Question 1

What are the sources of human capital?

Accepted Answer

Human capital, the accumulated skills and knowledge people possess, comes from both formal education and training, and from on-the-job experience. On-the-job experience creates "learning by doing," in which workers become more knowledgeable about the best way to accomplish a task as they do the task.

Question 2

The Classical macroeconomic model proposes that

Accepted Answer

A) government intervention is required to help the economy reach its potential. 
B) real GDP equals potential GDP as long as inflation equals zero. 
C) changes in the quantity of money are critical in driving economic growth. 
D) markets work efficiently to produce the best macroeconomic outcomes. 
E) socialism produces the most efficient economic outcomes for a society. 
A) government intervention is required to help the economy reach its potential. 
B) real GDP equals potential GDP as long as inflation equals zero. 
C) changes in the quantity of money are critical in driving economic growth. 
D) markets work efficiently to produce the best macroeconomic outcomes. 
E) socialism produces the most efficient economic outcomes for a society. D

Question 3

Iceland's real GDP grows at a rate of 2.6 percent and population grows at a rate of 0.8 percent. Iceland's real GDP per person grows at a rate of

Accepted Answer

A) 1.8 percent. 
B) 2.6 percent. 
C) 3.4 percent. 
D) 3.0 percent. 
E) 3.2 percent. 
A) 1.8 percent. 
B) 2.6 percent. 
C) 3.4 percent. 
D) 3.0 percent. 
E) 3.2 percent. A

Question 4

Activities that encourage faster growth are

Accepted Answer

A) high levels of saving and investment in human capital. 
B) high levels of consumption and low levels of savings. 
C) taxes on saving that serve to encourage more spending and less saving. 
D) imposing trade barriers to limit international trade and thereby protect national industries. 
E) limiting property rights so that everyone can use any invention. 
A) high levels of saving and investment in human capital. 
B) high levels of consumption and low levels of savings. 
C) taxes on saving that serve to encourage more spending and less saving. 
D) imposing trade barriers to limit international trade and thereby protect national industries. 
E) limiting property rights so that everyone can use any invention.

Question 5

If real GDP was $14 trillion last year and is $16 trillion this year, what is the growth rate?

Accepted Answer

A) 12.5 percent 
B) -12.5 percent 
C) 14 percent 
D) $2 trillion 
E) 47 percent 
A) 12.5 percent 
B) -12.5 percent 
C) 14 percent 
D) $2 trillion 
E) 47 percent

Question 6

Using the rule of 70, a sustained 3 percent per year real GDP growth rate will

Accepted Answer

A) last for 70 years. 
B) double the current level of real GDP in about 23 years. 
C) double the current level of real GDP in about 210 years. 
D) double the current level of real GDP in about 70 years. 
E) double the current level of real GDP in about 40 years. 
A) last for 70 years. 
B) double the current level of real GDP in about 23 years. 
C) double the current level of real GDP in about 210 years. 
D) double the current level of real GDP in about 70 years. 
E) double the current level of real GDP in about 40 years.

Question 7

Economic growth is enhanced by

Accepted Answer

A) free international trade. 
B) limiting international trade so that the domestic economy can prosper. 
C) discouraging saving, because increased saving means less spending. 
D) ignoring incentive systems. 
E) increasing welfare payments to the poor so they can afford to buy goods. 
A) free international trade. 
B) limiting international trade so that the domestic economy can prosper. 
C) discouraging saving, because increased saving means less spending. 
D) ignoring incentive systems. 
E) increasing welfare payments to the poor so they can afford to buy goods.

Question 8

The quantity of labor demanded is the labor hours all

Accepted Answer

A) firms plan to hire at a given real wage rate. 
B) firms plan to hire at a given nominal wage rate. 
C) employees plan to work at a given real wage rate. 
D) employees plan to work at a given nominal wage rate. 
E) Both answers A and C are correct. 
A) firms plan to hire at a given real wage rate. 
B) firms plan to hire at a given nominal wage rate. 
C) employees plan to work at a given real wage rate. 
D) employees plan to work at a given nominal wage rate. 
E) Both answers A and C are correct.

Question 9

As the quantity of labor employed increases, the production functions exhibits a

Accepted Answer

A) positive, linear relationship. 
B) positive relationship, with each additional unit of labor producing less additional real GDP. 
C) positive relationship, with each additional unit of labor producing more additional real GDP. 
D) negative, linear relationship. 
E) U-shaped curve. 
A) positive, linear relationship. 
B) positive relationship, with each additional unit of labor producing less additional real GDP. 
C) positive relationship, with each additional unit of labor producing more additional real GDP. 
D) negative, linear relationship. 
E) U-shaped curve.

Question 10

A firm hires labor up to the point where the

Accepted Answer

A) real wage rate equals the nominal wage rate. 
B) additional hour of labor produces extra output that equals the real wage rate. 
C) additional hour of labor produces extra output that equals the nominal wage rate. 
D) firm can sell the extra output. 
E) real wage rate exceeds the nominal wage rate. 
A) real wage rate equals the nominal wage rate. 
B) additional hour of labor produces extra output that equals the real wage rate. 
C) additional hour of labor produces extra output that equals the nominal wage rate. 
D) firm can sell the extra output. 
E) real wage rate exceeds the nominal wage rate.

Question 11

A government policy that taxes saving in order to discourage saving and encourage spending will ________.

Accepted Answer

A) slow economic growth 
B) speed economic growth 
C) create a greater incentive for people to specialize 
D) strengthen people's property rights 
E) increase the growth rate of capital 
A) slow economic growth 
B) speed economic growth 
C) create a greater incentive for people to specialize 
D) strengthen people's property rights 
E) increase the growth rate of capital

Question 12

Which of the following characteristics is a precondition for economic growth?
I. economic freedom.
Ii. free markets
Iii. active government policy to discourage saving

Accepted Answer

A) i only 
B) ii only 
C) iii only 
D) Both i and ii 
E) Both ii and iii 
A) i only 
B) ii only 
C) iii only 
D) Both i and ii 
E) Both ii and iii

Question 13

The level of real GDP the economy produces at full employment is called

Accepted Answer

A) possible GDP. 
B) nominal GDP. 
C) potential GDP. 
D) maximum GDP. 
E) Lucas GDP. 
A) possible GDP. 
B) nominal GDP. 
C) potential GDP. 
D) maximum GDP. 
E) Lucas GDP.

Question 14

Which of the following statements is FALSE?

Accepted Answer

A) Saving helps create economic growth. 
B) Improvements in quality of education are important for economic growth. 
C) Free international trade helps create economic growth. 
D) Faster population growth is the key to growth in real GDP per person. 
E) Economic freedom requires property rights. 
A) Saving helps create economic growth. 
B) Improvements in quality of education are important for economic growth. 
C) Free international trade helps create economic growth. 
D) Faster population growth is the key to growth in real GDP per person. 
E) Economic freedom requires property rights.

Question 15

-The figure above shows the U.S. supply of labor curve. An increase in the income tax rate leads to a

Accepted Answer

A) rightward shift of the supply of labor curve. 
B) movement upward along the supply of labor curve from a point such as C to a point such as B. 
C) movement downward along the supply of labor curve from a point such as A to a point such as B. 
D) leftward shift of the supply of labor curve. 
E) None of the above answers is correct because there is no change in the supply of labor curve. 
A) rightward shift of the supply of labor curve. 
B) movement upward along the supply of labor curve from a point such as C to a point such as B. 
C) movement downward along the supply of labor curve from a point such as A to a point such as B. 
D) leftward shift of the supply of labor curve. 
E) None of the above answers is correct because there is no change in the supply of labor curve.

Question 16

All of the following are preconditions for economic growth EXCEPT i. property rights.
Ii. democracy.
Iii. free markets.

Accepted Answer

A) i only 
B) ii only 
C) iii only 
D) Both i and ii 
E) i, ii, and iii 
A) i only 
B) ii only 
C) iii only 
D) Both i and ii 
E) i, ii, and iii

Question 17

The demand for labor curve is

Accepted Answer

A) a vertical line because firms have to hire labor. 
B) upward sloping, showing that as the real wage rate increases, more workers are hired. 
C) a horizontal line because we assume that the real wage rate is fixed. 
D) downward sloping, showing that the quantity of labor demanded increases when the real wage falls. 
E) U-shaped. 
A) a vertical line because firms have to hire labor. 
B) upward sloping, showing that as the real wage rate increases, more workers are hired. 
C) a horizontal line because we assume that the real wage rate is fixed. 
D) downward sloping, showing that the quantity of labor demanded increases when the real wage falls. 
E) U-shaped.

Question 18

If real GDP grows at a faster rate than does population, then the standard of living, as measured by real GDP per person,

Accepted Answer

A) improves. 
B) worsens. 
C) remains the same. 
D) cannot be measured. 
E) either improves, worsens, or stays the same, depending on the size of the population and the actual level of real GDP. 
A) improves. 
B) worsens. 
C) remains the same. 
D) cannot be measured. 
E) either improves, worsens, or stays the same, depending on the size of the population and the actual level of real GDP.

Question 19

Define the production function. Discuss why the production function exhibits diminishing returns.

Accepted Answer

The production function is the relations

Question 20

Households increase the quantity of labor supplied when the

Accepted Answer

A) real wage rate rises because the opportunity cost of not working falls. 
B) nominal wage rate rises because the real wage rate must also rise. 
C) real wage rate rises because the opportunity cost of not working rises. 
D) nominal wage rate falls because the opportunity cost of not working rises. 
E) income tax rises because an increase in the income tax increases the demand for labor. 
A) real wage rate rises because the opportunity cost of not working falls. 
B) nominal wage rate rises because the real wage rate must also rise. 
C) real wage rate rises because the opportunity cost of not working rises. 
D) nominal wage rate falls because the opportunity cost of not working rises. 
E) income tax rises because an increase in the income tax increases the demand for labor.

What are the sources of human capital?

The Classical macroeconomic model proposes that

Iceland's real GDP grows at a rate of 2.6 percent and population grows at a rate of 0.8 percent. Iceland's real GDP per person grows at a rate of

Activities that encourage faster growth are

If real GDP was $14 trillion last year and is $16 trillion this year, what is the growth rate?

Using the rule of 70, a sustained 3 percent per year real GDP growth rate will

Economic growth is enhanced by

The quantity of labor demanded is the labor hours all

As the quantity of labor employed increases, the production functions exhibits a

A firm hires labor up to the point where the

A government policy that taxes saving in order to discourage saving and encourage spending will ________.

Which of the following characteristics is a precondition for economic growth? I. economic freedom. Ii. free markets Iii. active government policy to discourage saving

The level of real GDP the economy produces at full employment is called

Which of the following statements is FALSE?

-The figure above shows the U.S. supply of labor curve. An increase in the income tax rate leads to a

All of the following are preconditions for economic growth EXCEPT i. property rights. Ii. democracy. Iii. free markets.

The demand for labor curve is

If real GDP grows at a faster rate than does population, then the standard of living, as measured by real GDP per person,

Define the production function. Discuss why the production function exhibits diminishing returns.

Households increase the quantity of labor supplied when the

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 17: Potential Gdp and Economic Growth

What are the sources of human capital?

The Classical macroeconomic model proposes that

Iceland's real GDP grows at a rate of 2.6 percent and population grows at a rate of 0.8 percent. Iceland's real GDP per person grows at a rate of

Activities that encourage faster growth are

If real GDP was $14 trillion last year and is $16 trillion this year, what is the growth rate?

Using the rule of 70, a sustained 3 percent per year real GDP growth rate will

Economic growth is enhanced by

The quantity of labor demanded is the labor hours all

As the quantity of labor employed increases, the production functions exhibits a

A firm hires labor up to the point where the

A government policy that taxes saving in order to discourage saving and encourage spending will ________.

Which of the following characteristics is a precondition for economic growth? I. economic freedom. Ii. free markets Iii. active government policy to discourage saving

The level of real GDP the economy produces at full employment is called

Which of the following statements is FALSE?

-The figure above shows the U.S. supply of labor curve. An increase in the income tax rate leads to a

All of the following are preconditions for economic growth EXCEPT i. property rights. Ii. democracy. Iii. free markets.

The demand for labor curve is

If real GDP grows at a faster rate than does population, then the standard of living, as measured by real GDP per person,

Define the production function. Discuss why the production function exhibits diminishing returns.

Households increase the quantity of labor supplied when the

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters