Deck 25: 3: Sec 253 Mc Economic Growth and Public Policy

Question 1

"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

A)represents an unconventional view of the production process.
B)is an assertion that capital is subject to increasing 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.

Answer 1

B

Question 2

Consider three imaginary countries.In Aziria,saving amounts to $3,000 and consumption amounts to $7,000;in Graniva,saving amounts to $2,000 and consumption amounts to $8,000;and in Tanistan,saving amounts to $4,500 and consumption amounts to $10,500.The saving rate is

A)higher in Aziria than in Tanistan,and it is higher in Tanistan than in Graniva.
B)higher in Graniva than in Tanistan,and it is higher in Tanistan than in Aziria.
C)higher in Tanistan than in Graniva,and it is the same in Graniva and Aziria.
D)higher in Aziria than in Graniva,and it is the same in Aziria and Tanistan.

Answer 2

C

Question 3

The traditional view of the production process is that capital is subject to

A)constant returns.
B)increasing returns.
C)diminishing returns.
D)diminishing returns for low levels of capital,and increasing returns for high levels of capital.

Answer 3

B

Question 4

According to the traditional view of the production function,which of the following values of the additions to output per worker would be consistent with moving from 5 to 6,and then from 6 to 7,and then from 7 to 8 units of capital per worker in that order?

A)40,40,40
B)40,35,38
C)40,34,32
D)40,43,48

Question 5

Other things the same,when an economy increases its saving rate

A)consumption and production rise now.
B)consumption rises now and production rises later
C)consumption falls now and production rises later.
D)consumption falls now and production falls later.

Question 6

Country A and country B are the same except country A currently has more capital.Assuming diminishing returns,if both countries increase their capital by 100 units and other factors that determine output are unchanged,then

A)output in country A increases by more than in country B.
B)output in country A increases by the same amount as in country B.
C)output in country A increases by less than in country B.
D)None of the above is necessarily correct.

Question 7

"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

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 8

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

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 9

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

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

Question 10

Country A and country B both increase their capital stock by one unit.Output in country A increases by 12 while output in country B increases by 15.Other things the same,diminishing returns implies that country A is

A)richer than Country B.If Country A adds another unit of capital,output will increase by more than 12 units.
B)richer than Country B.If Country A adds another unit of capital,output will increase by less than 12 units.
C)poorer than Country B.If Country A adds another unit of capital,output will increase by more than 12 units.
D)poorer than Country B.If Country A adds another unit of capital,output will increase by less than 12 units.

Question 11

Accumulating capital

A)requires that society sacrifice consumption goods in the present.
B)allows society to consume more in the present.
C)decreases saving rates.
D)involves no tradeoffs.

Question 12

Consider three imaginary countries.In Aire,saving amounts to $4,000 and consumption amounts to $12,000;in Bovina,saving amounts to $3,000 and consumption amounts to $24,000;and in Cartar,saving amounts to $10,000 and consumption amounts to $50,000.The saving rate is

A)higher in Aire than in Cartar,and it is higher in Cartar than in Bovina.
B)higher in Cartar than in Aire,and it is higher in Aire than in Bovina.
C)higher in Cartar than in Bovina,and it is the same in Bovina and Aire.
D)higher in Aire than in Bovina,and it is the same in Aire and Cartar.

Question 13

Country A and country B both increase their capital stock by one unit.Output in country A increases by 10 while output in country B increases by 8.Other things the same,diminishing returns implies that country A is

A)richer than Country B.If Country A adds another unit of capital,output will increase by more than 10 units.
B)richer than Country B.If Country A adds another unit of capital,output will increase by less than 10 units.
C)poorer than Country B.If Country A adds another unit of capital,output will increase by more than 10 units.
D)poorer than Country B.If Country A adds another unit of capital,output will increase by less than 10 units.

Question 14

All else equal,if there are diminishing returns,then which of the following is true if a country increases its capital by one unit?

A)Output will rise by more than it did when the previous unit was added.
B)Output will rise but by less than it did when the previous unit was added.
C)Output will fall by more than it did when the previous unit was added.
D)Output will fall but by less then it did when the previous unit was added.

Question 15

All else equal,if there are diminishing returns,then if a country raised its capital by 100 units last year and by 100 units this year,

A)the increase in output was greater for this year than last year.
B)the increase in output was greater last year than this year.
C)the increase in output is the same in both years.
D)None of the above is necessarily correct.

Question 16

On a production function,as capital per worker increases,output per worker

A)increases.This increase is larger at larger values of capital per worker.
B)increases.This increase is smaller at larger values of capital per worker.
C)decreases.This decrease is larger at larger value of capital per worker.
D)decreases.This decrease is smaller at larger value of capital per worker.

Question 17

When a society decides to increase its quantity of physical capital,the society

A)can avoid the usual need to face trade-offs.
B)is apparently not very concerned about its rate of economic growth in the future.
C)is in effect deciding to consume fewer goods and services in the present.
D)is in effect deciding to save less of its current income in the present.

Question 18

If there are diminishing returns to capital,then

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 19

One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs.The growth that arises from capital accumulation is not a free lunch.It requires that society

A)conserve resources for future generations.
B)sacrifice consumption goods and services now in order to enjoy more consumption in the future.
C)recycle resources so that future generations can produce goods and services with the accumulated capital.
D)None of the above is correct.

Question 20

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

A)is an assertion that production functions have the property of constant returns to scale.
B)is consistent with the view that capital is subject to diminishing returns.
C)is inconsistent with the view that it is easier for a country to grow fast if it starts out relatively poor.
D)All of the above are correct.

Question 21

If a country were to increase its saving rate,then in the long run it would also increase its

A)level of income.
B)growth rate of income.
C)growth rate of productivity.
D)All of the above are correct.

Question 22

Other things the same,if a country raises its saving rate,then in the long run

A)both the level and growth rate of real GDP are unchanged.
B)the level of real GDP is higher but the growth rate of real GDP is unchanged.
C)both the level and growth rate of real GDP are higher.
D)None of the above are correct.

Question 23

Currently a country has real GDP per person of 500.Raising capital per worker by one would increase output per worker by 4.Other things the same,which of the following long-run combinations are consistent with the effects of this country increasing its saving rate?

A)real GDP per person is 520 and raising capital per worker by one would increase output per worker by 3
B)real GDP per person is 520 and raising capital per worker by one would increase output per worker by 5
C)real GDP per person is 480 and raising capital per worker by one would increase output per worker by 3
D)real GDP per person is 480 and raising capital per worker by one would increase output per worker by 5

Question 24

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 shape of the curve is consistent with which of the following statements about the economy to which the curve applies?

A)In the long run,a higher saving rate leads to a higher level of productivity.
B)In the long run,a higher saving rate leads to a higher level of income.
C)In the long run,a higher saving rate leads to neither a higher growth rate of productivity nor a higher growth rate of income.
D)All of the above are correct.

Question 25

If a country's saving rate declined,then other things the same,in the long run the country would have

A)lower productivity,but not lower real GDP per person.
B)lower productivity and lower real GDP per person.
C)lower real GDP per person,but not lower productivity
D)neither lower productivity nor lower real GDP per person.

Question 26

Other things the same,a country that increases its savings rate will have

A)higher future capital and higher future real GDP per person.
B)higher future capital but not higher future real GDP per person.
C)higher future real GDP per person but not higher future capital.
D)neither higher future capital nor higher future real GDP per person.

Question 27

Suppose that a country increased its saving rate.In the long run it would have

A)higher productivity,and another unit of capital would increase output by more than before.
B)higher productivity,but another unit of capital would increase output by less than before.
C)lower productivity,and another unit of capital would increase output by more than before.
D)lower productivity,but another unit of capital would increase output by less than before.

Question 28

Other things the same,a country that increases its saving rate increases

A)its future productivity and future real GDP.
B)neither its future productivity nor future real GDP.
C)its future productivity,but not its future real GDP.
D)its future real GDP,but not its future productivity.

Question 29

If a country increases its saving rate,which of the following permanently grow at a higher rate?

A)productivity and real GDP per person
B)productivity but not real GDP per person
C)real GDP per person but not productivity
D)neither real GDP per person nor productivity

Question 30

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.Choose a point anywhere on the curve and call it point A.If the economy is at point A in 2011,then it will definitely remain at point A in 2012 if,between 2011 and 2012,

A)the quantity of physical capital remains constant;the number of workers doubles;and human capital,natural resources,and technology all double as well.
B)the quantity of physical capital doubles;human capital,natural resources,and technology all double as well;and the number of workers remains constant.
C)the quantity of physical capital doubles;the number of workers doubles;and human capital,natural resources,and technology all double as well.
D)the quantity of physical capital doubles;the number of workers doubles;and human capital,natural resources,and technology remain constant.

Question 31

In the long run,a higher saving rate

A)cannot increase the capital stock.
B)means that people must consume less in the future.
C)increases the level of productivity.
D)None of the above is correct.

Question 32

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

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 33

In the long run,an increase in the saving rate

A)doesn't change the level of productivity or income.
B)raises the levels of both productivity and income.
C)raises the level of productivity but not the level of income.
D)raises the level of income but not the level of productivity.

Question 34

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

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 35

The slope of the production function with capital per worker on the horizontal axis and output per worker on the vertical axis

A)is positive and gets steeper as capital per worker rises.
B)is positive and gets flatter as capital per worker rises.
C)is negative and gets steeper as capital per worker rises.
D)is negative and gets flatter as capital per worker rises.

Question 36

If a country's saving rate increases,then in the long run

A)productivity is higher but real GDP per person is not higher.
B)real GDP per person is higher but productivity is not higher.
C)productivity and real GDP per person are both higher.
D)neither productivity nor real GDP per person is higher.

Question 37

All else equal,if there are diminishing returns and constant returns to scale,then what happens to productivity if capital and labor both increase but capital increases by more?

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 38

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

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

Question 39

In the long run,a higher saving rate

A)cannot increase the capital stock.
B)increases the growth rate of income.
C)increases the growth rate of productivity.
D)None of the above is correct.

Question 40

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 shape of the curve is consistent with which of the following statements about the economy to which the curve applies?

A)In the long run,a higher saving rate leads to a higher growth rate of productivity.
B)In the long run,a higher saving rate leads to a higher growth rate of income.
C)Returns to capital become increasingly smaller as the amount of capital per worker increases.
D)All of the above are correct.

Question 41

Assuming diminishing returns,

A)the increase in output growth from an increase in the saving rate rises over time,and that,other things the same,rich countries should grow faster than poor ones.
B)the increase in output growth from an increase in the saving rate falls over time,and that,other things the same,rich countries should grow faster than poor ones.
C)the increase in output growth from an increase in the saving rate rises over time,and that,other things the same,poor countries should grow faster than rich ones.
D)the increase in output growth from an increase in the saving rate falls over time,and that,other things the same,poor countries should grow faster than rich ones.

Question 42

The short-run effects of an increase in the saving rate include

A)a higher level of productivity.
B)a higher growth rate of productivity.
C)a higher growth rate of income.
D)All of the above are correct.

Question 43

Two countries are the same,except one is poorer.Assuming the traditional assumption about the production function is made there are

A)diminishing returns to capital so the poor country grows slower.
B)increasing returns to capital so the poor country grows slower.
C)diminishing returns to capital so the poor country grows faster.
D)increasing returns to capital so the poor country grows faster.

Question 44

Which of the following best describes the response of output as time passes to an increase in the saving rate?

A)The growth rate of output does not change.
B)The growth rate of output increases and gets even larger as time passes.
C)The growth rate of output increases and does not change as time passes.
D)The growth rate of output increases,but diminishes to its former level as time passes.

Question 45

Suppose Turkey increases its saving rate.In the long run

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

Question 46

Suppose that the U.S.undertakes a policy to increase its saving rate.This policy will likely

A)have no impact on the growth rate of real GDP per person.
B)decrease the growth of real GDP per person for a few years.
C)increase the growth of real GDP per person for several decades.
D)permanently increase the growth rate of real GDP per person.

Question 47

The logic behind the catch-up effect is that

A)workers in countries with low incomes will work more hours than workers in countries with high incomes.
B)the capital stock in rich countries deteriorates at a higher rate because it already has a lot of capital.
C)new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital.
D)None of the above is correct.

Question 48

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

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 49

Suppose that the U.S.undertakes a policy to increase its saving rate.This policy will likely

A)have no impact on the level of real GDP per person.
B)immediately and permanently decrease the level of real GDP per person.
C)immediately and permanently increase the level of real GDP person.
D)gradually raise the level of real GDP per person.

Question 50

Suppose that there are diminishing returns to capital.Suppose also that two countries are the same except one has more capital per worker and so it has more real GDP per worker than the other.Finally,suppose that the saving rate in both countries increases from 4 percent to 7 percent.Over the next ten years we would expect that

A)the growth rate will not change in either country.
B)the country that started with less capital per worker will grow faster.
C)the country that started with more capital per worker will grow faster.
D)both countries will grow and at the same higher rate.

Question 51

The traditional view of the production process is that capital is subject to

A)diminishing returns,so that other things the same,real GDP in poor countries should grow at a faster rate than in rich countries.
B)diminishing returns,so that other things the same,real GDP in poor countries should grow at a slower rate than in rich countries.
C)increasing returns,so that other things the same,real GDP in poor countries should grow at a faster rate than in rich countries.
D)increasing returns,so that other things the same,real GDP in poor countries should grow at a slower rate than in rich countries.

Question 52

Country A has real GDP per person of 100,000 while country B has real GDP per person of 200,000.All else constant,country A will eventually have a higher standard of living than country B if

A)the level of saving per person is 10,000 in country A and 10,000 in country B.
B)the level of saving per person is 12,000 in country A and 15,000 in country B.
C)Both of the above are correct.
D)None of the above are correct.

Question 53

The long-run effects of an increase in the saving rate include

A)a higher level of productivity.
B)a higher growth rate of productivity.
C)a higher growth rate of income.
D)All of the above are correct.

Question 54

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

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 55

An increase in the saving rate would,other things the same,

A)increase growth more for a poor country than for a rich country,and raise growth permanently.
B)increase growth more for a poor country than for a rich country,but raise growth temporarily.
C)increase growth more for a rich country than for a poor country,and raise growth permanently.
D)increase growth more for a rich country than for a poor country,but raise growth temporarily.

Question 56

Real GDP per person is $10,000 in Country A,$20,000 in Country B,and $30,000 in Country C.The saving rate increases by the same rate in all three countries.Other things equal,we would expect that

A)all three countries will grow at the same rate.
B)Country A will grow the fastest.
C)Country B will grow the fastest.
D)Country C will grow the fastest.

Question 57

Other things equal,relatively poor countries tend to grow

A)slower than relatively rich countries;this is called the poverty trap.
B)slower than relatively rich countries;this is called the fall-behind effect.
C)faster than relatively rich countries;this is called the catch-up effect.
D)faster than relatively rich countries;this is called the constant-returns-to-scale effect.

Question 58

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.Suppose that both increase their saving rate from 3 percent to 4 percent.In the long run

A)both countries will have permanently higher growth rates of real GDP per person,and the growth rate will be higher in the country with more capital.
B)both countries will have permanently higher growth rates of real GDP per person,and the growth rate will be higher in the country with less capital.
C)both countries will have higher levels of real GDP per person,and the temporary increase in growth in the level of real GDP per person will have been greater in the country with more capital.
D)both countries will have higher levels of real GDP per person,and the temporary increase in growth in the level of real GDP per person will have been greater in the country with less capital.

Question 59

The catch-up effect refers to the idea that

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 60

According to studies using international data,an increase in the saving rate

A)does not increase the growth rate of output.
B)increases the growth rate of output for a few years.
C)increases the growth rate of output for about a decade.
D)increases the growth rate of output for several decades.

Question 61

In recent decades Americans have increased their purchase of stocks of foreign-based companies.The Americans who have bought these stocks were engaged in

A)foreign portfolio investment.
B)indirect domestic investment.
C)foreign direct investment.
D)foreign indirect investment.

Question 62

Foreign saving is used for domestic investment when foreigners engage in

A)foreign direct investment.
B)foreign portfolio investment.
C)either foreign direct investment or foreign portfolio investment.
D)None of the above is correct.

Question 63

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

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 64

If companies from foreign countries build and operate factories in China,then China's productivity

A)and the wages of Chinese workers increase.
B)increases but the wages of Chinese workers decrease.
C)decreases but the wages of Chinese workers increase.
D)and the wages of Chinese workers decrease.

Question 65

If WarmWear,a U.S.manufacturer of winter clothing,opens a new factory in Austria,then

A)Austrian GNP increases by more than Austrian GDP,because GDP includes income earned by foreigners working in Austria.
B)Austrian GNP increases by more than Austrian GDP,because GDP excludes income earned by foreigners working in Austria.
C)Austrian GNP increases by less than Austrian GDP,because GDP includes income earned by foreigners working in Austria.
D)Austrian GNP increases by less than Austrian GDP,because GDP excludes income earned by foreigners working in Austria.

Question 66

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

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 67

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

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 68

If an American-based firm opens and operates a new clothing factory in Honduras,then it is engaging in

A)foreign portfolio investment.
B)foreign financial investment.
C)foreign direct investment.
D)indirect foreign investment.

Question 69

Over the period 1960-1990,

A)South Korea had a higher growth rate than the United States because it had a higher ratio of investment to GDP.
B)the United States had a higher growth rate than South Korea because it had a higher ratio of investment to GDP.
C)South Korea had a higher growth rate than the United States even though it had a similar ratio of investment to GDP.
D)the United States had a higher growth rate than South Korea even though it had a similar ratio of investment to real GDP.

Question 70

Suppose that an American opens and operates a candy factory in Finland.This is an example of

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

Question 71

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

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 72

Suppose Japanese-based Toshiba Corporation builds and operates a new computer factory in the United States.Future production from such an investment will

A)increase U.S.GNP more than it increases U.S.GDP.
B)increase U.S.GDP more than it increases U.S.GNP.
C)have no affect on U.S.GNP,but will increase U.S.GDP.
D)have no affect on U.S.GNP or GDP.

Question 73

Country A has real GDP per person of 250,000 while Country B has real GDP per person of 500,000.All else constant,Country A will eventually have a higher standard of living than Country B if

A)the level of saving per person is 5.000 in Country A and 7,500 in Country B.
B)the level of saving per person is 3,000 in Country A and 6,000 in Country B.
C)Both of the above are correct.
D)None of the above are correct.

Question 74

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

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 75

When Chile experiences investment from abroad,it experiences,as a result,

A)an increase in productivity.
B)a decrease in Gross National Product (GNP).
C)lower wages for Chilean workers.
D)None of the above is correct.

Question 76

In the 1800s,Europeans purchased stock in American companies that used the funds to build railroads and factories.The Europeans who did this engaged in

A)foreign portfolio investment.
B)indirect domestic investment.
C)foreign direct investment.
D)foreign indirect investment.

Question 77

Which of the following countries benefited significantly from the catch-up effect in the last half of the twentieth century?

A)Ethiopia
B)the United States
C)Canada
D)South Korea

Question 78

Suppose a U.S.automaker builds and operates a new factory in Italy.Future production from such an investment will

A)increase Italian GDP more than it increases Italian GNP.
B)increase Italian GNP more than it increases Italian GDP.
C)have no affect on Italian GNP,but will increase Italian GDP.
D)have no affect on either Italian GDP or GNP.

Question 79

The opening of a new American-owned factory in Algeria would tend to increase Algeria's GDP more than it increases Algeria's GNP because

A)some of the income from the factory accrues to people who do not live in Algeria.
B)gross domestic product is income earned within a country by both residents and nonresidents,whereas gross national product is the income earned by residents of a country while producing both at home and abroad.
C)all of the income from the factory is included in Algeria's GDP.
D)All of the above are correct.

Question 80

If an American-based firm opens and operates a factory in China,then it is engaging in

A)foreign portfolio investment.
B)foreign financial investment.
C)foreign direct investment.
D)indirect foreign investment.