Question 1

Over the past century in Canada, by how much has average income grown as measured by real GDP per person?

Accepted Answer

A)  about 1 percent per year, which implies a doubling about every 70 years 
B)  about 2 percent per year, which implies a doubling about every 35 years 
C)  about 3.5 percent per year, which implies a doubling about every 20 years 
D)  about 4 percent per year, which implies a doubling about every 17.5 years

Question 2

What is an example of a nonrenewable resource?

Accepted Answer

A)  natural gas 
B)  wind power 
C)  livestock 
D)  a forest

Question 3

Economist Michael Kremer provides some support for the hypothesis that an increase in population might foster economic prosperity. Which statement best explains this hypothesis?

Accepted Answer

A)  More people can produce more ideas, which contribute to increasing productivity. 
B)  More people are able to produce more output, everything else being the same. 
C)  A larger population implies more demand for goods and services, which stimulates the economy. 
D)  When there is a large number of children, governments need to invest more in education, which fosters economic growth.

Question 4

A forest is an example of a nonrenewable resource.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is considered human capital?

Accepted Answer

A)  the number of computers available in schools and universities 
B)  the average percentage of income people give to charity 
C)  the number of persons in the labour force 
D)  knowledge acquired from an apprenticeship program

Question 6

Which organization tries to encourage the flow of investment to poor countries?

Accepted Answer

A)  World Bank 
B)  Organization of Less Developed Countries 
C)  World Health Alliance 
D)  International Development Alliance

Question 7

Suppose that real GDP grew more in El Dorado than in Atlantis last year. What does this imply concerning productivity or standard of living?

Accepted Answer

A)  El Dorado must have a higher standard of living than Atlantis. 
B)  El Dorado's productivity must have grown faster than Atlantis's. 
C)  El Dorado must have a higher real GDP than Atlantis. 
D)  El Dorado's productivity must have been higher only if the population in the two countries grew at the same rate.

Question 8

The purpose of this problem is to make you acquainted with Statistics Canada's website. Open http://www.statcan.gc.ca/start-debut-eng.html and look for "Real gross domestic product, expenditure-based, by province and territory." Answer the following questions based on this table.
a) Which three provinces had the greatest real GDP per capita in 2017?
b) Calculate the shares of each of these provinces in Canada's real GDP in 2017.
c) Now, look for another table "Inter-city indexes of price differentials in consumer goods and services." In which city was the consumer price index the highest in both of the years 2017 and 2018? Can you think of an explanation for that?

Accepted Answer

The answer of The purpose of this problem is to...

Question 9

Which statement best explains the falling inflation-adjusted prices of most of the natural resources?

Accepted Answer

A)  Most are renewable; therefore, the supply of natural resources is increasing. 
B)  Our ability to conserve natural resources is increasing faster than their depletion. 
C)  The demand for natural resources is diminishing due to the discovery of new substitutes. 
D)  New deposits of natural resources have been discovered in emerging markets.

Question 10

The annual population growth rate in developed countries is about 1 percent, while the growth rate in developing countries is about 3 percent.

Accepted Answer

A) True 
 B)False

Question 11

Which list contains, in this order, natural resources, human capital, and physical capital?

Accepted Answer

A)  for a restaurant: the land where it stands; the things the kitchen; the freezers where the steaks are kept 
B)  for a furniture company: wood; the company cafeteria; saws 
C)  for a railroad: fuel; railroad engineers; railroad tracks 
D)  for an oil company: the oil it brings to surface; the rigs; the refineries using its oil

Question 12

What is a correct way to measure productivity?

Accepted Answer

A)  divide the number of hours worked by output 
B)  divide output by the number of hours worked 
C)  divide the number of workers by output 
D)  divide output by the number of workers

Question 13

On average, by how much does each year of schooling raise a person's wage in Canada?

Accepted Answer

A)  about 5 percent 
B)  about 10 percent 
C)  about 15 percent 
D)  about 20 percent

Question 14

Suppose that there are diminishing returns to capital. Suppose also that two countries are the same except one has less capital, and so less real GDP per person, than the other. Suppose that the saving rate in both countries increases from 5 percent to 6 percent. What would we expect over the next 10 years?

Accepted Answer

A)  The growth rate will not change in either country. 
B)  The country with less capital will grow faster. 
C)  The country with more capital will grow faster. 
D)  Both countries will grow at the same rate.

Question 15

Which statement best explains economists' understanding of the facts concerning the relationship between natural resources and economic growth?

Accepted Answer

A)  A country with few or no domestic natural resources is destined to remain undeveloped. 
B)  Differences in natural resources have virtually no role in explaining differences in standards of living. 
C)  Some countries can be rich mostly because of their natural resources, and countries without natural resources need not be poor, but can never have very high standards of living. 
D)  Abundant domestic natural resources may help make a country rich, but even countries with few natural resources can have high standards of living.

Question 16

From 1960 to 1990, the ratio of investment to GDP in South Korea was higher than in Canada and so South Korea had substantially higher growth.

Accepted Answer

A) True 
 B)False

Question 17

Suppose Mexico increases its saving rate. What will happen in the long run?

Accepted Answer

A)  The growth rates of productivity and real GDP per person will increase. 
B)  Productivity and real GDP per person will increase. 
C)  The growth rate of productivity will increase, and real GDP per person will increase. 
D)  Productivity will increase, and the growth rate of real GDP per person will increase.

Question 18

In the country of Kasnia, the price of copper increased from $6 per kilogram to $6.60 per kilogram during a time when the overall price level increased by 6 percent. During this period, what happened to the real price of copper?

Accepted Answer

A)  It has increased by about 2 percent. 
B)  It has decreased by about 4 percent. 
C)  It has decreased by about 8 percent. 
D)  It has increased by about 10 percent.

Question 19

In a market economy, what does the real, or inflation-adjusted, price of a resource measure?

Accepted Answer

A)  contribution to revenue 
B)  relative scarcity 
C)  relative importance 
D)  contribution to efficiency

Question 20

Other things the same, countries with low income are likely to increase their income more by adding another unit of capital than are countries that have high income.

Accepted Answer

A) True 
 B)False

Exam 7: Production and Growth

Over the past century in Canada, by how much has average income grown as measured by real GDP per person?

What is an example of a nonrenewable resource?

Economist Michael Kremer provides some support for the hypothesis that an increase in population might foster economic prosperity. Which statement best explains this hypothesis?

A forest is an example of a nonrenewable resource.

Which of the following is considered human capital?

Which organization tries to encourage the flow of investment to poor countries?

Suppose that real GDP grew more in El Dorado than in Atlantis last year. What does this imply concerning productivity or standard of living?

Which statement best explains the falling inflation-adjusted prices of most of the natural resources?

The annual population growth rate in developed countries is about 1 percent, while the growth rate in developing countries is about 3 percent.

Which list contains, in this order, natural resources, human capital, and physical capital?

What is a correct way to measure productivity?

On average, by how much does each year of schooling raise a person's wage in Canada?

Which statement best explains economists' understanding of the facts concerning the relationship between natural resources and economic growth?

From 1960 to 1990, the ratio of investment to GDP in South Korea was higher than in Canada and so South Korea had substantially higher growth.

Suppose Mexico increases its saving rate. What will happen in the long run?

In the country of Kasnia, the price of copper increased from $6 per kilogram to $6.60 per kilogram during a time when the overall price level increased by 6 percent. During this period, what happened to the real price of copper?

In a market economy, what does the real, or inflation-adjusted, price of a resource measure?

Other things the same, countries with low income are likely to increase their income more by adding another unit of capital than are countries that have high income.