Question 1

If the best educated and most skilled persons leave a country,then in the short term this country's human capital per worker

Accepted Answer

A) and physical capital per worker will increase. 
B) and physical capital per worker will decrease. 
C) will increase but physical capital per worker will decrease. 
D) will decrease but physical capital per worker will increase. 
A) and physical capital per worker will increase. 
B) and physical capital per worker will decrease. 
C) will increase but physical capital per worker will decrease. 
D) will decrease but physical capital per worker will increase.

Question 2

On the basis of theory and empirical evidence,economists have reached several conclusions about economic growth.Which of the following is not one of these conclusions?

Accepted Answer

A) A relatively simple way to increase growth rates permanently is to increase a country's saving rate. 
B) Growth is generally inhibited rather than promoted by policies like protective tariffs. 
C) Well-established property rights that are enforced by fair and efficient courts are important to economic growth. 
D) Countries with few domestic natural resources still have opportunities for economic growth. 
A) A relatively simple way to increase growth rates permanently is to increase a country's saving rate. 
B) Growth is generally inhibited rather than promoted by policies like protective tariffs. 
C) Well-established property rights that are enforced by fair and efficient courts are important to economic growth. 
D) Countries with few domestic natural resources still have opportunities for economic growth.

Question 3

Which of the following best describes the response of output as time passes to an increase in the saving rate?

Accepted Answer

A) The growth rate of output does not change. 
B) The growth rate of output increases and gets even larger as time passes. 
C) The growth rate of output increases and does not change as time passes. 
D) The growth rate of output increases,but diminishes to its former level as time passes. 
A) The growth rate of output does not change. 
B) The growth rate of output increases and gets even larger as time passes. 
C) The growth rate of output increases and does not change as time passes. 
D) The growth rate of output increases,but diminishes to its former level as time passes.

Question 4

Which of the following countries benefited significantly from the catch-up effect in the last half of the twentieth century?

Accepted Answer

A) Ethiopia 
B) the United States 
C) Canada 
D) South Korea 
A) Ethiopia 
B) the United States 
C) Canada 
D) South Korea

Question 5

The president of a poor country has announced that he will implement the following measures that he claims are designed to increase growth: 1.Reduce corruption in the legal system;2.Reduce reliance on market forces because they allocate goods and services in an unfair manner;3.Restrict investment in domestic industries by foreigners because they take some of the profits out of the country;4.Encourage trade with neighboring countries;and 5.Increase the fraction of GDP devoted to consumption.How many of these measures will have a positive effect on growth?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 6

Countries with more than 80 percent of their population living within 100 kilometers of a coast will have an average GDP per person that is

Accepted Answer

A) around four times a country with less than 20 percent of the population living near the coast. 
B) around ten times a country with less than 20 percent of the population living near the coast. 
C) around twenty times a country with less than 20 percent of the population living near the coast. 
D) around fifty times a country with less than 20 percent of the population living near the coast. 
A) around four times a country with less than 20 percent of the population living near the coast. 
B) around ten times a country with less than 20 percent of the population living near the coast. 
C) around twenty times a country with less than 20 percent of the population living near the coast. 
D) around fifty times a country with less than 20 percent of the population living near the coast.

Question 7

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 level of real GDP per person. 
B) immediately and permanently decrease the level of real GDP per person. 
C) immediately and permanently increase the level of real GDP person. 
D) gradually raise the level of real GDP per person. 
A) have no impact on the level of real GDP per person. 
B) immediately and permanently decrease the level of real GDP per person. 
C) immediately and permanently increase the level of real GDP person. 
D) gradually raise the level of real GDP per person.

Question 8

"When workers have a relatively small quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity by a relatively large amount." This statement

Accepted Answer

A) is an assertion that production functions have the property of constant returns to scale. 
B) is consistent with the view that capital is subject to diminishing returns. 
C) is inconsistent with the view that it is easier for a country to grow fast if it starts out relatively poor. 
D) All of the above are correct. 
A) is an assertion that production functions have the property of constant returns to scale. 
B) is consistent with the view that capital is subject to diminishing returns. 
C) is inconsistent with the view that it is easier for a country to grow fast if it starts out relatively poor. 
D) All of the above are correct.

Question 9

In the 1800s,Europeans purchased stock in American companies that used the funds to build railroads and factories.The Europeans who did this 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 10

If an American-based firm opens and operates a new clothing factory in Honduras,then it is engaging in

Accepted Answer

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

Question 11

Suppose a person receives an education in her home country.Which of the following will tend to make the increase in GDP of the person's home country larger than the increase in this person's income?

Accepted Answer

A) externalities and brain drain 
B) externalities but not brain drain 
C) brain drain but not externalities 
D) neither externalities nor brain drain 
A) externalities and brain drain 
B) externalities but not brain drain 
C) brain drain but not externalities 
D) neither externalities nor brain drain

Question 12

The long-run effects of an increase in the saving rate include

Accepted Answer

A) a higher level of productivity. 
B) a higher growth rate of productivity. 
C) a higher growth rate of income. 
D) All of the above are correct. 
A) a higher level of productivity. 
B) a higher growth rate of productivity. 
C) a higher growth rate of income. 
D) All of the above are correct.

Question 13

One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs.The growth that arises from capital accumulation is not a free lunch.It requires that society

Accepted Answer

A) conserve resources for future generations. 
B) sacrifice consumption goods and services now in order to enjoy more consumption in the future. 
C) recycle resources so that future generations can produce goods and services with the accumulated capital. 
D) None of the above is correct. 
A) conserve resources for future generations. 
B) sacrifice consumption goods and services now in order to enjoy more consumption in the future. 
C) recycle resources so that future generations can produce goods and services with the accumulated capital. 
D) None of the above is correct.

Question 14

The opening of a new American-owned factory in Algeria would tend to increase Algeria's GDP more than it increases Algeria's GNP because

Accepted Answer

A) some of the income from the factory accrues to people who do not live in Algeria. 
B) gross domestic product is income earned within a country by both residents and nonresidents,whereas gross national product is the income earned by residents of a country while producing both at home and abroad. 
C) all of the income from the factory is included in Algeria's GDP. 
D) All of the above are correct. 
A) some of the income from the factory accrues to people who do not live in Algeria. 
B) gross domestic product is income earned within a country by both residents and nonresidents,whereas gross national product is the income earned by residents of a country while producing both at home and abroad. 
C) all of the income from the factory is included in Algeria's GDP. 
D) All of the above are correct.

Question 15

Other things the same,when an economy increases its saving rate

Accepted Answer

A) consumption and production rise now. 
B) consumption rises now and production rises later 
C) consumption falls now and production rises later. 
D) consumption falls now and production falls later. 
A) consumption and production rise now. 
B) consumption rises now and production rises later 
C) consumption falls now and production rises later. 
D) consumption falls now and production falls later.

Question 16

Which of the following statements is correct?

Accepted Answer

A) In an economy-wide sense,property rights are an important prerequisite for the price system to work. 
B) Property rights give people the ability to exercise authority over the resources they own. 
C) Based on the available evidence,the existence of well-established and well-enforced property rights appears to be associated with an enhanced standard of living. 
D) All of the above are correct. 
A) In an economy-wide sense,property rights are an important prerequisite for the price system to work. 
B) Property rights give people the ability to exercise authority over the resources they own. 
C) Based on the available evidence,the existence of well-established and well-enforced property rights appears to be associated with an enhanced standard of living. 
D) All of the above are correct.

Question 17

According to the traditional view of the production function,which of the following values of the additions to output per worker would be consistent with moving from 5 to 6,and then from 6 to 7,and then from 7 to 8 units of capital per worker in that order?

Accepted Answer

A) 40,40,40 
B) 40,35,38 
C) 40,34,32 
D) 40,43,48 
A) 40,40,40 
B) 40,35,38 
C) 40,34,32 
D) 40,43,48

Question 18

In the 19th century John Deere took out a patent on a newly designed plow that incorporated steel to make plowing faster.Many farmers bought plows from his company and he made millions.This example shows that patents turn an idea into 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 19

Educational attainment tends to be

Accepted Answer

A) low in countries with high population growth. 
B) low in countries with low population growth. 
C) high in countries with high population growth. 
D) None of the above are true. 
A) low in countries with high population growth. 
B) low in countries with low population growth. 
C) high in countries with high population growth. 
D) None of the above are true.

Question 20

The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents,and he has given the farms to his friends.His friends don't know much about farming.The courts in Turan have ruled that the seizures are illegal,but the dictator has ignored the rulings.Other things equal,we would expect that the growth rate in Turan will

Accepted Answer

A) fall temporarily,but will return to where it was when the new owners learn how to farm. 
B) increase because the total amount of human capital in the country will increase as the new owners learn how to farm. 
C) fall and remain lower for a long time. 
D) not be affected unless widespread civil disorder or civil war results. 
A) fall temporarily,but will return to where it was when the new owners learn how to farm. 
B) increase because the total amount of human capital in the country will increase as the new owners learn how to farm. 
C) fall and remain lower for a long time. 
D) not be affected unless widespread civil disorder or civil war results.

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

If the best educated and most skilled persons leave a country,then in the short term this country's human capital per worker

On the basis of theory and empirical evidence,economists have reached several conclusions about economic growth.Which of the following is not one of these conclusions?

Which of the following best describes the response of output as time passes to an increase in the saving rate?

Which of the following countries benefited significantly from the catch-up effect in the last half of the twentieth century?

Countries with more than 80 percent of their population living within 100 kilometers of a coast will have an average GDP per person that is

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

"When workers have a relatively small quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity by a relatively large amount." This statement

In the 1800s,Europeans purchased stock in American companies that used the funds to build railroads and factories.The Europeans who did this engaged in

If an American-based firm opens and operates a new clothing factory in Honduras,then it is engaging in

Suppose a person receives an education in her home country.Which of the following will tend to make the increase in GDP of the person's home country larger than the increase in this person's income?

The long-run effects of an increase in the saving rate include

One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs.The growth that arises from capital accumulation is not a free lunch.It requires that society

The opening of a new American-owned factory in Algeria would tend to increase Algeria's GDP more than it increases Algeria's GNP because

Other things the same,when an economy increases its saving rate

Which of the following statements is correct?

According to the traditional view of the production function,which of the following values of the additions to output per worker would be consistent with moving from 5 to 6,and then from 6 to 7,and then from 7 to 8 units of capital per worker in that order?

In the 19th century John Deere took out a patent on a newly designed plow that incorporated steel to make plowing faster.Many farmers bought plows from his company and he made millions.This example shows that patents turn an idea into a

Educational attainment tends to be

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

Application International Trade: Part A

Application International Trade: Part B