Deck 11: The Big Questions of Economic Growth

Question 1

Which of the following are not examples of "convergence"?

A) Japan and Europe
B) Individual states within the United States
C) regions within western Europe
D) major nations in Latin America and Western Europe

Answer 1

major nations in Latin America and Western Europe

Question 2

If labor's share of national income is to remain constant, then ________.

A) the real wage must grow faster than labor productivity
B) the real wage must grow at the same rate as labor productivity
C) labor productivity must grow faster than the real wage
D) the combined growth rates of labor productivity and the real wage must equal the growth rate of national income

Answer 2

the real wage must grow at the same rate as labor productivity

Question 3

If w is the growth rate of the nominal wage rate, p is the inflation rate as measured by the price deflator for total GDP, y is the growth rate for total domestic product, and n is the growth rate of labor, then the growth of real wage is ________.

A) wp/n
B) y - p
C) w - p
D) wn/p

Answer 3

w - p

Question 4

A decrease in labor productivity and the real wage could be caused by

A) a decrease in demand for labor or an increase in the supply of labor.
B) a decrease in the demand for labor or a decrease in the supply of labor.
C) an increase in the demand for or supply of labor.
D) an increase in the demand for labor or a decrease in the supply of labor.

Question 5

In the formula used to measure the growth rate of multifactor productivity, the contribution of labor is represented by

A) bn.
B) bk - bn.
C) y - bk.
D) (1 - b)n.

Question 6

If W is the nominal wage rate, N is the quantity of labor, P is the price level, and Y is real income, then labor's share in national income is

A) WN - PY.
B) WP/YN.
C) WN/PY.
D) PY - WN.

Question 7

The so-called "Four Tigers" do not include

A) Japan.
B) Hong Kong.
C) Taiwan.
D) Singapore.

Question 8

Labor's share of national income is equal to ________.

A) 1 - b
B) WN/PY
C) (W/P)/(Y/N)
D) All of the above.

Question 9

Which of the following will cause slower growth in labor productivity?

A) decreased growth in physical capital
B) decreased growth in human capital such as education and training
C) decreased growth in government-financed infrastructure such as highways and airports
D) A and C
E) all of the above

Question 10

If the growth rate of multifactor productivity is 1.775, b = 0.15, n = 1, and y = 3, then the growth rate of capital is

A) 1.225.
B) 1.45.
C) 4.0.
D) 2.5.

Question 11

For the past 30 years, labor's share of national income ________ while labor productivity ________.

A) fell dramatically, increased
B) remained roughly constant, dropped
C) remained roughly constant, increased
D) increased modestly, dropped

Question 12

If the growth rate of multifactor productivity is 2.5, and b = 0.25, k = 4, n = 2, and y = 5, then the growth rate of labor productivity is

A) 3.0.
B) 8.0.
C) 2.0.
D) 2.5.

Question 13

In the formula for calculating the growth rate of multifactor productivity, the growth rate of labor productivity is represented by

A) y - n.
B) b(k - n).
C) bk/n.
D) b - n.

Question 14

Which of the following is NOT the cause of an adverse productivity shock to the labor market?

A) a decline in the quantity of non-labor factors of production
B) a drop in multifactor productivity
C) a decrease in the labor force
D) none of the above

Question 15

Some economists believe that the behavior of unemployment in Europe and in the United States during the 1980s and 1990s

A) was the same because both markets experienced adverse labor market shocks.
B) differed because the real wage in Europe was rigid.
C) was the same because the real wage in Europe and the United States moved together.
D) differed because the United States experienced adverse labor market shocks but Europe did not.

Question 16

Which of the following countries had an economic growth rate equal to zero between 1960 and 2004?

A) South Africa
B) Philippines
C) South Korea
D) Kenya

Question 17

What is the growth rate of multifactor productivity if b = 0.20, k = 3, n = 1, and y = 4?

A) 1.0
B) 0.4
C) 2.4
D) 2.8

Question 18

The formula for the growth rate of multifactor productivity is

A) a = y + bk + (1 - b)n.
B) y = a + bk + bn.
C) a = y - bk - (1 - b)n.
D) y = a - b/k(1 - b)n.

Question 19

A feedback from low real wages to low productivity could be caused by

A) an increase in the labor force caused by more immigration.
B) a reduction in the power of labor unions.
C) a reduction in the real minimum wage.
D) increased worker anxiety about job security.
E) all of the above.

Question 20

If the supply of labor increases while demand for labor is unchanged,

A) the real wage and labor productivity will increase.
B) the real wage will decrease and labor productivity will increase.
C) the real wage will increase and labor productivity will decrease.
D) the real wage and labor productivity will decrease.

Question 21

After 1979 there was an upsurge in labor productivity growth in the U.S. ________ sector, mainly coming from the ________ industry.

A) manufacturing, computer
B) manufacturing, machine tool
C) nonmanufacturing, edible oil
D) nonmanufacturing, financial services
E) nonmanufacturing, book publishing

Question 22

By comparison to U.S. labor market policies, European labor market policies promote

A) greater unemployment and job security.
B) slower real wage growth and greater income inequality.
C) greater job opportunities for low-skill workers and greater bargaining power for workers.
D) higher real minimum wages and slower real wage growth.

Question 23

The U.S. record is superior to that of Europe in ________.

A) growth in real productivity.
B) real wage growth
C) growth in employment
D) All of the above

Question 24

Relative to the United States, Europe has

A) higher unemployment.
B) slower job growth.
C) higher real wage growth.
D) A and B.
E) all of the above.

Question 25

William Nordhaus' depletion hypothesis

A) is an attempt to explain the drop in the multifactor productivity growth rate between 1913 and 1964.
B) suggests that depletion of natural resources may explain part of the drop in multifactor productivity growth.
C) suggests that a drop in the rate at which new inventions are made may explain part of the drop in multifactor productivity.
D) B and C
E) all of the above

Question 26

Which of the following is not one of the potential sources of lower growth in productivity cited by Gordon?

A) falling productivity in the public utilities industry
B) wasted resources in the construction of unnecessary infrastructure
C) increases in energy prices
D) a decrease in growth of the capital stock

Question 27

In calculating multifactor productivity growth, the elasticity of output to changes in capital (given as "b" in the textbook) is assumed to be

A) one minus the population growth rate.
B) the depreciation rate.
C) the share of capital income in GDP.

Question 28

Which of the following policies have been suggested as ways to boost the growth of productivity?

A) tax cuts to boost saving and investment
B) reducing the budget deficit by raising taxes and cutting expenditures
C) increasing public investment in education
D) redesigning and scaling back the regulatory apparatus of the federal government
E) all of the above

Question 29

Gordon notes that the average growth rate of labor productivity between 1996 and 2004 was ________ percent, and the average reached ________ percent in 2003-04.

A) 3; 3.5
B) 2; 205
C) 1.7; 3.2
D) 2; 1.5

Question 30

The relative flexibility of the United States labor market explains why ________ in the United States than in Europe.

A) income inequality is greater
B) real wages grow more slowly
C) unemployment is lower
D) all of the above

Question 31

The period between ________ is commonly regarded by economists as a "golden age" of rapid productivity growth in the United States.

A) 1898 and 1929
B) 1920 and 1940
C) 1933 and 1965
D) 1948 and 1973

Question 32

The slowdown in labor productivity growth from 1973 to 1995 ________ matched by a similar slowdown in MFP growth, suggesting that the growth rate of capital had ________ to do with the productivity problem.

A) was, much
B) was, little
C) was not, much
D) was not, little

Question 33

Dating the start of falling labor productivity growth in 1973 is very suggestive of this explanation for it: ________ energy prices and ________ use of energy per worker.

A) higher, decreased
B) higher, increased
C) lower, decreased
D) lower, increased

Question 34

Productivity growth slowed rapidly after 1973. Bruno and Sachs argue that the slowdown is partially explained by

A) reduced growth in capital per capita since increasing numbers of women entered the labor force.
B) the reduction in savings rates caused by inflation and the U.S. tax system.
C) the "residual" nature of technological change.
D) the rapid increase in the relative price of energy.

Question 35

According to Gordon, which of the following is not a plausible explanation for a decrease in the measured growth of capital per worker in the United States after 1973?

A) higher inflation causes overtaxation and discourages saving
B) increased labor force participation by women
C) slower growth in the capital stock
D) lower real wages in response to supply shocks in the 1970s

Question 36

Relative to the United States, Europe has

A) caught in output per capita.
B) caught up in growth of labor productivity.
C) faster job growth.
D) all of the above.

Question 37

The labor supply shock hypothesis suggests that

A) the United States and Europe are following similar labor market policies.
B) there is a one-way causation from labor productivity to real wage growth.
C) slow real wage growth and slow productivity growth are simultaneously determined by the labor market system.
D) B and C.
E) none of the above.

Question 38

The simplest calculation of the growth rate of multifactor productivity starts with the growth rate of real GDP and then

A) subtracts the growth rate of labor.
B) subtracts the growth rate of capital.
C) subtracts the growth rate of labor and some fraction of the growth rate of the capital-labor ratio.
D) adds the growth rate of labor and then subtracts the depreciation and population growth rates.

Question 39

Relative growth rates of the standard of living in the United States and Europe indicate that workers in ________ have chosen to "spend" ________ of their higher productivity on leisure rather than on consumption of market goods and services.

A) Europe, a significant part
B) the United States, a significant part
C) Europe, almost none
D) the United States, almost all

Question 40

Comparison of the European and U.S. labor markets suggests that

A) it is relatively cheap to hire workers in the United States.
B) the U.S. labor market is more "flexible" than the European labor market.
C) job security and income equality are greater in the European labor market.
D) A and B.
E) all of the above.

Question 41

MFP growth represented by a will be higher than the growth of labor productivity if

A) k > n.
B) k < n.
C) k = n.
D) None of the above. The relative size of k and n do not affect MFP growth.

Question 42

If 1 - b = WN/PY where W is the nominal wage rate, N is the quantity of labor input, and PY is total income in nominal terms, then labor's share of national income grows if

A) (w - p) > (y - n).
B) (w - p) < (y - n).
C) (w - n) > (y - p).
D) (w - n) < (y - p).

Question 43

The standard of living rises at a slower pace than labor productivity if

A) n = q.
B) n < q.
C) n > q.
D) The standard of living is not affected by the relative size of n and q.

Question 44

The Solow model predicts that the standard of living in poorer nations will converge on that of richer nations through rapid capital formation that raises output per person. The introduction of technological change to the model ________ change this prediction because technology ________ assumed to be freely available to all countries.

A) does, is
B) does, is not
C) does not, is not
D) does not, is

Question 45

The standard of living rises at a faster pace than labor productivity if

A) n = q.
B) n < q.
C) n > q.
D) The standard of living is not affected by the relative size of n and q.

Question 46

One of the shortcomings of the Solow model is that it

A) treats technological change as freely available to all countries.
B) does not treat technological change as freely available to all countries.
C) treats technological change as an endogenous variable.
D) treats technological change as the only source of economic growth.

Question 47

MFP growth represented by a will be lower than the growth of labor productivity if

A) k > n.
B) k < n.
C) k = n.
D) None of the above. The relative size of k and n do not affect MFP growth.

Question 48

Which of the following is the growth rate of the standard of living?

A) y - q
B) y - n
C) y - a
D) y - b

Question 49

Which of the following did not contribute to the European experience of the past few decades where the stand of living rose more slowly than labor productivity?

A) longer vacations
B) higher unemployment
C) higher participation rates
D) All of the above

Question 50

What type of economic conditions are summarized by the variable a?

A) conditions other than changes in capital and labor that change productivity
B) urbanization
C) governmental regulations
D) All of the above

Question 51

The key prediction of the Solow model adapted to include technological change ________ been born out, i.e. with a few exceptions convergence ________ a reality.

A) has not, is not
B) has not, is
C) has, is not
D) has, is

Question 52

Which of the following would cause labor's share of national income to decrease?

A) labor productivity increases less rapidly than the real wage rate.
B) labor productivity increases more rapidly than the real wage rate.
C) labor productivity has increased at the same rate as the real wage rate.
D) labor's share of national income is not affected by the relative growth rates of labor productivity and the real wage rate.

Question 53

If 1 - b = WN/PY where W is the nominal wage rate, N is the quantity of labor input, and PY is total income in nominal terms, then labor's share of national income shrinks if

A) (w - p) > (y - n).
B) (w - p) < (y - n).
C) (w - n) > (y - p).
D) (w - n) < (y - p).

Question 54

Which of the following is the formula for the growth rate of multifactor productivity written so that the first term in the equation represents the growth rate of labor productivity?

A) y + bk + (1 - b)n
B) y = a + bk + (1 - b)n
C) a = y - bk - (1 - b)n
D) a = (y - n) - b(k - n)

Question 55

What type of economic conditions are summarized by the variable a?

A) changes in labor productivity
B) changes in capital productivity
C) technological change
D) All of the above

Question 56

The production function Y = AKbN1-b written in terms of growth rates is

A) y = a - bk - (1 - b)n.
B) y = a + bk + (1 - b)n.
C) y = a - bk + (1 - b)n.
D) y = a + bk - (1 +b)n.

Question 57

What ratio defines the standard of living?

A) (Y/N)
B) (Y/K)
C) (Y/A)
D) (Y/Q)

Question 58

Which of the following would cause labor's share of national income to increase?

A) Labor productivity increases less rapidly than the real wage rate.
B) Labor productivity increases more rapidly than the real wage rate.
C) Labor productivity has increased at the same rate as the real wage rate.
D) Labor's share of national income is not affected by the relative growth rates of labor productivity and the real wage rate.

Question 59

There is some evidence that demographic changes in the composition of the workforce are ________ the growth rate of labor quality, and thus ________ the growth rate of output per labor hour.

A) raising, decreasing
B) raising, increasing
C) lowering, decreasing
D) lowering, increasing

Question 60

What is the ratio that defines labor productivity?

A) (Y/N)
B) (Y/Q)
C) (Y/A)
D) (Y/K)

Question 61

How does Gordon integrate the exogenous factors affecting economic growth into the production function for an economy?

A) Y = A(G,R,H) F(K,P,T,N)
B) Y = A(G,P,T) F(K,R,H,N)
C) Y = A(G,P,T,R) F(K,H,N)
D) Y = A(P,T,K) F(G,R,H,N)

Question 62

Gordon notes that along with slow labor productivity growth in the period 1973-1995, real wages also grew slowly. What sort of productivity shocks are consistent with this explanation of the link between real wage growth and the growth of labor productivity?

A) Productivity shocks which decrease supply of labor given the demand for labor.
B) Productivity shocks which increase supply of labor given the demand for labor.
C) Productivity shocks which increase demand for labor given the supply of labor
D) Productivity shocks which decrease demand for labor given the supply of labor

Question 63

Which of the following methods of importing technological change is available to a poor country which Gordon describes as being caught in the "poverty trap"?

A) Copy modern products made in rich countries
B) Purchase imported machinery that embodies the latest technology
C) Obtain investment by foreign firms
D) None of the above.

Question 64

In the production function Y = A(G,P,T) F(K,R,H,N), the factors that affect the entire production process are

A) G,R,H.
B) G,P,T.
C) P,T,K.
D) KRHN.

Question 65

Between 1973 and 1995, what changes occurred in the labor force and the capital stock that caused a productivity slowdown?

A) The growth of the capital stock and the growth of labor hours increased.
B) The growth of the capital stock and the growth of labor hours slowed.
C) The growth of the capital increased slowed and the growth of labor hours slowed.
D) The growth of the capital stock slowed and the growth of labor hours increased.

Question 66

What sort of productivity shocks would cause lower real wage growth and result in lower growth in labor productivity?

A) Productivity shocks which decrease supply of labor given the demand for labor.
B) Productivity shocks which increase supply of labor given the demand for labor.
C) Productivity shocks which increase demand for labor given the supply of labor.
D) Productivity shocks which decrease demand for labor given the supply of labor.

Question 67

Which of the following supports the skeptics doubts about the idea that a "New Economy" had emerged in the late 1990s?

A) In early 2000 investment in computer equipment turned to negative growth
B) A drop in productivity growth in 2001 was followed by a bounce-back of productivity growth in early 2002
C) The opinion of Alan Greenspan, Chairman of the Federal Reserve System, concerning the pace at which technological innovations are being applied
D) None of the above.

Question 68

In the production function Y = A(G,P,T) F(K,R,H,N), the exogenous factors are

A) G,R,H.
B) G,P,T.
C) P,T,K.
D) P,R,G.

Question 69

Which of the following is a method by which a poor country might import technological change without having to incur the heavy expense of research and development (not to mention human and physical capital formation) out of its own saving?

A) Copy modern products made in rich countries
B) Purchase imported machinery that embodies the latest technology
C) Obtain investment by foreign firms
D) All of the above.

Question 70

Which of the following was given as a reason to doubt the idea of "New Economy."

A) high growth in computer investment could not be sustained
B) actual real GDP could not continue to grow slower than natural real GDP growth
C) inflation could not be reduced by a higher productivity growth rate
D) All of the above

Question 71

Which of the following is not one of the economic problems that the "New Economy" is alleged to have solved?

A) deflation
B) slow growth in productivity
C) the budget deficit
D) business cycle

Question 72

To what phenomenon does "Solow's Paradox" refer?

A) The failure of the Solow growth model to incorporate endogenous growth variables
B) The absence of any measured effect of new computer technology on productivity statistics.
C) The absence of any long term effect of saving on economic growth rates in the Solow growth model.
D) The failure of the Solow growth model to predict non-convergence of poor countries.

Question 73

Which the following is not an exogenous factor affecting economic growth that countries caught in a "poverty trap" might utilize to encourage economic growth?

A) Human capital
B) Political capital
C) Infrastructure
D) Geographical location

Question 74

The idea of a "New Economy" driven by hi-tech equipment such as computers, cell phones, and the World Wide Web was rooted in part in the apparent simultaneous reversal of which of the following economic problems?

A) inflation
B) slow growth in productivity
C) the budget deficit
D) All of the above.