Question 1

Define potential GDP. Under what circumstances does actual real GDP fall short of potential GDP, equal potential GDP, and exceed potential GDP?

Accepted Answer

Potential GDP is the level of real GDP t

Question 2

The widespread adoption of computers in the workplace has likely led to

Accepted Answer

A) no change in the quantity of labor hours. 
B) an increase in labor productivity because computers are a capital good. 
C) a decrease in labor productivity because computers are a capital good. 
D) a decrease in human capital because computers are physical capital. 
E) an increase in the supply of labor because people are needed to operate the computers. 
A) no change in the quantity of labor hours. 
B) an increase in labor productivity because computers are a capital good. 
C) a decrease in labor productivity because computers are a capital good. 
D) a decrease in human capital because computers are physical capital. 
E) an increase in the supply of labor because people are needed to operate the computers.

Question 3

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Labor demand } \
\text { (billions of } \
\text { hours per year) }
\end{array} & \begin{array} { c } 
\text { Real wage rate } \
\text { (2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Labor supply } \
\text { (billions of } \
\text { hours per year) }
\end{array} \
\hline 0 & 30 & 6 \
1 & 25 & 5 \
2 & 20 & 4 \
3 & 15 & 3 \
4 & 10 & 2
\end{array}$$ 
 $$\begin{array} { c c } 
\begin{array} { c } 
\text { Employment } \
\text { (billions of } \
\text { hours per year) }
\end{array} & \begin{array} { c } 
\text { Real GDP } \
\text { (billions of 2005 } \
\text { dollars) }
\end{array} \
\hline 6 & 95 \
5 & 90 \
4 & 80 \
3 & 60 \
2 & 30
\end{array}$$
-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?

Accepted Answer

a. The equilibrium real wage rate is $15

Question 4

Human capital refers to the

Accepted Answer

A)  accumulated skill and knowledge of human beings. 
B) accumulated equipment used by human beings. 
C) accumulation of money by human beings. 
D) accumulation of money and equipment used by human beings. 
E) accumulated financial capital people have acquired. 
A)  accumulated skill and knowledge of human beings. 
B) accumulated equipment used by human beings. 
C) accumulation of money by human beings. 
D) accumulation of money and equipment used by human beings. 
E) accumulated financial capital people have acquired.

Question 5

When the labor market is in equilibrium, real GDP ________ potential GDP.

Accepted Answer

A) is greater than 
B) is equal to 
C) is less than 
D) might be greater than, less than, or equal to 
E) is not comparable to 
A) is greater than 
B) is equal to 
C) is less than 
D) might be greater than, less than, or equal to 
E) is not comparable to

Question 6

Property rights assure people that

Accepted Answer

A) the government will not confiscate their income or savings. 
B) the government will provide a minimum standard of living. 
C) the factors of production and goods are owned jointly by the government and the people. 
D) economic growth will enhance government involvement in the economy. 
E) international trade will be limited. 
A) the government will not confiscate their income or savings. 
B) the government will provide a minimum standard of living. 
C) the factors of production and goods are owned jointly by the government and the people. 
D) economic growth will enhance government involvement in the economy. 
E) international trade will be limited.

Question 7

-U.S. real GDP per person grew rapidly in the early 1960s. The table above has U.S. real GDP and population for 1961 and 1962.
a. What was U.S. real GDP per person in 1961?
b. What was U.S. real GDP per person in 1962?
c. Between 1961 and 1962, how rapidly did U.S. real GDP per person grow?

Accepted Answer

a. U.S. real GDP per person in 1961 = ($

Question 8

Growth in the standard of living is measured by the increase in

Accepted Answer

A) real GDP. 
B) the Rule of 70. 
C) employment. 
D) real GDP per person. 
E) consumption. 
A) real GDP. 
B) the Rule of 70. 
C) employment. 
D) real GDP per person. 
E) consumption.

Question 9

During 2005, real GDP in Ireland grew 9.8 percent. If Ireland maintains this level of growth in the future, real GDP will double in approximately how many years?

Accepted Answer

With an annual growth rate of

Question 10

If the stock of physical capital (that is machinery, equipment, etc.)and human capital remain the same and the population increases, then

Accepted Answer

A) labor productivity will increase. 
B) labor productivity will decrease. 
C) the standard of living will increase. 
D) the new labor will be more productive. 
E) real GDP decreases. 
A) labor productivity will increase. 
B) labor productivity will decrease. 
C) the standard of living will increase. 
D) the new labor will be more productive. 
E) real GDP decreases.

Question 11

East Asian economies have grown

Accepted Answer

A) rapidly because of high saving rates. 
B) rapidly despite a lack of property rights. 
C) slowly because of a lack of property rights. 
D) slowly because of low saving rates. 
E) rapidly because they virtually eliminated international trade. 
A) rapidly because of high saving rates. 
B) rapidly despite a lack of property rights. 
C) slowly because of a lack of property rights. 
D) slowly because of low saving rates. 
E) rapidly because they virtually eliminated international trade.

Question 12

Increases in human capital can come

Accepted Answer

A) only from formal schooling. 
B) from employing more machinery. 
C) only from on-the-job experience. 
D) from formal education and on-the-job learning. 
E) from nowhere because whatever human capital an individual possesses is what he or she was born with. 
A) only from formal schooling. 
B) from employing more machinery. 
C) only from on-the-job experience. 
D) from formal education and on-the-job learning. 
E) from nowhere because whatever human capital an individual possesses is what he or she was born with.

Question 13

According to the production function, as the quantity of labor employed increases, real GDP increases

Accepted Answer

A) at an increasing rate. 
B) at a decreasing rate. 
C) at a constant rate. 
D) and then eventually decreases. 
E) until it reaches potential GDP and then it no longer changes. 
A) at an increasing rate. 
B) at a decreasing rate. 
C) at a constant rate. 
D) and then eventually decreases. 
E) until it reaches potential GDP and then it no longer changes.

Question 14

If a country lacks ________, economic growth ________.

Accepted Answer

A) a democratic form of government; cannot occur 
B) a proper incentive system; cannot occur 
C) pure capitalism; will be slower compared to other countries 
D) a proper incentive system; will occur at a pace suggested by the new growth theory 
E) economic freedom; will increase at a faster pace 
A) a democratic form of government; cannot occur 
B) a proper incentive system; cannot occur 
C) pure capitalism; will be slower compared to other countries 
D) a proper incentive system; will occur at a pace suggested by the new growth theory 
E) economic freedom; will increase at a faster pace

Question 15

Saving

Accepted Answer

A) slows growth because it decreases consumption. 
B) finances investment which brings capital accumulation. 
C) has no impact on economic growth. 
D) is very low in most East Asian nations. 
E) is important for a country to gain the benefits of international trade. 
A) slows growth because it decreases consumption. 
B) finances investment which brings capital accumulation. 
C) has no impact on economic growth. 
D) is very low in most East Asian nations. 
E) is important for a country to gain the benefits of international trade.

Question 16

The supply of labor curve has a ________ slope because as the real wage rate rises, ________.

Accepted Answer

A) negative; firms hire fewer workers 
B) positive; the opportunity cost of leisure rises 
C) positive; the opportunity cost of leisure falls 
D) negative; households work more hours 
E) positive; firms offer more jobs 
A) negative; firms hire fewer workers 
B) positive; the opportunity cost of leisure rises 
C) positive; the opportunity cost of leisure falls 
D) negative; households work more hours 
E) positive; firms offer more jobs

Question 17

As more labor is hired, moving along the production function, diminishing returns occur because

Accepted Answer

A) workers are overworked and so their productivity decreases. 
B) the wage rate paid is too low and so workers decrease their work effort. 
C) there are fixed quantities of other resources. 
D) the real wage rate must increase in order to hire additional workers. 
E) real GDP increases more rapidly the more workers are hired. 
A) workers are overworked and so their productivity decreases. 
B) the wage rate paid is too low and so workers decrease their work effort. 
C) there are fixed quantities of other resources. 
D) the real wage rate must increase in order to hire additional workers. 
E) real GDP increases more rapidly the more workers are hired.

Question 18

Suppose that real GDP grows at 3 percent per year. What is the growth rate of real GDP per person if the population grows at:
a. 2 percent?
 What happens to the standard of living?
b. 3 percent?
 What happens to the standard of living?
c. 4 percent?
 What happens to the standard of living?

Accepted Answer

a. The growth rate of real GDP per perso

Question 19

If Country A's real GDP per person is growing at 6 percent and Country B's real GDP per person is growing at 3 percent, then

Accepted Answer

A) the standard of living is higher in Country A. 
B) the standard of living is higher in Country B. 
C) the standard of living is growing more rapidly in Country A. 
D) we cannot say whose standard of living is growing more rapidly without knowing the population growth rate. 
E) we cannot say whose standard of living is growing more rapidly without knowing the growth rate of real GDP. 
A) the standard of living is higher in Country A. 
B) the standard of living is higher in Country B. 
C) the standard of living is growing more rapidly in Country A. 
D) we cannot say whose standard of living is growing more rapidly without knowing the population growth rate. 
E) we cannot say whose standard of living is growing more rapidly without knowing the growth rate of real GDP.

Question 20

The economic growth rate is expressed as the ________.

Accepted Answer

A) annual percentage change of real GDP per person 
B) growth rate of real GDP minus the growth rate of population 
C) the standard of living 
D) annual percentage change of real GDP 
E) growth rate of the population 
A) annual percentage change of real GDP per person 
B) growth rate of real GDP minus the growth rate of population 
C) the standard of living 
D) annual percentage change of real GDP 
E) growth rate of the population

Define potential GDP. Under what circumstances does actual real GDP fall short of potential GDP, equal potential GDP, and exceed potential GDP?

The widespread adoption of computers in the workplace has likely led to

Human capital refers to the

When the labor market is in equilibrium, real GDP ________ potential GDP.

Property rights assure people that

-U.S. real GDP per person grew rapidly in the early 1960s. The table above has U.S. real GDP and population for 1961 and 1962. a. What was U.S. real GDP per person in 1961? b. What was U.S. real GDP per person in 1962? c. Between 1961 and 1962, how rapidly did U.S. real GDP per person grow?

Growth in the standard of living is measured by the increase in

During 2005, real GDP in Ireland grew 9.8 percent. If Ireland maintains this level of growth in the future, real GDP will double in approximately how many years?

If the stock of physical capital (that is machinery, equipment, etc.)and human capital remain the same and the population increases, then

East Asian economies have grown

Increases in human capital can come

According to the production function, as the quantity of labor employed increases, real GDP increases

If a country lacks , economic growth .

Saving

The supply of labor curve has a slope because as the real wage rate rises, .

As more labor is hired, moving along the production function, diminishing returns occur because

Suppose that real GDP grows at 3 percent per year. What is the growth rate of real GDP per person if the population grows at: a. 2 percent? What happens to the standard of living? b. 3 percent? What happens to the standard of living? c. 4 percent? What happens to the standard of living?

If Country A's real GDP per person is growing at 6 percent and Country B's real GDP per person is growing at 3 percent, then

The economic growth rate is expressed as 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

Define potential GDP. Under what circumstances does actual real GDP fall short of potential GDP, equal potential GDP, and exceed potential GDP?

The widespread adoption of computers in the workplace has likely led to

Human capital refers to the

When the labor market is in equilibrium, real GDP ________ potential GDP.

Property rights assure people that

-U.S. real GDP per person grew rapidly in the early 1960s. The table above has U.S. real GDP and population for 1961 and 1962. a. What was U.S. real GDP per person in 1961? b. What was U.S. real GDP per person in 1962? c. Between 1961 and 1962, how rapidly did U.S. real GDP per person grow?

Growth in the standard of living is measured by the increase in

During 2005, real GDP in Ireland grew 9.8 percent. If Ireland maintains this level of growth in the future, real GDP will double in approximately how many years?

If the stock of physical capital (that is machinery, equipment, etc.)and human capital remain the same and the population increases, then

East Asian economies have grown

Increases in human capital can come

According to the production function, as the quantity of labor employed increases, real GDP increases

If a country lacks ________, economic growth ________.

Saving

The supply of labor curve has a ________ slope because as the real wage rate rises, ________.

As more labor is hired, moving along the production function, diminishing returns occur because

Suppose that real GDP grows at 3 percent per year. What is the growth rate of real GDP per person if the population grows at: a. 2 percent? What happens to the standard of living? b. 3 percent? What happens to the standard of living? c. 4 percent? What happens to the standard of living?

If Country A's real GDP per person is growing at 6 percent and Country B's real GDP per person is growing at 3 percent, then

The economic growth rate is expressed as 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

If a country lacks , economic growth .

The supply of labor curve has a slope because as the real wage rate rises, .