Question 1

If there are diminishing returns to capital,then

Accepted Answer

A) capital produces fewer goods as it ages. 
B) old ideas are not as useful as new ones. 
C) increases in the capital stock eventually decrease output. 
D) increases in the capital stock increase output by ever smaller amounts.

Question 2

An organization that tries to encourage the flow of investment to poor countries is the

Accepted Answer

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

Question 3

Other things the same,if a country raises its saving rate,when is productivity growth higher?

Accepted Answer

A) as the economy moves toward the long run and in the long run. 
B) as the economy moves toward the long run,but not in the long run. 
C) in the long run,but not as the economy moves toward the long run. 
D) neither as the economy moves toward the long run,nor in the long run.

Question 4

The president of Suldinia,a developing country,proposes that his country needs to help domestic firms by reducing trade restrictions.

Accepted Answer

A) These are outward-oriented policies and most economists believe they would have beneficial effects on growth in Suldinia. 
B) These are outward-oriented policies and most economists believe they would have adverse effects on growth in Suldinia. 
C) These are inward-oriented policies and most economists believe they would have beneficial effects on growth in Suldinia. 
D) These are inward-oriented policies and most economists believe they would have adverse effects on growth in Suldinia.

Question 5

Other things the same,if a country raises its saving rate,when is growth of real GDP per person higher?

Accepted Answer

A) as the economy moves toward the long run and in the long run. 
B) as the economy moves toward the long run,but not in the long run. 
C) in the long run,but not as the economy moves toward the long run. 
D) neither as the economy moves toward the long run,nor in the long run.

Question 6

Outward-oriented policies

Accepted Answer

A) allow countries to take advantage of gains from trade. 
B) have generally led to high growth for the countries that pursued them. 
C) receive widespread support from economists. 
D) All of the above are correct.

Question 7

A country's human capital increases

Accepted Answer

A) if its workers become better educated or healthier. 
B) only if its workers become better educated. 
C) only if its workers become healthier. 
D) None of the above is correct.

Question 8

In an economy where net exports are zero,if saving rises in some period,then in that period

Accepted Answer

A) consumption and investment fall. 
B) consumption falls and investment rises. 
C) consumption rises and investment falls. 
D) consumption rises and investment falls

Question 9

Fretonia and Libstien are the same except Fretonia has a larger capital stock.Both countries undertake policies that raise their saving rates to the same higher level.We would expect that

Accepted Answer

A) both countries would have permanent increases in their growth rates,but the increase would initially be larger in Fretonia. 
B) both countries would have permanent increases in their growth rates,but the increase would initially be smaller in Fretonia. 
C) both countries would have temporary increases in their growth rates,but the increase would be larger in Fretonia. 
D) both countries would have temporary increases in their growth rates,but the increase would be smaller in Fretonia.

Question 10

When a country removes trade barriers and imports appliances and exports engineering services,

Accepted Answer

A) its growth slows. 
B) its productivity decreases. 
C) it is essentially transforming engineering services into appliances. 
D) its economic well-being decreases while that of the country that sells appliances increases.

Question 11

An increase in capital will increase real GDP per person

Accepted Answer

A) more in a poor country than a rich country.The increase in real GDP per person will be larger if the addition to capital is from domestic rather than foreign investment. 
B) more in a poor country than a rich country.The increase in real GDP per person will be the same whether the addition to capital is from domestic or foreign investment. 
C) less in a poor country than a rich country.The increase in real GDP per person will be larger if the addition to capital is from domestic rather than foreign investment. 
D) less in a poor country than a rich country.The increase in real GDP per person will be the same whether the addition to capital is from domestic or foreign investment.

Question 12

"When workers already have a large quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity only slightly." This statement

Accepted Answer

A) represents the traditional view of the production process. 
B) is an assertion that capital is subject to diminishing returns. 
C) is made under the assumption that the quantities of human capital,natural resources,and technology are being held constant. 
D) All of the above are correct.

Question 13

Inward-oriented policies

Accepted Answer

A) are generally supported by economists. 
B) are primarily concerned with the development of human capital. 
C) in some ways are like prohibiting the use of certain technologies. 
D) All of the above are correct.

Question 14

The catch-up effect refers to the idea that

Accepted Answer

A) saving will always catch-up with investment spending. 
B) it is easier for a country to grow fast and so catch-up if it starts out relatively poor. 
C) population eventually catches-up with increased output. 
D) if investment spending is low,increased saving will help investment to "catch-up."

Question 15

In the U.S. ,each additional year of schooling has historically raised a person's wage on average by about

Accepted Answer

A) 5 percent.In less developed countries the gap between the wages of educated and uneducated workers is smaller. 
B) 10 percent.In less developed countries the gap between the wages of educated and uneducated workers is smaller. 
C) 5 percent.In less developed countries the gap between the wages of educated and uneducated workers is larger. 
D) 10 percent.In less developed countries the gap between the wages of educated and uneducated workers is larger.

Question 16

Suppose an economy experiences an increase in its saving rate.The higher saving rate leads to a higher growth rate of productivity

Accepted Answer

A) in the short run,but not in the long run. 
B) in the long run,but not in the short run. 
C) in both the short run and the long run. 
D) in neither the short run nor the long run.

Question 17

In some countries it is time consuming and costly to establish ownership of property.Reforms to reduce these costs would likely

Accepted Answer

A) have no affect on either real GDP nor productivity 
B) raise real GDP and productivity. 
C) raise real GDP but not productivity. 
D) raise productivity but not real GDP.

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