Deck 3: The Wealth of Nationsthe Supply Side

Question 1

Pro-Poor growth is defined as

A) growth that raises the incomes of the poor
B) a combination of economic growth and falling inequality
C) a combination of economic growth and rising inequality
D) growth that results in a decline in the number of people living on less than $1 a day
E) immiserizing growth

Answer 1

a combination of economic growth and falling inequality

Question 2

On average,Japanese workers have lower hourly productivity and work fewer hours than their Italian counterparts,yet Japan has a higher GDP per capita than Italy. This is because

A) Japan has a larger population than Italy
B) Japan has a higher labor force participation rate and employment rate
C) Japan exports more goods than Italy
D) Japan has a smaller underground economy than Italy
E) There are statistical discrepancies in the two nations' data collection systems

Answer 2

Japan has a higher labor force participation rate and employment rate

Question 3

In his Essay on the Principle of Population,T.R.Malthus predicted

A) that populations would migrate to countries with the most productive land
B) that by the year 2000, world population would be 6 billion people
C) most of the demographic trends currently taking place in Europe
D) that output per capita would decline until the population was left in poverty
E) that better technology would provide the population with more leisure time

Answer 3

that output per capita would decline until the population was left in poverty

Question 4

Consider a hypothetical economy with a population of 500 people,each of whom is employed for 2000 hours per year. The nation's GDP is $25 million. In this economy,

A) GDP per capita is $12,500 and labor productivity per hour is $4
B) GDP per capita is $25,000 and labor productivity per hour is $50
C) GDP per capita is $50,000 and labor productivity per hour is $40
D) GDP per capita is $25,000 and labor productivity per hour is $80
E) GDP per capita is $50,000 and labor productivity per hour is $25

Question 5

An economy is producing GDP of $32,000 per week with 100 workers each working 40 hours per week. Labor productivity per hour is

A) 800
B) 8
C) 320
D) 4,000
E) 800,000

Question 6

In most countries,the Malthusian predictions have not been realized because

A) the marginal product of labor is increasing
B) population is declining
C) technology is improving
D) aggregate demand is declining
E) of governmental regulations unforeseen in Malthus' time

Question 7

The three principal inputs in the production process are

A) land, natural resources, and capital
B) money, labor, and technology
C) physical capital, human capital, and financial capital
D) capital, labor, and total factor productivity
E) technology, total factor productivity, and innovation

Question 8

GDP in country A is currently twice that of country B,and A also has 1.5 times the population of B. However,A's GDP grows by 2% per year,and its population grows by 1% per year. B's GDP grows by 5% per year,and its population grows by 6% per year. Which of the following is true?

A) A has less GDP per capita than B
B) At some time in the future, A and B will have the same GDP per capita
C) A will always have more GDP than B
D) A will always have more population than B
E) GDP per capita is declining in B

Question 9

Generally speaking,the consensus of evidence suggests that economic growth is

A) Pro-poor
B) associated with falling income inequality
C) associated with rising inequality
D) immiserizing
E) not systematically associated with changes in inequality

Question 10

GDP per capita in France in 2001 was equivalent to $24,230. The labor force participation rate was 44%,the employment rate was 91.5%,and hourly productivity was $39.27. The average number of hours worked yearly by an employed person was

A) 1283
B) 1402
C) 1532
D) 1876
E) 2019

Question 11

The "business cycle" refers to which of the following?

A) the long run trend in GDP
B) seasonal changes in output from spring to summer to autumn to winter
C) alternating periods of recession and expansion

Question 12

Which of the following is not part of the production function?

A) output
B) total factor productivity
C) labor
D) physical capital
E) prices

Question 13

Economic growth differs from business cycles in that

A) economic growth is a long run phenomenon; business cycles are short term
B) economic growth is largely a demand phenomenon; business cycles are strictly a supply phenomenon
C) economic growth is more responsive than business cycles to monetary policy
D) economic growth is ultimately a monetary phenomenon; business cycles are not
E) economic growth is determined largely by foreign trade; business cycles are a strictly domestic phenomenon

Question 14

If labor productivity increases,which of the following could happen?

A) employment falls
B) GDP rises
C) the hours of employment per worker falls
D) leisure time increases
E) any of the above

Question 15

The two basic forms of capital used in production are

A) buildings and real estate
B) stocks and bonds
C) buildings and machinery
D) machines and money
E) time and energy

Question 16

What,if any,is the difference between a household buying a computer and a business buying the same computer?

A) the business pays a higher price
B) the computer has greater durability in a business than in a household
C) the former is consumption, and the latter is investment
D) the computer depreciates faster in a household
E) there is no difference

Question 17

Over the last 200 years

A) global inequality has risen mainly because of rising between country inequality
B) global inequality has risen mainly because of rising within country inequality
C) global inequality has fallen mainly because of falling between country inequality
D) global inequality has fallen mainly because of falling within country inequality
E) global inequality has not changed

Question 18

If an economy is growing at 5% per annum.How long will it take,approximately,for its GDP to double?

A) 52 years
B) 37 years
C) 20 years
D) 14 years
E) 9 years

Question 19

If everyone in the population were employed for a fixed number of hours per year,then

A) GDP per capita would equal labor productivity multiplied by hours worked per person
B) GDP would equal labor productivity multiplied by hours worked per person
C) Labor productivity would equal GDP per capita multiplied by hours worked per person
D) GDP per capita would equal GDP divided by hours worked per person
E) Labor productivity times population would equal GDP

Question 20

The relationship between an economy's productive inputs and its outputs is called

A) the division of labor
B) the economic dialectic
C) the production function
D) the transformation correlation
E) the principle of economic creation

Question 21

In the growth accounting framework,growth in output that cannot be explained by changes in capital or labor are generally attributed to

A) changes in the intensity of land use
B) changes in aggregate demand
C) statistical error
D) changes in total factor productivity
E) foreign trade

Question 22

Consider an economy with a Cobb-Douglas production function in which capital and labor receive equal shares of national income and labor input is constant. If the capital stock grows by 2% and output grows by 4%,then the most likely explanation is

A) the marginal product of labor is increasing
B) the production function exhibits decreasing returns to scale
C) total factor productivity has increased by 3%
D) TFP has grown by 2%
E) There is a 2% change in the capital account balance

Question 23

The next questions refer to the following.
Suppose the economy has TFP = 10, there are 400 hours worked, and 9 unit of capital and the Cobb-Douglas production function is .
If total factor productivity grows by 1% per year while capital and labor each grow by 2% per year,then output grows by

A) 1.5% per year
B) 3% per year
C) 5% per year
D) 1.67% per year
E) 4% per year

Question 24

The amount of labor input used in the production process is best measured by

A) population
B) employment
C) the labor force
D) total hours worked
E) the wage

Question 25

The capital-output ratio for most industrialized nations

A) is negative because the marginal product of capital is diminishing
B) is less than one because each machine produces more value than it cost
C) is roughly equal to one because output growth is linked to capital growth
D) is greater than one because capital is a durable stock and output is an annual flow
E) cannot be measured without knowing how much labor there is in the economy

Question 26

For an economy with a Cobb-Douglas production function in which labor receives 70% of national income and capital receives 30%,a 10% increase in total hours worked,holding all else constant

A) increases the marginal product of labor by 3%
B) increases the marginal product of capital by 7%
C) increases total factor productivity by 5%
D) increases the share of national income paid to labor 10%
E) increases output by 10%

Question 27

The next questions refer to the following.
Suppose the economy has TFP = 10, there are 400 hours worked, and 9 unit of capital and the Cobb-Douglas production function is .
Output is currently

A) 36,000
B) 600
C) 12,000
D) 1,800
E) 6,000

Question 28

Which of the following is an addition to the capital stock?

A) a developer's purchase of real estate
B) a stock broker's purchase of preferred stock
C) a corporation's purchase of an existing building
D) a household's purchase of a new automobile
E) a college's purchase of a new photocopy machine

Question 29

Holding all other things constant,a firm has the following production schedule: .
This firm exhibits

A) diminishing marginal product of labor
B) increasing labor productivity
C) technological innovation
D) depreciation of capital
E) a shortage of labor

Question 30

The additional output produced by adding one extra unit of capital to the production process while holding everything else constant is called

A) total factor productivity
B) average output
C) the marginal product of capital
D) returns to scale
E) economies of scale

Question 31

The difference between the size of the US population and the number of persons employed in the US is primarily accounted for by

A) the number of persons who are unemployed
B) foreign citizens living in the US and US citizens living abroad
C) the number of persons in the armed forces
D) those who are not in the labor force and those in institutions
E) the number of sole proprietors and small business owners

Question 32

The next questions refer to the following.
Suppose the economy has TFP = 10, there are 400 hours worked, and 9 unit of capital and the Cobb-Douglas production function is .
For this hypothetical economy,the share of output paid to labor is

A) 70%
B) 30%
C) 50%
D) 10%
E) 90%