Question 1

A key reason why some countries are growing very slowly is

Accepted Answer

A) they lack a democratic government. 
B) they lack economic freedom. 
C) their inflation rate is too high. 
D) they are too poor, so there is no saving. 
E) there is too much competition within their economies. 
A) they lack a democratic government. 
B) they lack economic freedom. 
C) their inflation rate is too high. 
D) they are too poor, so there is no saving. 
E) there is too much competition within their economies.

Question 2

If the growth rate of population is greater than a nation's growth rate of real GDP, then its real GDP per person

Accepted Answer

A) falls. 
B) rises. 
C) does not change. 
D) might rise, fall, or not change. 
E) cannot be measured. 
A) falls. 
B) rises. 
C) does not change. 
D) might rise, fall, or not change. 
E) cannot be measured.

Question 3

For the world, what period of time experienced the fastest growth rate of real GDP per person?

Accepted Answer

A) around 500 B.C. 
B) around 400 A.D. 
C) between 1000 A.D. and 1500 A.D. 
D) after about 1850 A.D. 
E) between 1500 A.D. and 1850 A.D. 
A) around 500 B.C. 
B) around 400 A.D. 
C) between 1000 A.D. and 1500 A.D. 
D) after about 1850 A.D. 
E) between 1500 A.D. and 1850 A.D.

Question 4

The Monetarist model expands the Keynesian model by proposing that

Accepted Answer

A) decreases in the quantity of money lead to higher interest rates. 
B) the government should lower taxes promote economic growth. 
C) decreases in tax rates generate higher consumption. 
D) decreases in the growth rate of the quantity of money trigger expansions by controlling inflation. 
E) markets should be left alone to determine the optimal outcome. 
A) decreases in the quantity of money lead to higher interest rates. 
B) the government should lower taxes promote economic growth. 
C) decreases in tax rates generate higher consumption. 
D) decreases in the growth rate of the quantity of money trigger expansions by controlling inflation. 
E) markets should be left alone to determine the optimal outcome.

Question 5

What is the Rule of 70?

Accepted Answer

The Rule of 70 is that the num

Question 6

Define labor productivity. Discuss the relationship between labor productivity, human capital growth, and technology change.

Accepted Answer

Labor productivity is real GDP per hour

Question 7

A reason for an increase in labor productivity growth is

Accepted Answer

A) an increase in people's human capital. 
B) a decrease in the capital stock so that firms must hire more workers. 
C) growth in the supply of labor. 
D) an increase in the population so that firms hire more workers. 
E) an increase in the quantity of labor. 
A) an increase in people's human capital. 
B) a decrease in the capital stock so that firms must hire more workers. 
C) growth in the supply of labor. 
D) an increase in the population so that firms hire more workers. 
E) an increase in the quantity of labor.

Question 8

An increase in labor productivity

Accepted Answer

A) increases the standard of living. 
B) decreases the standard of living. 
C) might be the result of an increase in the quantity of labor. 
D) generally occurs when physical capital decreases because firms must then hire more workers. 
E) cannot occur without a corresponding increase in employment. 
A) increases the standard of living. 
B) decreases the standard of living. 
C) might be the result of an increase in the quantity of labor. 
D) generally occurs when physical capital decreases because firms must then hire more workers. 
E) cannot occur without a corresponding increase in employment.

Question 9

Hershey Chocolate Factory pays a money wage rate equal to $30 per hour and sells its candy bars for $1.50 each. Hershey Chocolate Factory should hire labor until an additional unit of labor produces ________ candy bars an hour.

Accepted Answer

A) 45 
B) 1.5 
C) 20 
D) 30 
E) 10 
A) 45 
B) 1.5 
C) 20 
D) 30 
E) 10

Question 10

The amount of real GDP produced at any one time depends on i) a fixed amount of capital.
Ii) a fixed level of technology.
Iii) decisions people make about leisure versus working.

Accepted Answer

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

Question 11

To maximize profits, firms hire labor as long as

Accepted Answer

A) each additional hour hired produces more additional output than the real wage rate. 
B) the total hours hired produces more additional output than the real wage rate. 
C) each additional hour hired produces more additional output than the nominal wage rate. 
D) the quantity of labor supplied increases as the real wage rate increases. 
E) workers continue to supply labor to the firm. 
A) each additional hour hired produces more additional output than the real wage rate. 
B) the total hours hired produces more additional output than the real wage rate. 
C) each additional hour hired produces more additional output than the nominal wage rate. 
D) the quantity of labor supplied increases as the real wage rate increases. 
E) workers continue to supply labor to the firm.

Question 12

Labor productivity is $20 per hour and aggregate hours are 400 billion hours.
a. What does real GDP equal?
b. Because of technological advances, labor productivity doubles to $40 per hour. Furthermore, assume that aggregate hours decrease to 300 billion hours. What does real GDP equal?

Accepted Answer

a. Real GDP equals (labor prod

Question 13

During 2008, Swaziland had a real GDP growth rate of 1.8 percent and a real GDP growth rate per person of -1.3 percent. These rates indicate that in Swaziland

Accepted Answer

A) there was an error when calculating the growth rates because the growth rate of real GDP per person cannot be negative. 
B) the population growth rate was negative. 
C) the population grew at a faster rate than real GDP. 
D) poverty levels are declining. 
E) real GDP grew more rapidly than did the population. 
A) there was an error when calculating the growth rates because the growth rate of real GDP per person cannot be negative. 
B) the population growth rate was negative. 
C) the population grew at a faster rate than real GDP. 
D) poverty levels are declining. 
E) real GDP grew more rapidly than did the population.

Question 14

The sustainable upper limit of real GDP is a level of GDP that is

Accepted Answer

A) greater than potential GDP, but by how much greater is unknown and controversial. 
B) less than potential GDP, but by how much less is unknown and controversial. 
C) potential GDP. 
D) determined only by what is the full employment equilibrium in the labor market. 
E) None of the above answers is correct because there is no sustainable upper limit to real GDP because real GDP can always be increased. 
A) greater than potential GDP, but by how much greater is unknown and controversial. 
B) less than potential GDP, but by how much less is unknown and controversial. 
C) potential GDP. 
D) determined only by what is the full employment equilibrium in the labor market. 
E) None of the above answers is correct because there is no sustainable upper limit to real GDP because real GDP can always be increased.

Question 15

-The above figure shows a nation's production function. Point B is

Accepted Answer

A) unattainable. 
B) attainable if the nation uses resources inefficiently. 
C) attainable if the nation uses resources efficiently. 
D) the maximum amount of real GDP the nation can ever produce. 
E) Both answers C and D are correct. 
A) unattainable. 
B) attainable if the nation uses resources inefficiently. 
C) attainable if the nation uses resources efficiently. 
D) the maximum amount of real GDP the nation can ever produce. 
E) Both answers C and D are correct.

Question 16

Which of the following variables is used to determine a country's economic growth?
i. real GDP
ii. wages
iii. inflation

Accepted Answer

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

Question 17

When the real wage rate exceeds the equilibrium real wage rate, there is a ________ of labor and the real wage rate will ________.

Accepted Answer

A) surplus; fall 
B) shortage; fall 
C) shortage; rise 
D) surplus; rise 
E) surplus; not change because only efficiency wages or union wages can change. 
A) surplus; fall 
B) shortage; fall 
C) shortage; rise 
D) surplus; rise 
E) surplus; not change because only efficiency wages or union wages can change.

Question 18

$\begin{array}{ccc}
\begin{array}{c}
\text { Real wage rate } \
\text { (2005 dollars) }
\end{array} & \begin{array}{c}
\text { Labor demand } \
\text { (billions of } \
\text { hours per year) }
\end{array} & \begin{array}{c}
\text { Labor supply } \
\text { (billions of } \
\text { hours per year) }
\end{array} \
\hline 5 & 360 & 260 \
10 & 325 & 275 \
15 & 300 & 300 \
20 & 280 & 330
\end{array}$ 
 $$\begin{array} { c c } 
\begin{array} { c } 
\text { Employment } \
\text { (billions of } \
\text { hours per year) }
\end{array} & \begin{array} { c } 
\text { Real GDP } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} \
\hline 100 & 2.0 \
200 & 3.0 \
300 & 3.8 \
400 & 4.4 \
\hline
\end{array}$$
-The first table above gives the labor demand and labor supply schedules for a nation. The second table gives its production function.
a. What is the equilibrium real wage rate and the level of employment?
b. What is potential GDP?
 If you cannot determine a precise amount, give the range in which potential GDP must lie.

Accepted Answer

a. The equilibrium real wage rate is $15

Question 19

Which of the following is true?

Accepted Answer

A) Real GDP fluctuates around potential GDP. 
B) Potential GDP fluctuates around nominal GDP. 
C) Nominal GDP fluctuates around real GDP. 
D) Real GDP never equals potential GDP. 
E) The Okun Gaps are much larger than the Lucas Wedge. 
A) Real GDP fluctuates around potential GDP. 
B) Potential GDP fluctuates around nominal GDP. 
C) Nominal GDP fluctuates around real GDP. 
D) Real GDP never equals potential GDP. 
E) The Okun Gaps are much larger than the Lucas Wedge.

Question 20

Assume the population growth rate is 2 percent and the real GDP growth rate is 5 percent. The change in standard of living, as measured by the growth rate in real GDP per person, is

Accepted Answer

A) 7 percent. 
B) 2.5 percent. 
C) 5 percent. 
D) 3 percent. 
E) -3 percent. 
A) 7 percent. 
B) 2.5 percent. 
C) 5 percent. 
D) 3 percent. 
E) -3 percent.

A key reason why some countries are growing very slowly is

If the growth rate of population is greater than a nation's growth rate of real GDP, then its real GDP per person

For the world, what period of time experienced the fastest growth rate of real GDP per person?

The Monetarist model expands the Keynesian model by proposing that

What is the Rule of 70?

Define labor productivity. Discuss the relationship between labor productivity, human capital growth, and technology change.

A reason for an increase in labor productivity growth is

An increase in labor productivity

Hershey Chocolate Factory pays a money wage rate equal to $30 per hour and sells its candy bars for $1.50 each. Hershey Chocolate Factory should hire labor until an additional unit of labor produces ________ candy bars an hour.

The amount of real GDP produced at any one time depends on i) a fixed amount of capital. Ii) a fixed level of technology. Iii) decisions people make about leisure versus working.

To maximize profits, firms hire labor as long as

Labor productivity is $20 per hour and aggregate hours are 400 billion hours. a. What does real GDP equal? b. Because of technological advances, labor productivity doubles to $40 per hour. Furthermore, assume that aggregate hours decrease to 300 billion hours. What does real GDP equal?

During 2008, Swaziland had a real GDP growth rate of 1.8 percent and a real GDP growth rate per person of -1.3 percent. These rates indicate that in Swaziland

The sustainable upper limit of real GDP is a level of GDP that is

-The above figure shows a nation's production function. Point B is

Which of the following variables is used to determine a country's economic growth? i. real GDP ii. wages iii. inflation

When the real wage rate exceeds the equilibrium real wage rate, there is a of labor and the real wage rate will .

Which of the following is true?

Assume the population growth rate is 2 percent and the real GDP growth rate is 5 percent. The change in standard of living, as measured by the growth rate in real GDP per person, is

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

A key reason why some countries are growing very slowly is

If the growth rate of population is greater than a nation's growth rate of real GDP, then its real GDP per person

For the world, what period of time experienced the fastest growth rate of real GDP per person?

The Monetarist model expands the Keynesian model by proposing that

What is the Rule of 70?

Define labor productivity. Discuss the relationship between labor productivity, human capital growth, and technology change.

A reason for an increase in labor productivity growth is

An increase in labor productivity

Hershey Chocolate Factory pays a money wage rate equal to $30 per hour and sells its candy bars for $1.50 each. Hershey Chocolate Factory should hire labor until an additional unit of labor produces ________ candy bars an hour.

The amount of real GDP produced at any one time depends on i) a fixed amount of capital. Ii) a fixed level of technology. Iii) decisions people make about leisure versus working.

To maximize profits, firms hire labor as long as

Labor productivity is $20 per hour and aggregate hours are 400 billion hours. a. What does real GDP equal? b. Because of technological advances, labor productivity doubles to $40 per hour. Furthermore, assume that aggregate hours decrease to 300 billion hours. What does real GDP equal?

During 2008, Swaziland had a real GDP growth rate of 1.8 percent and a real GDP growth rate per person of -1.3 percent. These rates indicate that in Swaziland

The sustainable upper limit of real GDP is a level of GDP that is

-The above figure shows a nation's production function. Point B is

Which of the following variables is used to determine a country's economic growth? i. real GDP ii. wages iii. inflation

When the real wage rate exceeds the equilibrium real wage rate, there is a ________ of labor and the real wage rate will ________.

Which of the following is true?

Assume the population growth rate is 2 percent and the real GDP growth rate is 5 percent. The change in standard of living, as measured by the growth rate in real GDP per person, is

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

When the real wage rate exceeds the equilibrium real wage rate, there is a of labor and the real wage rate will .