Question 1

What is the relationship between average household income and standard of living?

Accepted Answer

A)  There is no relationship. Increasing average income says nothing about income distribution. 
B)  Rising income enables households to acquire more of the goods and services that improve their material standard of living. 
C)  Rising income tends to increase the crime rate and violence, thereby lowering a country's standard of living. 
D)  There is no relationship. Standard of living depends on productivity not household income. 
A)  There is no relationship. Increasing average income says nothing about income distribution. 
B)  Rising income enables households to acquire more of the goods and services that improve their material standard of living. 
C)  Rising income tends to increase the crime rate and violence, thereby lowering a country's standard of living. 
D)  There is no relationship. Standard of living depends on productivity not household income.

Question 2

Which of the following is a cost of economic growth?

Accepted Answer

A)  the sacrifice of current consumption 
B)  inflation in consumption goods 
C)  the sacrifice of future consumption 
D)  excessive depletion of a nation's human capital 
A)  the sacrifice of current consumption 
B)  inflation in consumption goods 
C)  the sacrifice of future consumption 
D)  excessive depletion of a nation's human capital

Question 3

The determinants of economic growth include all of the following except

Accepted Answer

A)  technological improvement. 
B)  improvements in the quality of factors of production. 
C)  a stable price level. 
D)  increases in the quantity of factors of production. 
A)  technological improvement. 
B)  improvements in the quality of factors of production. 
C)  a stable price level. 
D)  increases in the quantity of factors of production.

Question 4

Economic growth can generally be achieved through a(n)

Accepted Answer

A)  decrease in economic freedom. 
B)  decline in the rate of growth in the working-age population. 
C)  increase in the proportion of GDP used for saving. 
D)  increase in the depreciation of capital goods. 
A)  decrease in economic freedom. 
B)  decline in the rate of growth in the working-age population. 
C)  increase in the proportion of GDP used for saving. 
D)  increase in the depreciation of capital goods.

Question 5

What is the opportunity cost of allocating more and more resources to the production of capital goods?

Accepted Answer

A)  a decrease in real income 
B)  the amount of consumption goods that could have been produced 
C)  the increase in pollution 
D)  the environmental goods foregone 
A)  a decrease in real income 
B)  the amount of consumption goods that could have been produced 
C)  the increase in pollution 
D)  the environmental goods foregone

Question 6

Data from most industrialized countries show that countries with high investment rates (as a percentage of GDP) tend to be countries

Accepted Answer

A)  with the highest rates of inflation. 
B)  with the most unequal income distribution. 
C)  with high rates of economic growth. 
D)  with the lowest rate of national saving. 
A)  with the highest rates of inflation. 
B)  with the most unequal income distribution. 
C)  with high rates of economic growth. 
D)  with the lowest rate of national saving.

Question 7

Economic growth is the process through which the economy's potential output is increased.

Accepted Answer

A) True 
 B)False

Question 8

The position of the long-run aggregate supply curve is determined by 
I. the aggregate production function
II. the labor demand curve
III. the labor supply curve
IV. the prevailing average price level

Accepted Answer

A)  I, II, III, and IV 
B)  I, II, and III only 
C)  I and IV only 
D)  I, II, III, and IV. 
A)  I, II, III, and IV 
B)  I, II, and III only 
C)  I and IV only 
D)  I, II, III, and IV.

Question 9

All else constant, if a nation's potential output doubles in 36 years, its average annual growth rate is

Accepted Answer

A)  approximately 1% . 
B)  approximately 2%. 
C)  approximately 3%. 
D)  approximately 4%. 
A)  approximately 1% . 
B)  approximately 2%. 
C)  approximately 3%. 
D)  approximately 4%.

Question 10

Which of the following would shift the production function upward?

Accepted Answer

A)  an increase in the price of oil 
B)  an increase in the availability of a natural resource 
C)  a decrease in the supply of labor 
D)  an increase in the nominal wage rate 
A)  an increase in the price of oil 
B)  an increase in the availability of a natural resource 
C)  a decrease in the supply of labor 
D)  an increase in the nominal wage rate

Question 11

Figure 8-5   Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve.
-Refer to Figure 8-5. The labor market represented in Panel (b) is in long-run equilibrium

Accepted Answer

A)  if it is operating at the natural level of employment. 
B)  if unemployment rate equals zero. 
C)  if the macroeconomy is in equilibrium. 
D)  if there are no diminishing marginal returns. 
A)  if it is operating at the natural level of employment. 
B)  if unemployment rate equals zero. 
C)  if the macroeconomy is in equilibrium. 
D)  if there are no diminishing marginal returns.

Question 12

In the long run, economic growth can be expected to lead to 
I. increases in consumption.
II. increases in the capital stock.
III. increases in the savings rate.
IV. outward shifts in the production possibilities curve.

Accepted Answer

A)  I, II, III, and IV 
B)  I, II, and III only 
C)  I, II, and IV only 
D)  I and IV only 
A)  I, II, III, and IV 
B)  I, II, and III only 
C)  I, II, and IV only 
D)  I and IV only

Question 13

Figure 8-4  
-Refer to Figure 8-4. Which of the following could cause the production function to shift upward?

Accepted Answer

A)  an increase in the quantity of labor employed 
B)  an increase in the economy's average price level 
C)  an increase in the availability of natural resources 
D)  an increase in the real wage rate 
A)  an increase in the quantity of labor employed 
B)  an increase in the economy's average price level 
C)  an increase in the availability of natural resources 
D)  an increase in the real wage rate

Question 14

Using a three-panel diagram of the labor market, the aggregate production function, and long-run aggregate supply, show and explain the effect of an increase in capital stock on wages, employment, and potential output.

Accepted Answer

To illustrate the effect of an increase

Question 15

A shift in the production function will shift the long-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 16

Figure 8-6  
-Refer to Figure 8-6. Assume that the economy is initially in long-run equilibrium. Suppose the federal government initiates a tax program that stimulates firms to increase their investment and this leads to economic growth. This policy might, in the short run, result in

Accepted Answer

A)  a leftward shift of the aggregate demand and the short-run aggregate supply curve and in the long run, a rightward shift of the long-run aggregate supply curve. 
B)  a rightward shift of the aggregate demand curve and in the long run, a rightward shift of the long-run aggregate supply and the short-run aggregate supply curves. 
C)  a rightward shift of the short-run aggregate supply curve and in the long run, a rightward shift of the long-run aggregate supply curve. 
D)  a leftward shift of the aggregate demand curve and in the long run, a rightward shift of the long-run aggregate supply and the short-run aggregate supply curves. 
A)  a leftward shift of the aggregate demand and the short-run aggregate supply curve and in the long run, a rightward shift of the long-run aggregate supply curve. 
B)  a rightward shift of the aggregate demand curve and in the long run, a rightward shift of the long-run aggregate supply and the short-run aggregate supply curves. 
C)  a rightward shift of the short-run aggregate supply curve and in the long run, a rightward shift of the long-run aggregate supply curve. 
D)  a leftward shift of the aggregate demand curve and in the long run, a rightward shift of the long-run aggregate supply and the short-run aggregate supply curves.

Question 17

Figure 8-5   Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve.
-Refer to Figure 8-5. In the labor market represented in Panel (b), 
I. the equilibrium real wage equals $40,000.
II. at the equilibrium real wage, 100 million workers are employed.
III. the equilibrium real wage is that which prevails when the economy achieves its natural level of employment.

Accepted Answer

A)  I only 
B)  I and II only 
C)  I, II, and III 
D)  None of the above; to determine if the labor market is in equilibrium, we need information on the economy's aggregate production function. 
A)  I only 
B)  I and II only 
C)  I, II, and III 
D)  None of the above; to determine if the labor market is in equilibrium, we need information on the economy's aggregate production function.

Question 18

Figure 8-5   Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve.
-Refer to Figure 8-5. The real wage is the ratio of

Accepted Answer

A)  the price level to the nominal wage. 
B)  the nominal wage to the quantity of labor employed. 
C)  the nominal wage to the price level. 
D)  real GDP to the nominal wage. 
A)  the price level to the nominal wage. 
B)  the nominal wage to the quantity of labor employed. 
C)  the nominal wage to the price level. 
D)  real GDP to the nominal wage.

Question 19

For economic growth to occur, the citizens of an economy must

Accepted Answer

A)  sacrifice future consumption for current consumption. 
B)  sacrifice current consumption for future consumption. 
C)  accept lower real wages today for higher real wages in the future. 
D)  sacrifice leisure today for leisure in the future. 
A)  sacrifice future consumption for current consumption. 
B)  sacrifice current consumption for future consumption. 
C)  accept lower real wages today for higher real wages in the future. 
D)  sacrifice leisure today for leisure in the future.

Question 20

Economic growth 
I. is represented by an outward shift of the production possibilities curve.
II. is defined in terms of a series of events that increase the economy's ability to produce goods and services.
III. refers to a process that increases potential output.
IV. occurs when the economy operates on its production possibilities frontier.

Accepted Answer

A)  I and IV only 
B)  I, II, and III 
C)  I, III, and IV 
D)  I, II, III, and IV 
A)  I and IV only 
B)  I, II, and III 
C)  I, III, and IV 
D)  I, II, III, and IV

What is the relationship between average household income and standard of living?

Which of the following is a cost of economic growth?

The determinants of economic growth include all of the following except

Economic growth can generally be achieved through a(n)

What is the opportunity cost of allocating more and more resources to the production of capital goods?

Data from most industrialized countries show that countries with high investment rates (as a percentage of GDP) tend to be countries

Economic growth is the process through which the economy's potential output is increased.

The position of the long-run aggregate supply curve is determined by I. the aggregate production function II. the labor demand curve III. the labor supply curve IV. the prevailing average price level

All else constant, if a nation's potential output doubles in 36 years, its average annual growth rate is

Which of the following would shift the production function upward?

Figure 8-5 Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve. -Refer to Figure 8-5. The labor market represented in Panel (b) is in long-run equilibrium

In the long run, economic growth can be expected to lead to I. increases in consumption. II. increases in the capital stock. III. increases in the savings rate. IV. outward shifts in the production possibilities curve.

Figure 8-4 -Refer to Figure 8-4. Which of the following could cause the production function to shift upward?

Using a three-panel diagram of the labor market, the aggregate production function, and long-run aggregate supply, show and explain the effect of an increase in capital stock on wages, employment, and potential output.

A shift in the production function will shift the long-run aggregate supply curve.

Figure 8-6 -Refer to Figure 8-6. Assume that the economy is initially in long-run equilibrium. Suppose the federal government initiates a tax program that stimulates firms to increase their investment and this leads to economic growth. This policy might, in the short run, result in

Figure 8-5 Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve. -Refer to Figure 8-5. The real wage is the ratio of

For economic growth to occur, the citizens of an economy must

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

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Exam 8: Economic Growth

What is the relationship between average household income and standard of living?

Which of the following is a cost of economic growth?

The determinants of economic growth include all of the following except

Economic growth can generally be achieved through a(n)

What is the opportunity cost of allocating more and more resources to the production of capital goods?

Data from most industrialized countries show that countries with high investment rates (as a percentage of GDP) tend to be countries

Economic growth is the process through which the economy's potential output is increased.

The position of the long-run aggregate supply curve is determined by I. the aggregate production function II. the labor demand curve III. the labor supply curve IV. the prevailing average price level

All else constant, if a nation's potential output doubles in 36 years, its average annual growth rate is

Which of the following would shift the production function upward?

Figure 8-5 Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve. -Refer to Figure 8-5. The labor market represented in Panel (b) is in long-run equilibrium

In the long run, economic growth can be expected to lead to I. increases in consumption. II. increases in the capital stock. III. increases in the savings rate. IV. outward shifts in the production possibilities curve.

Figure 8-4 -Refer to Figure 8-4. Which of the following could cause the production function to shift upward?

Using a three-panel diagram of the labor market, the aggregate production function, and long-run aggregate supply, show and explain the effect of an increase in capital stock on wages, employment, and potential output.

A shift in the production function will shift the long-run aggregate supply curve.

Figure 8-6 -Refer to Figure 8-6. Assume that the economy is initially in long-run equilibrium. Suppose the federal government initiates a tax program that stimulates firms to increase their investment and this leads to economic growth. This policy might, in the short run, result in

Figure 8-5 Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve. -Refer to Figure 8-5. The real wage is the ratio of

For economic growth to occur, the citizens of an economy must

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters