Ch 3 multiple choice

Chapter 25 Production and Growth Sec00 Production and Growth MULTIPLE CHOICE 3 During the past century if the average growth rate of real GDP per person of Vietnam had been 7%, it implies that it woul[.]

Chapter 25

Production and Growth

Sec00 - Production and Growth

MULTIPLE CHOICE

3 During the past century if the average growth rate of real GDP per person of Vietnam had been 7%, it implies that

it would have doubled, on average, about every

10 Which of the following statements is correct?

a The level of real GDP is a good gauge of economic prosperity, and the growth of real GDP is a

good gauge of economic progress

b The level of real GDP is a good gauge of economic progress, and the growth of real GDP is a good gauge of economic prosperity

c The level of real GDP is a good gauge of economic prosperity, and the level of real GDP per person

is a good gauge of economic progress

d The level of real GDP is a good gauge of economic progress, and the level of real GDP per person

is a good gauge of economic prosperity

6 Over the past 100 years, U.S real GDP per person has doubled about every 35 years If, in the next 100 years,

it doubles every 25 years, then a century from now U.S real GDP per person will be

a 4 times higher than it is now

b 8 times higher than it is now

c 12 times higher than it is now

d 16 times higher than it is now

3

Sec01 - Production and Growth - Economic Growth around the World

6 If one wants to know how the material well-being of the average person has changed over time in a given country, one should look at the

a level of real GDP

b growth rate of nominal GDP

c growth rate of real GDP

d growth rate of real GDP per person

5

7 The level of real GDP person

a differs widely across countries, but the growth rate of real GDP per person is similar across

countries

b is very similar across countries, but the growth rate of real GDP per person differs widely across

countries

c and the growth rate of real GDP per person are similar across countries

d and the growth rate of real GDP per person vary widely across countries

22 Which of the following does the level of real GDP measure?

a total real income

b productivity

c the standard of living

d All of the above are correct

7

23 Which of the following is correct?

a Countries with the highest growth rates over the last 100 years are the ones that had the highest

level of real GDP 100 years ago

b Most countries have had little fluctuation around their average growth rates during the past 100

years

c The ranking of countries by income changes substantially over time

d Over the last 100 years, Japan had the highest real GDP growth rate, and now has the highest real GDP per person

31 Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million The year before, real GDP was 500.0 billion and the population was 2.0 million What was the growth rate of real GDP per person during the year?

a 12 percent

b 10 percent

c 4 percent

d 2 percent

37 Which of the following is not correct?

a Across countries there are large differences in the average income per person These differences

are reflected in large differences in the quality of life

b With a growth rate of about 2 percent per year, average income per person doubles about every 35 years

c The ranking of countries by average income changes very little over time

d In some countries real income per person has changed very little over many years

Sec02 - Production and Growth - Productivity: Its Role and Determinants

a the amount of difficulty that is involved in producing a given quantity of goods and services

b the quantity of labor that is required to produce one unit of goods and services

c the quantity of goods and services produced from each unit of labor input

d the quantity of goods and services produced over a given amount of time

6 Perry accumulated a lot of mathematical skills while in high school, college, and graduate school Economistsinclude these skills as part of Perry’s

a is the same thing as human capital

b can be discovered but it can never be kept secret

c is a determinant of productivity

d does not play a role in the relationship that economists call the production function.

11 Industrial machinery is an example of

a a factor of production that in the past was an output from the production process

b physical capital

c something that influences productivity

d All of the above are correct

9

13 Despite its status as one of the richest countries in the world, Japan

a has a very low level of productivity

b has few natural resources

c has very little human capital

d engages in a relatively small amount of international trade

15 Which of the following statements is correct?

a By definition, all natural resources are nonrenewable

b Market prices give us reason to believe that natural resources are a limit to economic growth

c An economy must be blessed with ample quantities of natural resources if it is to be a highly

productive economy

d Differences in natural resources can explain some of the differences in standards of living around the world

11

21 In one day Alpha Cabinet Company made 40 cabinets with 320 hours of labor What was their productivity?

a 1/8 cabinet per hour

b 8 hours per cabinet

c 40 cabinets

d None of the above is correct

27 Workland has a population of 10,000, of whom 7,000 work 8 hours a day to produce a total of 224,000 final goods Laborland has a population of 5,000, of whom 4,000 work 12 hours a day to produce a total of 120,000final goods

a Workland has higher productivity and higher real GDP per person than Laborland

b Workland has higher productivity but lower real GDP per person than Laborland

c Workland has lower productivity but higher real GDP per person than Laborland

d Workland has lower productivity and lower real GDP per person than Laborland

13

33 Both Tom and Jerry work 10 hours a day Tom can produce six baskets of goods per hour while Jerry can produce four baskets of the same goods per hour It follows that Tom's

a productivity is greater than Jerry's

b output is greater than Jerry's

c standard of living is higher than Jerry's

d All of the above are correct

41 The key determinant of a the standard of living in a country is

a the amount of goods and services produced from each hour of a worker's time

b the total amount of goods and services produced within the country

c the total amount of its physical capital

d its growth rate of real GDP

15

47 Which of the following would not be considered physical capital?

a a new factory building

b a computer used to help Mercury Delivery Service keep track of its orders

c on-the-job training

d a desk used in an accountant's office

53 Which of the following is human capital?

a a student loan

b understanding how to use a company's accounting software

c training videos for new corporate employees

d All of the above are correct

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58 Which of the following would be human capital and physical capital, respectively?

a for an accounting firm, the accountants’ knowledge of tax laws and computer software

b for a grocery store, grocery carts and shelving

c for a school, chalkboard and desks

d for a library, the building and the reference librarians’ knowledge of the Internet

64 Which of the following is an example of a renewable natural resource?

a the knowledge possessed by scientists

b carpenters’ labor services

c lumber

d All of the above are correct

70 In a market economy, the real, or inflation-adjusted, price of a resource measures its

a contribution to revenue

b relative scarcity

c productivity

d contribution to efficiency

79 If a good has become more scarce, then we know for sure that

a the demand for it increased

b the supply of it decreased

c either the demand for it increased or the supply of it decreased

d both the supply of it and the demand for it decreased

87 A management professor discovers a way for corporate management to operate more efficiently He publishes his findings in a journal His findings are

a proprietary and common knowledge

b neither proprietary nor common knowledge

c proprietary, but not common, knowledge

d common, but not proprietary, knowledge

93 Suppose that over the last ten years productivity grew faster in Oceania than in Freedonia and the population

of both countries was unchanged

a It follows that real GDP per person must be higher in Oceania than in Freedonia

b It follows that real GDP per person grew faster in Oceania than in Freedonia

c It follows that the standard of living must be higher in Oceania than in Freedonia

d All of the above are correct

99 Which of the following would be considered physical capital?

a the available knowledge on how to make semiconductors

b a taxi-cab driver’s knowledge of the fastest routes to take

c bulldozers, backhoes and other construction equipment

d All of the above are correct

105 In a particular production process, if the quantities of all inputs used are increased by 60 percent, then the quantity of output increases by 60 percent as well This means that

a the production process cannot be enhanced by technological advances

b no mathematical representation of the relevant production function can be formulated

c the relevant production function has the limits-to-growth property

d the relevant production function has the constant-returns-to-scale property

111 An economy’s production function has the constant-returns-to-scale property If the economy’s labor force doubled and all other inputs stayed the same, then real GDP would

a stay the same

b increase by exactly 50 percent

c increase by exactly 100 percent

d increase, but not necessarily by either 50 percent or 100 percent

Scenario 25-1 An economy’s production form takes the form Y = AF(L, K, H, N).

118 Refer to Scenario 25-1 If the production function has the constant-returns-to-scale property, then it is

possible that the specific form of the production function is

Sec03 - Production and Growth - Economic Growth and Public Policy

MULTIPLE CHOICE

1 “When workers already have a large quantity of capital to use in producing goods and services, giving them anadditional 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

9 Investment in

a physical capital, unlike investment in human capital, has an opportunity cost

b physical capital, like investment in human capital, has an opportunity cost

c human capital is particularly attractive because it involves no externalities

d human capital has been shown to be relatively unimportant, relative to investment in physical

capital, for a country’s long-run economic success

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13 In countries that experience political instability, standards of living tend to be low because of

a violations of diminishing returns

b excessive levels of caloric intake

c lack of respect for property rights

d attempts by government officials to thwart the catch-up effect

18 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

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23 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

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

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33 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

38 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

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43 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

51 If an American-based firm opens and operates a new watch factory in Panama, then it is engaging in

a foreign portfolio investment

b foreign financial investment

c foreign direct investment

d indirect foreign investment

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

a some of the income from the factory accrues to people who do not live in Egypt

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 Egypt's GDP

d All of the above are correct

64 Which of the following is generally an opportunity cost of investment in human capital?

a future job security

b forgone present wages

c increased earning potential

d All of the above are correct

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74 Inward-oriented policies

a include imposing tariffs and other trade restrictions

b have generally increased productivity and growth in the countries that pursued them

c promote the production of goods and services that the country produces most efficiently

d All of the above are correct

79 When a country removes trade barriers and imports toys and exports farm machinery,

a its growth slows

b its productivity decreases

c it is essentially transforming farm machinery into toys

d its economic well-being decreases while that of the country that sells toys increases

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

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

94 On the basis of theory and empirical evidence, economists have reached several conclusions about economic

growth Which of the following is not one of these conclusions?

a A relatively simple way to increase growth rates permanently is to increase a country's saving rate

b Growth is generally inhibited rather than promoted by policies like protective tariffs

c Well-established property rights that are enforced by fair and efficient courts are important to

economic growth

d Countries with few domestic natural resources still have opportunities for economic growth

95 All else equal, which of the following would tend to cause real GDP per person to rise?

a a change from outward-oriented policies to inward-oriented policies

b an increase in investment in human capital

c a weakening of property rights

d All of the above are correct

100 The Economic Development Minister of a country has a list of things she thinks may explain her country's lowgrowth of real GDP per person relative to other countries She asks you to pick the one you think most likely explains her country's low growth Which of the following contributes to low growth?

a poorly enforced property rights

b outward-oriented trade policies

c policies that permit foreign investment

d All of the above are correct

105 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

111 Electronics firms may be able to get patents on their ideas Doing so makes their ideas

a private goods rather than public goods This gives people more incentive to engage in research

b private goods rather than public goods This gives people less incentive to engage in research

c public goods rather than private goods This gives people more incentive to engage in research

d public goods rather than private goods This gives people more incentive to engage in private

research

115 By saving more, a country

a has more resources for capital goods The increase in capital raises productivity

b has more resources for capital goods The increase in capital reduces productivity

c has fewer resources for capital goods The decrease in capital raises productivity

d has fewer resources for capital goods The decrease in capital reduces productivity