Question 1

Which of the following will increase a country's real GDP per person?

Accepted Answer

A) imposing restrictions on foreign trade and foreign investment 
B) imposing restrictions on foreign trade and reducing restrictions on foreign investment 
C) reducing restrictions on foreign trade and imposing restrictions on foreign investment 
D) reducing restrictions on foreign trade and foreign investment

Question 2

Thomas Malthus's predictions turned out to be wrong due to

Accepted Answer

A) technological advances such as those during the Industrial Revolution. 
B) smaller populations now than in the time of Malthus. 
C) the effects of brain-drain. 
D) unlimited natural resources.

Question 3

Patents turn new ideas into

Accepted Answer

A) public goods,and increase the incentive to engage in research. 
B) public goods,but decrease the incentive to engage in research. 
C) private goods,and increase the incentive to engage in research. 
D) private goods,but decrease the incentive to engage in research.

Question 4

If over a short time a large number of teenagers become old enough to find employment and a much smaller number of people retire,then productivity

Accepted Answer

A) and real GDP per person rise. 
B) rises but real GDP per person falls. 
C) falls but real GDP per person rises. 
D) and real GDP per person fall.

Question 5

Over extended periods of time,population growth

Accepted Answer

A) has no effect on the standard of living. 
B) has uncertain effects on the standard of living. 
C) clearly raises the standard of living. 
D) clearly lowers the standard of living.

Question 6

Other things the same,if a country increased its saving rate,in 40 years or so it would likely have

Accepted Answer

A) higher productivity,and a higher growth rate of real GDP. 
B) higher productivity,but not a higher growth rate of real GDP. 
C) the same productivity and growth of real GDP it began with. 
D) None of the above is correct.

Question 7

Figure 25-1.On the horizontal axis,K/L represents capital (K)per worker (L).On the vertical axis,Y/L represents output (Y)per worker (L). 
-Refer to Figure 25-1.The curve becomes flatter as the amount of capital per worker increases because of

Accepted Answer

A) increasing returns to capital. 
B) increasing returns to labor. 
C) diminishing returns to capital. 
D) diminishing returns to labor.

Question 8

Senator Noitall says that in order to help poor countries develop,the United States should: 1.Encourage poor countries to allow U.S.and other foreign firms to build and operate businesses in their country;2.Reduce or eliminate subsidies to U.S.producers when poor countries have a comparative advantage producing goods the U.S.subsidizes;3.Work to promote political stability in poor countries;and 4.Reduce poor countries reliance on market forces in their economies.How many of these ideas are likely to help poor countries grow?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4

Question 9

If over a short time there is an increase in the number of people retired and a decrease in the number of people working,then productivity

Accepted Answer

A) and real GDP per person rise. 
B) rises but real GDP per person falls. 
C) falls and real GDP per person rises. 
D) and real GDP per person fall.

Question 10

Inventors often obtain patents on new products and processes,thereby turning new ideas into

Accepted Answer

A) private goods and increasing the incentive to engage in research. 
B) private goods but decreasing the incentive to engage in research. 
C) public goods and increasing the incentive to engage in research. 
D) public goods but decreasing the incentive to engage in research.

Question 11

If a Japanese company opens a new factory in South Korea,it makes

Accepted Answer

A) foreign direct investment.The factory will make a bigger impact on South Korea's GDP than on its GNP. 
B) foreign direct investment.The factory will make a bigger impact on South Korea's GNP than on its GDP. 
C) foreign portfolio investment.The factory will make a bigger impact on South Korea's GDP than on its GNP. 
D) foreign portfolio investment.The factory will make a bigger impact on South Korea's GNP than on its GDP.

Question 12

Investment from abroad

Accepted Answer

A) is a way for poor countries to learn the state-of-the-art technologies developed and used in richer countries. 
B) is viewed by economists as a way to increase growth. 
C) often requires removing restrictions that governments have imposed on foreign ownership of domestic capital. 
D) All of the above are correct.

Question 13

Educated people may generate ideas that increase production.These ideas

Accepted Answer

A) produce a return to society from education that is greater than the return to the individual. 
B) could justify government subsides for education. 
C) are external benefits of education. 
D) All of the above are correct.

Question 14

Suppose that an American company opens and operates a restaurant in Ireland.This is an example of

Accepted Answer

A) foreign direct investment.American saving is used to finance Irish investment. 
B) foreign direct investment.American saving is used to finance American investment. 
C) foreign portfolio investment.American saving is used to finance Irish investment. 
D) foreign portfolio investment.American saving is used to finance American investment.

Question 15

An increase in a country's population may contribute to the rate of technological progress because a larger population

Accepted Answer

A) forces the capital stock to be spread more thinly. 
B) forces natural resources to be spread more thinly. 
C) brings with it more scientists,inventors,and engineers. 
D) brings with it more favorable recognition from other countries.

Question 16

Which of the following is consistent with the catch-up effect?

Accepted Answer

A) The United States had a higher growth rate before 1900 than after. 
B) After World War II the United States had lower growth rates than war-ravaged European countries. 
C) Although the United States has a relatively high level of output per person,its growth rate is rather modest compared to some countries. 
D) All of the above are correct.

Question 17

Which of the following public policies would be least likely to result in more rapid economic growth for a poor or developing country?

Accepted Answer

A) policies designed to promote economic development in coastal areas 
B) policies designed to foster strict enforcement of property rights 
C) policies designed to foster free trade 
D) inward-oriented policies

Question 18

In the fourteenth century it is estimated that deaths resulting from the bubonic plague reduced the population by about a third.Assuming diminishing returns,the decrease in population should have

Accepted Answer

A) increased productivity and real GDP per person. 
B) increased productivity but decreased real GDP per person. 
C) increased real GDP per person,but decreased productivity. 
D) decreased productivity and real GDP per person.

Question 19

All else equal,if there are diminishing returns,then what happens to productivity if both capital and labor increase?

Accepted Answer

A) Productivity will definitely fall. 
B) Productivity will definitely be unchanged. 
C) Productivity will definitely rise. 
D) None of the above are necessarily correct.

Question 20

A country with a relatively low level of real GDP per person is considering adopting two policies to promote economic growth.The first is to decrease barriers to trade.The second is to restrict foreign portfolio investment.Which of these policies do most economists say promote growth?

Accepted Answer

A) both the first and the second 
B) the first but not the second 
C) the second but not the first 
D) neither the first nor the second

Exam 12: Production and Growth: Economic Growth and Public Policy