of the population
C) the investment in research and development
D) the availability of natural resources

Question 42

Government policies can promote economic growth in many ways, such as by:

A) fostering education
B) maintaining property rights
C) maintaining political stability
D) allowing unrestricted trade
E) all of the above

Question 43

If the production function of a country has constant returns to scale and all input of the country has increased by 100 per cent, then its output would increase by:

A) 200 per cent
B) 100 per cent
C) 1 per cent
D) 0 per cent

Question 44

Which of the following statements is correct?

A) Technological knowledge is the society's understanding about how the world works, whereas human capital refers to the resources spent transmitting this understanding to the labour force
B) Human capital is the society's understanding about how the world works, whereas technological knowledge refers to the resources spent transmitting this understanding to the labour force
C) Technological knowledge is the bridge that links physical and natural resources to human capital
D) Technological knowledge is the society's understanding about human capital

Question 45

Which of the following countries have a history of providing political stability and property rights to international firms?

A) Italy, Australia, New Zealand
B) Japan, Australia, The United Arab Emirates
C) Malaysia, Congo and South Africa
D) Australia, Cameroon, The United Arab Emirates

Question 46

The historical data show that:

A) the world's poorest countries have remained in poverty
B) the world's richest countries have no guarantee that they will stay the richest
C) living standards have not varied widely from country to country
D) the world's poorest countries could always catch up with the world's richest countries

Question 47

Population growth can:

A) promote economic growth as long as policies based on total GDP growth are in place
B) promote economic growth as long as policies based on GDP per capita are in place
C) improve worker productivity
D) create improved education for the nation

Question 48

In 1950, Japan's real GDP per person was $2417; in 2000 it was $24 672. What is Japan's annual growth rate of real GDP per person?

A) 9.2 per cent
B) 4.76 per cent
C) 9.8 per cent
D) 10.2 per cent

Question 49

Using the rule of 70, calculate approximately how many years it would take for a country's real per-capita GDP to double if the growth rate is:
a. 1 per cent
b. 2 per cent
c. 3.5 per cent
d. 10 per cent
e. 14 per cent

Question 50

Countries have tried various methods to increase their living standards by reducing population growth. As an economist interested in incentives rather than coercion, what kind of policy would you recommend to slow population growth?

Question 51

Economists believe that governments that encourage research and development through their policies do it through which of the following methods?

A) Protecting infant industries from overseas investment, public research funding
B) A patent system, university research funding, conferring intellectual property rights
C) A patent system, consumer subsidies, research funding
D) Decreased migration, intellectual property rights, government research funding

Question 52

Although technological knowledge and human capital are closely related, there is an important difference.

A) Human capital refers to society's understanding about how the world works, while technological knowledge refers to the resources expended transmitting this understanding to the labour force
B) Human capital refers to society's understanding about how the world works, while technological knowledge refers to the resources expended transmitting this understanding to the production function
C) Technological knowledge refers to society's understanding about how the world works, while human capital refers to the resources expended transmitting this understanding to the labour force
D) Technological knowledge refers to society's understanding about how the world works, while human capital refers to the resources expended transmitting this understanding to the production function

Question 53

Given a production function Y = AF(L, K, H, N), where Y is the quantity of output, L is the quantity of labour, H is the quantity of human capital and N is the quantity of natural resources, what does A represent?

A) Productivity growth
B) The physical capital per worker
C) The level of available production technology
D) Technological growth

Question 54

Suppose that the average weekly income in a nation was $120 in 1952, and the growth rate of average income is 3.5 per cent per year. About how high will average national weekly income be in 2012?

Question 55

Suppose that Dan Murphy's income was $63 000 in 2010. If his income grew at 3.5 per cent per year, how long would it take for his income to double?

Question 56

Is there statistical evidence that shows correlations between investment and economic growth, and between population growth and economic growth across countries, where growth is defined in terms of per-capita GDP? Does this evidence prove a causal relationship?

Question 57

The output per worker equation Y/L = A F(1, K/L, H/L, N/L) provides a mechanical summary of the four determinants of:

A) technology
B) diminishing returns
C) catch-up effect
D) productivity

Question 58

Which of the following statements is correct for the period 1950-2000?

A) Japan has been an economic superpower
B) Bangladesh has experienced huge economic growth
C) Mexico's real GDP per person has decreased
D) at the beginning of the period, Mexico had higher real GDP per person than Japan

Question 59

Inward orientation policies, such as those in India between 1947 and 1993 have tended to:

A) maximise consumer benefit
B) create a highly efficient use of production resources
C) limit growth opportunities
D) enable large amounts of tariff-free trade

Question 60

In the countries of South Asia in 1992, only 56 young women were enrolled in secondary school for every 100 young men. Which of the following would help to increase economic growth in these countries?

A) an increase in the career opportunities for women
B) an increase in the awareness of birth control techniques
C) granting women easier access to education
D) all of the above

Question 61

New Zealand was the first country to sign a free trade agreement with China. What would be the reason for this, from the point of view of both parties?

Question 62

India, which has an open economy, suffered a spate of terrorist attacks in December 2008. How would the responses of both Indian savers and foreigners with savings invested in India expect to affect the value of investment in production? How would such a change affect Australia's trade with India?