Deck 7: Economic Growth and Development

Question 1

Economic growth is usually defined as

A)the rate of increase in output divided by the increase in labour.
B)the increase in output over time,as measured by real per capita GDP.
C)the increase in input availability.
D)the reduction in the real cost of necessities.

Answer 1

the increase in output over time,as measured by real per capita GDP.

Question 2

Suppose two countries have per capita real GDP of $20,000 in 1995.Country A has a growth rate of 4 percent and Country B has a growth rate of 5 percent.By 1998,the per capita real GDPs for the two countries respectively are (rounded up)

A)$21,630 and $22,050.
B)$22,400 and $23,000.
C)$22,500 and $23,150.
D)$22,400 and $25,000.

Answer 2

$22,500 and $23,150.

Question 3

The term economic growth refers to increases in

A)resources use.
B)nominal income.
C)satisfaction.
D)productive capacity.

Answer 3

productive capacity.

Question 4

An increase in growth rates will cause the production possibilities curve to

A)shift inward.
B)become steeper.
C)become flatter.
D)shift outward.

Question 5

Productive capacity usually refers to

A)resources use.
B)nominal income.
C)satisfaction.
D)economic growth.

Question 6

If we are interested in knowing whether a poor country is improving economically,we want to know not only what the economic growth rate is,but also

A)whether the economic growth rate is faster than other nations' growth rates.
B)whether government spending is growing at the same rate.
C)whether the economic growth rate is greater than last years rate.
D)whether the lowest income groups are benefiting from the growth.

Question 7

Suppose two countries have identical growth rates of real GDP and the same initial value of per capita real GDP.We know,then,that

A)life expectancies are the same in both countries.
B)economic well-being is the same in both countries.
C)living standards may differ in the two countries because we don't know how income is distributed in the countries.
D)living standards in the two countries are probably identical,or very close to each other.

Question 8

If population growth is less than growth of real output,

A)real per capita GDP growth will be less than the growth of GDP.
B)there can be no economic growth.
C)real per capita GDP growth will be greater than the growth of GDP.
D)real per capita GDP and GDP will be growing at the same rate.

Question 9

If population growth is more than growth of real output,

A)real per capita GDP growth will be less than the growth of GDP.
B)there can be no economic growth.
C)real per capita GDP growth will be greater than the growth of GDP.
D)real per capita GDP and GDP will be growing at the same rate.

Question 10

Economic growth is best measured by increases in

A)nominal personal income.
B)nominal GDP.
C)per capita real GDP.
D)per capita nominal GDP.

Question 11

If real per capita GDP growth is less than the growth of GDP then

A)population growth is greater than growth of real output
B)there can be no economic growth.
C)population growth is less than growth of real output
D)real per capita GDP and GDP will be growing at the same rate.

Question 12

A small improvement in a country's growth rate is a benefit to policy makers because

A)a small change can have large effects on per capita GDP over time.
B)inflationary pressures will prove inconsequential.
C)policy makers focus too much on economic growth and not enough on increasing savings rates.
D)the larger GDP is the better the economic welfare will be in the future.

Question 13

A decrease in growth rates will cause the production possibilities curve to

A)shift inward.
B)become steeper.
C)become flatter.
D)shift outward.

Question 14

The faster economic growth is,the

A)steeper the slope of the production possibilities curve.
B)farther the production possibilities curve shifts out.
C)closer to the origin the production possibilities curve becomes.
D)more bowed the production possibilities curve becomes.

Question 15

A small reduction in a country's growth rate is a concern to policy makers because

A)a small change can have large effects on per capita GDP over time.
B)a reduction usually leads to future reductions until finally the economy stagnates.
C)policy makers focus too much on economic growth and not enough on increasing savings rates.
D)the larger GDP is the better the economic welfare will be in the future.

Question 16

Economic growth

A)is sustainable with the help of "green" initiatives.
B)occurs when there are increases in per-capita GDP.
C)occurs when there are increases in real GDP.
D)occurs when there are increases in nominal GDP.

Question 17

Increases in per-capita GDP are commonly referred to as

A)inflation.
B)economic growth.
C)shifts in aggregate demand
D)the Human Development Index (HDI)

Question 18

The slower economic growth is,the

A)flatter the slope of the production possibilities curve.
B)farther the production possibilities curve shifts inward.
C)closer to the origin the production possibilities curve becomes.
D)more bowed the production possibilities curve becomes.

Question 19

If real per capita GDP growth is greater than the growth of GDP then

A)population growth is greater than growth of real output
B)there can be no economic growth.
C)population growth is less than growth of real output
D)real per capita GDP and GDP will be growing at the same rate.

Question 20

Real GDP is a serviceable measure of

A)economic welfare.
B)cost of living standards.
C)cultural superiority.
D)productive activity.

Question 21

The most important thing about higher labour productivity is that it means

A)we are doing better than anyone else.
B)we can compete well with other nations.
C)we can achieve a happier population.
D)we can have a higher standard of living.

Question 22

The majority of evidence points to the fact that,in the last decade in Canada,labour productivity has

A)decreased.
B)increased.
C)stayed the same.
D)decreased in the manufacturing sector but increased in the service sector.

Question 23

Whenever average output produced per worker during a specific time period increases,then

A)leisure time increases.
B)nominal gdp decreases.
C)labour productivity increases.
D)the standard of living goes down.

Question 24

Labour productivity is

A)the average amount produced times the number of workers.
B)the average amount produced times the number of people in the labour force.
C)the average amount produced per worker.
D)the rate of change in the total amount produced per worker.

Question 25

An increase in output per unit of labour may be attributable to

A)a movement along the production possibilities curve.
B)lower wages.
C)economic growth.
D)all of these.

Question 26

Economic growth may overstate changes in the standard of living if

A)people are retiring at a younger age.
B)the average work week is increasing.
C)the number of students attending college is increasing.
D)expected life spans are increasing.

Question 27

With economic growth,there is

A)a movement along the production possibilities curve.
B)an inward (leftward)shift in the vertical aggregate supply function.
C)an increase in output per unit of labour.
D)all of these.

Question 28

Productivity relates to

A)working harder over time.
B)working longer over time.
C)producing the same output with fewer labour hours.
D)producing the same output with more labour hours.

Question 29

By dividing the value of total domestic output (GDP)by the number of workers,economists derive

A)the net domestic product.
B)labour productivity.
C)the size of the labour force.
D)the rate of capital accumulation.

Question 30

The growth rate of per capita real GDP is a reasonable measure of

A)inflation.
B)productive activity.
C)personal well-being.
D)quality of life.

Question 31

Labour productivity is found by

A)the net domestic product.
B)dividing the value of total domestic output (GDP)by the number of workers.
C)the size of the labour force divided by total real GDP.
D)the rate of capital accumulation.

Question 32

Economic growth may understate changes in the standard of living if

A)people are retiring at a younger age.
B)the average work week is decreasing.
C)the number of students attending college is increasing.
D)expected life spans are increasing.

Question 33

Economic growth may overstate changes in standards of living if

A)the growth is accompanied by increasing congestion.
B)leisure time is also decreasing.
C)the types of jobs generated feelings of alienation.
D)deflation is taking place.

Question 34

Economic growth may understate changes in standards of living if

A)the growth is accompanied by increasing congestion.
B)leisure time is also increasing.
C)the types of jobs generated feelings of alienation.
D)deflation is taking place.

Question 35

The average amount produced per worker is commonly referred to as

A)inflationary
B)the value added.
C)labour productivity .
D)the real interest rate.

Question 36

Whenever average output produced per worker during a specific time period decreases,then

A)leisure time decreases.
B)nominal gdp increases.
C)labour productivity decreases.
D)the standard of living goes up.

Question 37

Productivity growth affects

A)all sectors of an economy.
B)only the manufacturing sector of an economy.
C)only the manufacturing sector of industrialized economies.
D)all sectors of an economy except the service sector.

Question 38

Other things constant,a higher savings rate

A)leads to higher interest rates.
B)means higher standards of living in the future.
C)means higher standards of living today.
D)is associated with a decline in the rate of growth of the population.

Question 39

Productive activity is a reasonable measure of

A)inflation.
B)the growth rate of per capita real GDP.
C)personal well-being.
D)quality of life.

Question 40

Other things constant,a lower savings rate

A)leads to lower interest rates.
B)means lower standards of living in the future.
C)means lower standards of living today.
D)is associated with a decline in the rate of growth of the population.

Question 41

Labour productivity decreases when

A)the population increases.
B)output remains constant while the labour force increases.
C)output decreases at the same rate as the labour force increases.
D)output decreases faster than population increases.

Question 42

Giving up consumption today for consumption tomorrow accelerates economic growth by

A)having the economy produce no consumer goods.
B)increasing saving out of disposable income.
C)increasing the expected rate of inflation.
D)rapid expansion of the money supply.

Question 43

The rate of economic growth will be faster

A)the greater the rate of growth of the money supply.
B)the greater the rate of saving.
C)the greater the rate of growth of the population.
D)the greater consumption spending is.

Question 44

A lower rate of savings should lead to

A)lower current consumption.
B)more growth.
C)less investment,capital growth,and future consumption.
D)a higher price level and reduced future consumption.

Question 45

Other things held constant,an increase in consumption spending implies

A)a decline in saving.
B)a decline in government spending.
C)a higher standard of living in the future.
D)economic growth will soon increase.

Question 46

If we produce the same output with fewer labour hours then

A)we are working harder over time.
B)working longer over time.
C)productivity in increasing.
D)productivity in decreasing.

Question 47

In Canada,productivity growth has been on the rise since

A)1960s.
B)1970s.
C)1980s.
D)1990s.

Question 48

Productivity is ________ if we produce the same output with fewer labour hours.

A)increasing
B)not changing
C)decreasing
D)proportional

Question 49

If we produce the same output with more labour hours then Productivity relates to

A)working harder over time.
B)working longer over time.
C)productivity is increasing.
D)productivity is decreasing.

Question 50

Other things held constant,a decline in saving implies

A)an increase in consumption spending.
B)a decline in government spending.
C)a higher standard of living in the future.
D)economic growth will soon increase.

Question 51

Labour productivity increases when

A)the population increases.
B)output remains constant while the labour force decreases.
C)output increases at the same rate as the labour force increases.
D)output increases faster than population increases.

Question 52

Productivity is ________ if we produce less output with the same labour hours.

A)increasing
B)not changing
C)decreasing
D)proportional

Question 53

The rate of economic growth will be slower

A)the lower the rate of growth of the money supply.
B)the lower the rate of saving.
C)the lower the rate of growth of the population.
D)the lower consumption spending is.

Question 54

When comparing across countries,the higher the rate of savings,

A)the lower the level of per capita real GDP.
B)the higher the level of per capita real GDP.
C)the less industrialized the country.
D)the lower the productivity rates.

Question 55

Which of the following is an example of a measure of labour productivity?

A)Farm workers produce 30 bushels of wheat per worker per day
B)Autos get 30 gallons to the mile
C)The growth rate of per capita real GDP is 3.5 percent per year
D)Wages increase by 3.5 percent per year for 5 years

Question 56

If we produce the more output with the same amount of labour hours then

A)we are working harder over time.
B)working longer over time.
C)productivity is increasing.
D)productivity is decreasing.

Question 57

A higher rate of savings should lead to

A)higher current consumption.
B)less growth.
C)more investment,capital growth,and future consumption.
D)a higher price level and reduced future consumption.

Question 58

Productivity is ________ if we produce the same output with more labour hours.

A)increasing
B)not changing
C)decreasing
D)proportional

Question 59

Productivity is ________ if we produce more output with the same labour hours.

A)increasing
B)not changing
C)decreasing
D)proportional

Question 60

If we produce the less output with the same amount of labour hours then

A)we are working harder over time.
B)working longer over time.
C)productivity is increasing.
D)productivity is decreasing.

Question 61

Traditionally,economists regarded improvements in technology as

A)the most important factor that helped explain economic growth,and basically the only factor that would cause economic growth.
B)an outside factor that helped explain economic growth.
C)an important factor in explaining economic growth that was due to economic forces that also could easily be explained.
D)unrelated to economic growth in any systematic way.

Question 62

To consume more in the future,a society must

A)maintain low inflation.
B)plan carefully.
C)consume less today.
D)have low tax rates on consumption.

Question 63

Many countries find it difficult to achieve economic growth.This is because economic growth

A)is not understood well by economists,so it is difficult to advise policy makers on the best policies to pursue.
B)requires saving and saving means less consumption today.A poor country may find it difficult to consume less today.
C)appears to be predetermined and not subject to factors that policy makers can have any affect on.
D)depends on technological change and technological change depends on non-economic factors such as the growth rate of scientific knowledge.

Question 64

With respect to open economies,those who study economic growth tend to believe that

A)the more closed an economy is,the higher the rate of growth the economy will experience.
B)trade tariffs tend to improve economic growth.
C)free trade encourages a more rapid spread of technology,and hence increases economic growth.
D)open economies tend to have access to smaller markets than do closed economies.

Question 65

A system of property rights

A)encourages economic growth by creating incentives to invest in capital and to be innovative.
B)discourages economic growth by discouraging the development of new ideas and ways of doing things.
C)reduces the efficiency of government,which reduces the growth rate of the economy over time.
D)encourages investment but discourages entrepreneurial activity,so the effect on economic growth is uncertain.

Question 66

New growth theory argues that

A)growth is due to the proper government policies concerning interest rates.
B)growth relies on maintaining lower growth rates of population,especially in less developed countries.
C)technology cannot be looked at as an outside factor without an explanation of what drives it.
D)technology is the key factor that explains growth but technology is beyond economic explanation itself.

Question 67

Entrepreneurship functions less effectively when

A)the government performs the entrepreneurial function.
B)the property rights system is not very well-defined .
C)saving is relatively low.
D)most of the population has low levels of education.

Question 68

Entrepreneurship functions better when

A)the government performs the entrepreneurial function.
B)there is a well-defined property rights system.
C)saving is relatively low.
D)most of the population has low levels of education.

Question 69

Other things held constant,an increase in saving implies

A)a decrease in consumption spending.
B)a decline in government spending.
C)a lower standard of living in the future.
D)economic growth will soon decrease.

Question 70

An important factor in determining a country's rate of economic growth is

A)the diversity of its population.
B)its rate of saving.
C)the size of its labour force.
D)the proportion of the adult population that is working.

Question 71

Economists typically agree that the special position given to owners of patents tends to

A)reduce expenditures on research and development.
B)increase expenditures on research and development.
C)reduce economic growth.
D)reduce productivity.

Question 72

The development of a strain of wheat that will yield two crops per year rather than one crop per year is an example of economic growth resulting from

A)capital accumulation.
B)increased gross investment.
C)technological progress.
D)an increase in per capita real income.

Question 73

A government grant that gives an inventor the exclusive right or privilege to make,use,or sell his or her invention is known as

A)a positive externality.
B)a negative externality.
C)a protectionism clause.
D)a patent.

Question 74

Economic growth will tend to be higher in a country that

A)has a low savings rate.
B)has an open economy that encourages the rapid spread of technology.
C)has an undeveloped system of property rights.
D)does not grant patents to investors.

Question 75

The more certain property rights are

A)the less people need to invest in education or human capital development.
B)the less entrepreneurship there will be.
C)the more capital accumulation there will be.
D)the more an economy must grow to maintain a certain living standard.

Question 76

A system of property rights

A)enhances economic growth by creating incentives to the Bank of Canada to maintain stable prices.
B)enhances economic growth by increasing the probability that a person can gain from making investments today.
C)retards economic growth by serving the interests of the wealthy only.
D)retards economic growth by limiting the options of people who own nothing.

Question 77

Other things held constant,a decrease in consumption spending implies

A)an increase in saving.
B)an increase in government spending.
C)a lower standard of living in the future.
D)economic growth will soon decrease.

Question 78

The less certain property rights are

A)the more people need to invest in education or human capital development.
B)the more entrepreneurship there will be.
C)the less capital accumulation there will be.
D)the less an economy must grow to maintain a certain living standard.

Question 79

Other things held constant,an increase in consumption spending implies

A)a decrease in saving.
B)a decrease in government spending.
C)a lower standard of living in the future.
D)economic growth is stagnant.

Question 80

One of the major tenets of the new growth theory is that

A)technology is not an important determinant of economic growth.
B)economic growth is not as important as leisure time growth.
C)the greater the rewards for technological advances are,the greater the number of technological advances we will have.
D)the rewards associated with technological advances have little to do with the actual rate of invention or innovation.