Deck 7: Economic Growth

Question 1

If the growth rate in an economy is 3.5%,then its GDP will double in about:

A) 3.5 years.
B) 20 years.
C) 70 years.
D) 245 years.

Answer 1

20 years.

Question 2

The World Bank defines extreme poverty as a person living on less than:

A) $1.25 per day.
B) $2 per day.
C) $16 per day
D) $5,763 per year.

Answer 2

$1.25 per day.

Question 3

For which growth rate would the Rule of 70 be least accurate?

A) 1%
B) 15%
C) 20%
D) 30%

Answer 3

30%

Question 4

Policymakers look at _____________ to compare growth rates over an entire year without seasonal ups and downs.

A) year-over-year GDP growth rates
B) annualized GDP growth rates
C) quarter-to-quarter annualized growth rates
D) quarterly growth rates

Question 5

If a country's population increases at a slower rate than the growth in its real GDP:

A) GDP per capita has increased.
B) the standard of living in the country has declined.
C) average output per person has decreased.
D) the country's rate of inflation has decreased.

Question 6

If an economy's GDP will double in 25 years,then its growth rate must be about:

A) 2.5%.
B) 2.8%.
C) 25%.
D) 28%.

Question 7

In the United States,real GDP is measured by:

A) the Federal Reserve.
B) the Congressional Budget Office.
C) the National Bureau of Economic Research.
D) the Bureau of Economic Analysis.

Question 8

If an economy's GDP will double in 15 years,then its growth rate must be about:

A) 7%.
B) 4.7%.
C) 10%.
D) 15%.

Question 9

If the actual growth rate of U.S.GDP was 1.25% from the first quarter to the second quarter,the Bureau of Economic Analysis would report the annualized rate as:

A) 0.3125%.
B) 1.25%.
C) 5%.
D) 15%.

Question 10

Economic growth is most commonly measured by:

A) GDP.
B) GDP per capita.
C) Genuine Progress Indicator per capita.
D) real GDP per capita.

Question 11

If the Bureau of Economic Analysis reports that the annualized U.S.growth rate was 2.5% for the second quarter,then the actual growth rate from the first quarter to the second quarter was:

A) 0.625%.
B) 2.5%.
C) 7.5%.
D) 10%.

Question 12

Which statement about the Rule of 70 is NOT true?

A) It is a valuable tool for understanding the power of compounding growth rates over time.
B) It is fairly accurate for small growth rates.
C) It becomes more accurate over time.
D) It is an easy way to approximate the number of years it takes for an amount to double in value.

Question 13

If the growth rate in an economy is 2%,its GDP will double in about:

A) 70 years.
B) 140 years.
C) 35 years.
D) 28 years.

Question 14

Which statement about the Rule of 70 is TRUE?

A) It is fairly accurate for small growth rates.
B) It becomes more accurate over time.
C) It provides an exact estimate of compounded values over time.
D) It states that the number of years required for a value to double in size is 70 times the growth rate.

Question 15

Which of the following is NOT one of the BRIC countries (four countries that overcame significant obstacles to have the highest growth rates among industrialized countries in 2012)?

A) Bolivia
B) Russia
C) India
D) China

Question 16

If a country's population increases at a higher rate than the growth in its real GDP:

A) GDP per capita has increased.
B) the standard of living in the country has declined.
C) average output per person remains constant.
D) the country's rate of inflation has increased.

Question 17

Between 1990 and 2010,the number of people in the world living in poverty has:

A) stayed roughly the same.
B) been cut in half.
C) doubled.
D) increased by 50%.

Question 18

Which of the following occurrences is the key explanation for the high economic growth in the United States in the past century?

A) investment in human capital
B) increasing the capital-to-labor ratio
C) technology improvements
D) an increase in population

Question 19

For which growth rate would the Rule of 70 be most accurate?

A) 1%
B) 15%
C) 20%
D) 30%

Question 20

Which of the following statements is FALSE?

A) Economic growth leads to lower poverty rates.
B) Economic growth always leads to a more equitable distribution of income.
C) Economic growth leads to longer life expectancies.
D) Economic growth leads to increased consumption of goods and services.

Question 21

Human capital includes:

A) physical capital.
B) labor.
C) the improvements to labor capabilities from training,education,and apprenticeship programs.
D) pension plans that enable early retirement.

Question 22

Land and natural resources include:

A) the mental and physical talents of people.
B) human capital.
C) manufactured products that are used to produce other goods and services.
D) water and minerals that come from the earth.

Question 23

The classical form of the production function states that output is determined by:

A) population growth.
B) some function of available labor or capital.
C) some function of the money supply.
D) the government.

Question 24

If output equals A*(5K + 2L),what is output if A equals 2,000,capital equals 10,and labor equals 100?

A) 500,000
B) 120,000
C) 50,000
D) 12,000

Question 25

The ability to use physical resources in creative ways to produce goods and services is known as:

A) labor.
B) natural resources.
C) physical capital.
D) entrepreneurial ability,technology,and ideas.

Question 26

The natural gas deposits found in the United States over the past decade are an example of an increase in:

A) land and natural resources.
B) labor.
C) physical capital.
D) entrepreneurial ability,technology,and ideas.

Question 27

Labor includes all of the following factors EXCEPT:

A) the physical talents of people.
B) the ability to use physical resources in creative ways to produce goods and services.
C) the mental talents of people.
D) the time and effort provided by migrant workers on farms.

Question 28

The percentage of the world's population that is poor,defined by the $2 per day threshold,is about:

A) 10%.
B) 15%.
C) 20%.
D) 30%.

Question 29

Improvements in production capacity will:

A) rotate the production possibility frontier (PPF)clockwise.
B) move the economy up to the PPF.
C) move the economy along the PPF.
D) shift the PPF outward.

Question 30

When Main Street Bank buys new automatic teller machines,the quantity of _____ in the economy increases.

A) land and natural resources
B) labor
C) physical capital
D) entrepreneurial ability,technology,and ideas

Question 31

Every year in India:

A) about a million people get out of poverty.
B) tens of millions of people get out of poverty.
C) tens of millions people fall into poverty.
D) about a million people fall into poverty.

Question 32

Which statement about short-run economic growth is NOT true?

A) It occurs when an economy makes use of underutilized resources.
B) It is easier to achieve than long-run economic growth.
C) It is likely to occur when countries are recovering from an economic downturn.
D) It is likely to occur when obstacles preventing resources from being used are put in place.

Question 33

Refer to the production possibilities frontiers below.Panel A illustrates _______ economic growth and Panel B illustrates _______ economic growth.

A) short-run;short-run.
B) short-run;long-run.
C) long-run;long-run.
D) long-run;short-run.

Question 34

The classical form of the production function states that:

A) Output = f(L / K)
B) Output = f(N,K)
C) Output = f(L,K)
D) Output = f(N / K)

Question 35

A production function:

A) shows the output that is produced using different combinations of inputs combined with existing technology.
B) shows the output that is produced using different combinations of technology combined with existing inputs.
C) shows the output that is most highly valued by consumers.
D) shows the most desired production method for a given level of output.

Question 36

Which statement about long-run economic growth is TRUE?

A) It occurs when an economy makes use of underutilized resources.
B) It is easier to achieve than short-run economic growth.
C) It is likely to occur when the capacity to produce goods and services increases.
D) It is likely to occur when obstacles preventing resources from being used are reduced.

Question 37

If technology is held constant,an increase in capital concurrent with a decrease in labor input causes output to:

A) rise,fall,or stay the same.
B) rise.
C) fall.
D) stay the same.

Question 38

Physical capital includes:

A) the physical talents of people.
B) the ability to take physical resources and use them in creative ways to produce goods and services.
C) manufactured products that are used to produce other goods and services.
D) land and raw resources that come from land.

Question 39

Which of the following is NOT a factor in the production function?

A) labor
B) technology
C) money
D) capital

Question 40

Technology:

A) is a physical resource.
B) improves the productivity of all factors.
C) is a manufactured product used to produce other goods and services.
D) is another term for entrepreneurial ability.

Question 41

An increase in physical capital per worker will:

A) lead to more output per worker.
B) lead to lower standards of living.
C) increase standards of living only if coupled with an increase in other inputs.
D) reduce the productivity of labor.

Question 42

Whispering Valley Furniture employs five workers working eight hours each to produce 80 rocking chairs.Rocky Gap Furniture employs 10 workers working eight hours each to produce 160 rocking chairs.Which company's workers are more productive?

A) Whispering Valley Furniture's workers are more productive.
B) Rocky Gap Furniture's workers are more productive.
C) The two companies' workers are equally productive.
D) It is not possible to determine which workers are more productive.

Question 43

Joseph's Schumpeter's idea that waves of innovations lead to business cycles is called:

A) creative destruction.
B) innovative destruction.
C) the theory of technological business cycle.
D) the upward spiral.

Question 44

According to Joseph Schumpeter,what is the driving force behind business cycles?

A) waves of inventions
B) weather cycles
C) waves of innovations
D) consumer spending

Question 45

Which of the following changes will NOT result in economic growth according to the production function?

A) improvements in the productivity of labor
B) increases in consumption spending
C) increases in capital
D) improvements in technology

Question 46

Investment in human capital is important because:

A) humans need capital.
B) it lowers the total wage bill.
C) it increases labor productivity.
D) it improves morale.

Question 47

Which of the following is a source of increases in productivity?

A) research and development
B) improvements in labor quality
C) capital investment
D) All of the answers are correct.

Question 48

Which of the following increases productivity?

A) increased skill in the labor force
B) young labor force
C) poorly educated labor force
D) large labor force

Question 49

According to the classical model,which of the following developments does NOT contribute to economic growth?

A) labor productivity
B) more capital
C) technological change
D) higher interest rate

Question 50

Whispering Valley Furniture employs five workers working eight hours each to produce 80 rocking chairs.Rocky Gap Furniture employs 10 workers working eight hours each to produce 100 rocking chairs.Which company's workers are more productive?

A) Whispering Valley Furniture's workers are more productive.
B) Rocky Gap Furniture's workers are more productive.
C) The two companies' workers are equally productive.
D) It is not possible to determine which workers are more productive.

Question 51

Which of the following does NOT increase productivity?

A) research and development
B) improvements in labor quality
C) capital investment
D) an increased money supply

Question 52

The capital-to-labor ratio measures:

A) the average number of hours worked.
B) the financial resources of a company divided by the number of employees.
C) the rate of technological improvement.
D) the amount of economic capital per worker.

Question 53

Improvements in technology:

A) explain most of the economic growth in recent decades.
B) caused the last recession.
C) are relatively unimportant for today's standard of living.
D) have slowed in the past 100 years.

Question 54

According to Schumpeter,the most important activity that drives business cycles is:

A) consumption.
B) savings.
C) innovation.
D) government direction of the economy.

Question 55

Creative destruction occurs when:

A) companies attempt to destroy the demand for their competitors' product.
B) the periodic emergence of innovation boosts the economy.
C) new technology is born out of the same theories that led to the old technology.
D) firms plan for their products to become obsolete so that consumers will be forced to buy replacements.

Question 56

Which is NOT a source of productivity growth?

A) raising the capital-to-labor ratio
B) increasing the quality of labor
C) moving resources from production to pension benefits
D) making investments in technological improvements

Question 57

A production function of the sort that says output per worker equals A * f(L / L,K / L,H / L,N / L)tells us all of the following EXCEPT that ____________ will lead to a better standard of living.

A) increases in capital
B) more people
C) more human capital
D) more natural resources

Question 58

To have long-term economic growth,the production function suggests:

A) keeping interest rates high to encourage saving.
B) increasing the availability of technology,capital,and labor.
C) increasing government oversight of business decisions.
D) redistributing income from the wealthy to the poor.

Question 59

Rocky Gap Furniture employs 10 workers working eight hours each to produce 100 rocking chairs.What is the productivity of these workers?

A) 2.5 chairs per hour
B) 1.25 chairs per hour
C) 100 chairs
D) 50 chairs

Question 60

Schumpeter's term creative destruction describes the:

A) Luddites' destruction of machines.
B) innovative dynamism of capitalism.
C) working class communist movement.
D) destruction of buildings.

Question 61

Decreasing the accessibility to college in order to funnel workers into the workforce faster will:

A) decrease productivity of the economy.
B) increase productivity of the economy.
C) increase real wages.
D) have no impact on the economy.

Question 62

The primary reason the U.S.standard of living is relatively _____ is that U.S.workers produce _____ than workers throughout most of the rest of the world.

A) high;less
B) high;more
C) low;more
D) low;less

Question 63

If a country has a low capital-to-labor ratio,then it tends to have:

A) low labor productivity but high wages.
B) high labor productivity but low wages.
C) high labor productivity and high wages.
D) low labor productivity and low wages.

Question 64

Which of the following items is NOT an example of investment in human capital?

A) policy of universal education
B) on-the-job training
C) acquisition of obsolete skills
D) apprenticeship

Question 65

What is the primary explanation for the rapid growth of the U.S.economy over the last century?

A) increases in the number of immigrants
B) increases in human capital
C) increases in government spending for the infrastructure
D) technological progress

Question 66

The capital-to-labor ratio is:

A) high in rich countries.
B) high in poor countries.
C) a key element in decreasing real wages.
D) the ratio of managers to workers.

Question 67

Which of the following technologies most strongly affected the growth in U.S.productivity in recent decades?

A) railroads
B) microcomputers
C) ticker tape
D) petrochemicals

Question 68

In general,the higher the capital-to-labor ratio:

A) the higher the wages.
B) the lower the wages.
C) the lower the productivity.
D) the lower the rate of investment.

Question 69

All of the following are considered sources of long-run growth EXCEPT:

A) increases in demand.
B) increases in capital.
C) increases in productivity.
D) improvements in technology.

Question 70

Which one of the following is NOT one of the reasons for the phenomenal growth of the U.S.economy over the past century?

A) increases in human capital
B) open immigration policies
C) high worker productivity
D) a reduction in the capital-to-labor ratio

Question 71

On-the-job training can lead to an increase in:

A) the capital-to-labor ratio.
B) the quality of the labor force.
C) the financial capital ratio.
D) population.

Question 72

Increases in ___________ often lead to economic growth.

A) technology
B) public goods
C) money supply
D) government regulations

Question 73

Which of the following is NOT a source of productivity growth?

A) decreasing the capital-to-labor ratio
B) increasing the quality of the labor force
C) improvements in technology
D) All of these are sources of productivity growth.

Question 74

Developed nations tend to have:

A) limited labor supplies but lots of capital.
B) low capital-to-labor ratios.
C) limited amounts of both labor and capital.
D) large amounts of both labor and capital.

Question 75

Which of the following strategies is an example of increasing the capital-to-labor ratio?

A) replacing the roof on a factory building
B) sending workers to training classes
C) giving a construction crew more backhoes
D) increasing the number of workers harvesting the crop in a field

Question 76

Which of the following occurrences is NOT a source of productivity growth?

A) increasing the capital-to-labor ratio
B) increasing the level of consumption spending
C) increasing the quality of the labor force
D) improvements in technology

Question 77

The higher the productivity of a nation,the:

A) greater is its population growth.
B) lower is its capital-to-labor ratio.
C) larger is its labor force.
D) higher is its standard of living.

Question 78

Increases in ___________ often lead to economic growth.

A) capital
B) public goods
C) money supply
D) government regulations

Question 79

Human capital refers to:

A) equipment,buildings,and inventories.
B) funds firms raise by selling stocks and bonds.
C) skills,knowledge,and quality of workers.
D) infrastructure of a nation.

Question 80

The following table shows data for four countries. Country
Workers
Capital Stock
A
100
$4,000
B
50
$500
C
200
$1,000
D
150
$150
The table shows that the country with the most productive workers is:

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