Question 1

Explain how "good institutions" enhance the incentives for entrepreneurship.

Accepted Answer

All of the institutions discussed in the text are necessary for entrepreneurship to flourish.Political stability ensures that businesses feel that there is a safe environment to set up factories and install physical capital.If there is a threat of nationalization,businesses will not feel confident in spending funds to acquire investments.Honest government reduces the threat of corruption,which is effectively a tax on business that reduces the profit motivation.The existence of a dependable legal system ensures that businesses and consumers can enforce contracts and seek legal recourse in the case of disputes.The existence of a dependable legal system also allows the enforcement of property rights so that businesses have the incentive to invest and own property.Finally,open and competitive markets ensure that firms can compete to earn profits,which is the prime motivation for entrepreneurship.

Question 2

A country's GDP per capita and infant survival rates usually are:

Accepted Answer

A)  not correlated. 
B)  somewhat correlated. 
C)  strongly correlated. 
D)  correlated only in poor countries. 
A)  not correlated. 
B)  somewhat correlated. 
C)  strongly correlated. 
D)  correlated only in poor countries. C

Question 3

Suppose a country's real GDP per capita was $9,000 in 1990,and it grew to $18,000 by 2000.What is the annual growth rate of the country's real GDP per capita during this period?

Accepted Answer

A)  7% 
B)  10% 
C)  20% 
D)  25% 
A)  7% 
B)  10% 
C)  20% 
D)  25% A

Question 4

The rule of 70 indicates that an increase in the growth rate of a variable will _____ the time needed to double living standards.

Accepted Answer

A)  reduce 
B)  increase 
C)  have no effect on 
D)  have an unpredictable effect on. 
A)  reduce 
B)  increase 
C)  have no effect on 
D)  have an unpredictable effect on.

Question 5

Since 1974 Nigeria's growth rate has been:

Accepted Answer

A)  high and positive. 
B)  low and positive. 
C)  approximately zero. 
D)  negative. 
A)  high and positive. 
B)  low and positive. 
C)  approximately zero. 
D)  negative.

Question 6

South Korea has a per capita GDP _____ as high as that of North Korea.

Accepted Answer

A)  twice 
B)  5 times 
C)  8 times 
D)  at least 10 times 
A)  twice 
B)  5 times 
C)  8 times 
D)  at least 10 times

Question 7

The rule of 70 states that if the annual growth rate of a variable is x%,the necessary time for doubling is:

Accepted Answer

A)  70 plus x. 
B)  70 minus x. 
C)  70 times x. 
D)  70 divided by x. 
A)  70 plus x. 
B)  70 minus x. 
C)  70 times x. 
D)  70 divided by x.

Question 8

Corruption increases the returns to entrepreneurship by giving new businesses easy access to government officials.

Accepted Answer

A) True 
 B)False

Question 9

Landlocked countries tend to grow _____ because _____.

Accepted Answer

A)  faster;lack of water access makes trade more difficult and costly 
B)  slower;lack of water access makes trade more difficult and costly 
C)  faster;fewer resources are required to build a strong military 
D)  slower;fewer resources are required to build a strong military 
A)  faster;lack of water access makes trade more difficult and costly 
B)  slower;lack of water access makes trade more difficult and costly 
C)  faster;fewer resources are required to build a strong military 
D)  slower;fewer resources are required to build a strong military

Question 10

Relative to the United States,Argentina was _____ in 1950 and _____ in 2000.

Accepted Answer

A)  poor;poor 
B)  rich;rich 
C)  poor;rich 
D)  rich;poor 
A)  poor;poor 
B)  rich;rich 
C)  poor;rich 
D)  rich;poor

Question 11

If U.S.per capita GDP is $50,000 and grows at 3% per year,what will U.S.per capita GDP be in 70 years?

Accepted Answer

A)  $100,000 
B)  $200,000 
C)  $400,000 
D)  $800,000 
A)  $100,000 
B)  $200,000 
C)  $400,000 
D)  $800,000

Question 12

Which country was among the top 10 most-corrupt countries in the year 2000?

Accepted Answer

A)  Angola 
B)  Bermuda 
C)  Kenya 
D)  Saudi Arabia 
A)  Angola 
B)  Bermuda 
C)  Kenya 
D)  Saudi Arabia

Question 13

Landlocked countries tend to grow slower than countries that have access to water.

Accepted Answer

A) True 
 B)False

Question 14

In the context of world history,economic growth is unusual.

Accepted Answer

A) True 
 B)False

Question 15

When economists speak of "long-run economic growth," they mean increasing the:

Accepted Answer

A)  real GDP of a country. 
B)  per capita real GDP of a country. 
C)  geographic size of a country. 
D)  population of a country. 
A)  real GDP of a country. 
B)  per capita real GDP of a country. 
C)  geographic size of a country. 
D)  population of a country.

Question 16

The ultimate cause for the different economic performance in North and South Korea is:

Accepted Answer

A)  more corruption in South Korea than in North Korea. 
B)  better economic institutions in South Korea than in North Korea. 
C)  more foreign aid from the U.S.in South Korea than in North Korea. 
D)  more abundant natural resources in South Korea than in North Korea. 
A)  more corruption in South Korea than in North Korea. 
B)  better economic institutions in South Korea than in North Korea. 
C)  more foreign aid from the U.S.in South Korea than in North Korea. 
D)  more abundant natural resources in South Korea than in North Korea.

Question 17

There is _____ relationship between levels of corruption and living standards in countries around the world.

Accepted Answer

A)  a strong positive 
B)  a strong negative 
C)  a weak 
D)  no 
A)  a strong positive 
B)  a strong negative 
C)  a weak 
D)  no

Question 18

Institutions and incentives are _____ causes,and factors of productions are _____ causes of the wealth of nations.

Accepted Answer

A)  ultimate;immediate 
B)  immediate;ultimate 
C)  ultimate;indirect 
D)  immediate;direct 
A)  ultimate;immediate 
B)  immediate;ultimate 
C)  ultimate;indirect 
D)  immediate;direct

Question 19

Factors of production that contribute to growth in per capita GDP include:

Accepted Answer

A)  proximal and ultimate factors of production. 
B)  physical capital,skilled labor,and technological know-how. 
C)  organization of resources. 
D)  institutions. 
A)  proximal and ultimate factors of production. 
B)  physical capital,skilled labor,and technological know-how. 
C)  organization of resources. 
D)  institutions.

Question 20

With China growing at rates in excess of 7% per year in recent decades,what has happened to the standard of living in China? Explain using the rule of 70.

Accepted Answer

With growth in excess of 7% per year,the

Exam 7: The Wealth of Nations and Economic Growth

Explain how "good institutions" enhance the incentives for entrepreneurship.

A country's GDP per capita and infant survival rates usually are:

Suppose a country's real GDP per capita was $9,000 in 1990,and it grew to $18,000 by 2000.What is the annual growth rate of the country's real GDP per capita during this period?

The rule of 70 indicates that an increase in the growth rate of a variable will _____ the time needed to double living standards.

Since 1974 Nigeria's growth rate has been:

South Korea has a per capita GDP _____ as high as that of North Korea.

The rule of 70 states that if the annual growth rate of a variable is x%,the necessary time for doubling is:

Corruption increases the returns to entrepreneurship by giving new businesses easy access to government officials.

Landlocked countries tend to grow _____ because _____.

Relative to the United States,Argentina was _____ in 1950 and _____ in 2000.

If U.S.per capita GDP is $50,000 and grows at 3% per year,what will U.S.per capita GDP be in 70 years?

Which country was among the top 10 most-corrupt countries in the year 2000?

Landlocked countries tend to grow slower than countries that have access to water.

In the context of world history,economic growth is unusual.

When economists speak of "long-run economic growth," they mean increasing the:

The ultimate cause for the different economic performance in North and South Korea is:

There is _____ relationship between levels of corruption and living standards in countries around the world.

Institutions and incentives are _____ causes,and factors of productions are _____ causes of the wealth of nations.

Factors of production that contribute to growth in per capita GDP include:

With China growing at rates in excess of 7% per year in recent decades,what has happened to the standard of living in China? Explain using the rule of 70.

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Landlocked countries tend to grow _ because _.

Relative to the United States,Argentina was _ in 1950 and _ in 2000.

Institutions and incentives are _ causes,and factors of productions are _ causes of the wealth of nations.