Question 1

Rapid population growth

Accepted Answer

A) was hailed by Thomas Robert Malthus as the key to future economic growth. 
B) tends to lead to higher levels of educational attainment. 
C) is the main reason that less developed nations are poor. 
D) may depress economic prosperity by reducing the amount of capital which each worker has to work with. 
A) was hailed by Thomas Robert Malthus as the key to future economic growth. 
B) tends to lead to higher levels of educational attainment. 
C) is the main reason that less developed nations are poor. 
D) may depress economic prosperity by reducing the amount of capital which each worker has to work with.

Question 2

If WarmWear,a U.S.manufacturer of winter clothing,opens a new factory in Austria,then

Accepted Answer

A) Austrian GNP increases by more than Austrian GDP,because GDP includes income earned by foreigners working in Austria. 
B) Austrian GNP increases by more than Austrian GDP,because GDP excludes income earned by foreigners working in Austria. 
C) Austrian GNP increases by less than Austrian GDP,because GDP includes income earned by foreigners working in Austria. 
D) Austrian GNP increases by less than Austrian GDP,because GDP excludes income earned by foreigners working in Austria. 
A) Austrian GNP increases by more than Austrian GDP,because GDP includes income earned by foreigners working in Austria. 
B) Austrian GNP increases by more than Austrian GDP,because GDP excludes income earned by foreigners working in Austria. 
C) Austrian GNP increases by less than Austrian GDP,because GDP includes income earned by foreigners working in Austria. 
D) Austrian GNP increases by less than Austrian GDP,because GDP excludes income earned by foreigners working in Austria.

Question 3

If companies from foreign countries build and operate factories in China,then China's productivity

Accepted Answer

A) and the wages of Chinese workers increase. 
B) increases but the wages of Chinese workers decrease. 
C) decreases but the wages of Chinese workers increase. 
D) and the wages of Chinese workers decrease. 
A) and the wages of Chinese workers increase. 
B) increases but the wages of Chinese workers decrease. 
C) decreases but the wages of Chinese workers increase. 
D) and the wages of Chinese workers decrease.

Question 4

Fretonia and Libstien are the same except Fretonia has a larger capital stock.Both countries undertake policies that raise their saving rates to the same higher level.We would expect that

Accepted Answer

A) both countries would have permanent increases in their growth rates,but the increase would initially be larger in Fretonia. 
B) both countries would have permanent increases in their growth rates,but the increase would initially be smaller in Fretonia. 
C) both countries would have temporary increases in their growth rates,but the increase would be larger in Fretonia. 
D) both countries would have temporary increases in their growth rates,but the increase would be smaller in Fretonia. 
A) both countries would have permanent increases in their growth rates,but the increase would initially be larger in Fretonia. 
B) both countries would have permanent increases in their growth rates,but the increase would initially be smaller in Fretonia. 
C) both countries would have temporary increases in their growth rates,but the increase would be larger in Fretonia. 
D) both countries would have temporary increases in their growth rates,but the increase would be smaller in Fretonia.

Question 5

According to research by Robert Fogel,what proportion of the British population in 1780 was so malnourished that they could not perform manual labor?

Accepted Answer

A) 5 percent 
B) 10 percent 
C) 20 percent 
D) 25 percent 
A) 5 percent 
B) 10 percent 
C) 20 percent 
D) 25 percent

Question 6

The logic behind the catch-up effect is that

Accepted Answer

A) workers in countries with low incomes will work more hours than workers in countries with high incomes. 
B) the capital stock in rich countries deteriorates at a higher rate because it already has a lot of capital. 
C) new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital. 
D) None of the above is correct. 
A) workers in countries with low incomes will work more hours than workers in countries with high incomes. 
B) the capital stock in rich countries deteriorates at a higher rate because it already has a lot of capital. 
C) new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital. 
D) None of the above is correct.

Question 7

Country A has real GDP per person of 100,000 while country B has real GDP per person of 200,000.All else constant,country A will eventually have a higher standard of living than country B if

Accepted Answer

A) the level of saving per person is 10,000 in country A and 10,000 in country B. 
B) the level of saving per person is 12,000 in country A and 15,000 in country B. 
C) Both of the above are correct. 
D) None of the above are correct. 
A) the level of saving per person is 10,000 in country A and 10,000 in country B. 
B) the level of saving per person is 12,000 in country A and 15,000 in country B. 
C) Both of the above are correct. 
D) None of the above are correct.

Question 8

Currently a country has real GDP per person of 500.Raising capital per worker by one would increase output per worker by 4.Other things the same,which of the following long-run combinations are consistent with the effects of this country increasing its saving rate?

Accepted Answer

A) real GDP per person is 520 and raising capital per worker by one would increase output per worker by 3 
B) real GDP per person is 520 and raising capital per worker by one would increase output per worker by 5 
C) real GDP per person is 480 and raising capital per worker by one would increase output per worker by 3 
D) real GDP per person is 480 and raising capital per worker by one would increase output per worker by 5 
A) real GDP per person is 520 and raising capital per worker by one would increase output per worker by 3 
B) real GDP per person is 520 and raising capital per worker by one would increase output per worker by 5 
C) real GDP per person is 480 and raising capital per worker by one would increase output per worker by 3 
D) real GDP per person is 480 and raising capital per worker by one would increase output per worker by 5

Question 9

A rapid increase in the number of workers,other things the same,is likely in the short term to

Accepted Answer

A) raise real GDP per person,but decrease real GDP. 
B) decrease both real GDP and real GDP per person. 
C) raise both real GDP and real GDP per person. 
D) raise real GDP,but decrease real GDP per person. 
A) raise real GDP per person,but decrease real GDP. 
B) decrease both real GDP and real GDP per person. 
C) raise both real GDP and real GDP per person. 
D) raise real GDP,but decrease real GDP per person.

Question 10

The traditional view of the production process is that capital is subject to

Accepted Answer

A) constant returns. 
B) increasing returns. 
C) diminishing returns. 
D) diminishing returns for low levels of capital,and increasing returns for high levels of capital. 
A) constant returns. 
B) increasing returns. 
C) diminishing returns. 
D) diminishing returns for low levels of capital,and increasing returns for high levels of capital.

Question 11

Suppose that the U.S.undertakes a policy to increase its saving rate.This policy will likely

Accepted Answer

A) have no impact on the growth rate of real GDP per person. 
B) decrease the growth of real GDP per person for a few years. 
C) increase the growth of real GDP per person for several decades. 
D) permanently increase the growth rate of real GDP per person. 
A) have no impact on the growth rate of real GDP per person. 
B) decrease the growth of real GDP per person for a few years. 
C) increase the growth of real GDP per person for several decades. 
D) permanently increase the growth rate of real GDP per person.

Question 12

If a country's saving rate declined,then other things the same,in the long run the country would have

Accepted Answer

A) lower productivity,but not lower real GDP per person. 
B) lower productivity and lower real GDP per person. 
C) lower real GDP per person,but not lower productivity 
D) neither lower productivity nor lower real GDP per person. 
A) lower productivity,but not lower real GDP per person. 
B) lower productivity and lower real GDP per person. 
C) lower real GDP per person,but not lower productivity 
D) neither lower productivity nor lower real GDP per person.

Question 13

Which of the following statements is not correct?

Accepted Answer

A) The catch-up effect is based on the assumption of diminishing returns to capital. 
B) Investment in poor countries by citizens of rich countries is one way poor countries can learn new technologies. 
C) Malthus argued that charity and government aid was an effective way to reduce poverty. 
D) Peace and justice are keys to growth. 
A) The catch-up effect is based on the assumption of diminishing returns to capital. 
B) Investment in poor countries by citizens of rich countries is one way poor countries can learn new technologies. 
C) Malthus argued that charity and government aid was an effective way to reduce poverty. 
D) Peace and justice are keys to growth.

Question 14

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

Accepted Answer

A) a change from inward-oriented policies to outward-oriented policies 
B) an increase in investment in human capital 
C) strengthening of property rights. 
D) All of the above are correct. 
A) a change from inward-oriented policies to outward-oriented policies 
B) an increase in investment in human capital 
C) strengthening of property rights. 
D) All of the above are correct.

Question 15

In medieval Europe an important technological advance was the use of the padded horse collar for plowing.Once this idea was thought of,other people used it.This illustrates that knowledge is generally a

Accepted Answer

A) public good. 
B) societal good. 
C) private good. 
D) normal good. 
A) public good. 
B) societal good. 
C) private good. 
D) normal good.

Question 16

The dictator of a country requires that companies planning to open or expand must pay a large fee to file an application one year prior to building new factories or expanding existing ones.Other things the same,in the long run this requirement would

Accepted Answer

A) reduce real GDP per person and productivity. 
B) reduce real GDP per person but not productivity. 
C) reduce productivity but not real GDP per person. 
D) None of the above is correct. 
A) reduce real GDP per person and productivity. 
B) reduce real GDP per person but not productivity. 
C) reduce productivity but not real GDP per person. 
D) None of the above is correct.

Question 17

The slope of the production function with capital per worker on the horizontal axis and output per worker on the vertical axis

Accepted Answer

A) is positive and gets steeper as capital per worker rises. 
B) is positive and gets flatter as capital per worker rises. 
C) is negative and gets steeper as capital per worker rises. 
D) is negative and gets flatter as capital per worker rises. 
A) is positive and gets steeper as capital per worker rises. 
B) is positive and gets flatter as capital per worker rises. 
C) is negative and gets steeper as capital per worker rises. 
D) is negative and gets flatter as capital per worker rises.

Question 18

In recent decades Americans have increased their purchase of stocks of foreign-based companies.The Americans who have bought these stocks were engaged in

Accepted Answer

A) foreign portfolio investment. 
B) indirect domestic investment. 
C) foreign direct investment. 
D) foreign indirect investment. 
A) foreign portfolio investment. 
B) indirect domestic investment. 
C) foreign direct investment. 
D) foreign indirect investment.

Question 19

Which of the following is true?

Accepted Answer

A) Kremer argued that with greater population,society would generate more ideas so that growth of real GDP per person could continue.Malthus argued that increasing population would outstrip agricultural production. 
B) Kremer argued that increases in population would reduce the amount of human and physical capital per worker so that eventually the standard of living would decline.Malthus argued that increases in technology would allow increased output growth so that even with population growth,society would enjoy a higher standard of living. 
C) Malthus argued that with greater population,society would generate more ideas so that growth of real GDP per person could continue.Kremer argued that increasing population would outstrip agricultural production. 
D) Malthus argued that increases in population would reduce the amount of human and physical capital per worker so that eventually the standard of living would decline.Kremer argued that increases in technology would allow increased output growth so that even with population growth,society would enjoy a higher standard of living. 
A) Kremer argued that with greater population,society would generate more ideas so that growth of real GDP per person could continue.Malthus argued that increasing population would outstrip agricultural production. 
B) Kremer argued that increases in population would reduce the amount of human and physical capital per worker so that eventually the standard of living would decline.Malthus argued that increases in technology would allow increased output growth so that even with population growth,society would enjoy a higher standard of living. 
C) Malthus argued that with greater population,society would generate more ideas so that growth of real GDP per person could continue.Kremer argued that increasing population would outstrip agricultural production. 
D) Malthus argued that increases in population would reduce the amount of human and physical capital per worker so that eventually the standard of living would decline.Kremer argued that increases in technology would allow increased output growth so that even with population growth,society would enjoy a higher standard of living.

Question 20

Suppose Turkey increases its saving rate.In the long run

Accepted Answer

A) the growth rates of productivity and real GDP per person increase. 
B) productivity and real GDP per person increase. 
C) the growth rate of productivity increases,and real GDP per person increases. 
D) productivity increases,and the growth rate of real GDP per person increases. 
A) the growth rates of productivity and real GDP per person increase. 
B) productivity and real GDP per person increase. 
C) the growth rate of productivity increases,and real GDP per person increases. 
D) productivity increases,and the growth rate of real GDP per person increases.

Exam 12: Production and Growth: Economic Growth and Public Policy

Rapid population growth

If WarmWear,a U.S.manufacturer of winter clothing,opens a new factory in Austria,then

If companies from foreign countries build and operate factories in China,then China's productivity

Fretonia and Libstien are the same except Fretonia has a larger capital stock.Both countries undertake policies that raise their saving rates to the same higher level.We would expect that

According to research by Robert Fogel,what proportion of the British population in 1780 was so malnourished that they could not perform manual labor?

The logic behind the catch-up effect is that

Country A has real GDP per person of 100,000 while country B has real GDP per person of 200,000.All else constant,country A will eventually have a higher standard of living than country B if

Currently a country has real GDP per person of 500.Raising capital per worker by one would increase output per worker by 4.Other things the same,which of the following long-run combinations are consistent with the effects of this country increasing its saving rate?

A rapid increase in the number of workers,other things the same,is likely in the short term to

The traditional view of the production process is that capital is subject to

Suppose that the U.S.undertakes a policy to increase its saving rate.This policy will likely

If a country's saving rate declined,then other things the same,in the long run the country would have

Which of the following statements is not correct?

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

In medieval Europe an important technological advance was the use of the padded horse collar for plowing.Once this idea was thought of,other people used it.This illustrates that knowledge is generally a

The dictator of a country requires that companies planning to open or expand must pay a large fee to file an application one year prior to building new factories or expanding existing ones.Other things the same,in the long run this requirement would

The slope of the production function with capital per worker on the horizontal axis and output per worker on the vertical axis

In recent decades Americans have increased their purchase of stocks of foreign-based companies.The Americans who have bought these stocks were engaged in

Which of the following is true?

Suppose Turkey increases its saving rate.In the long run

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion