Question 1

Foreign direct investment and domestic investment have the same effect on all measures of economic prosperity.

Accepted Answer

A) True 
 B)False  False

Question 2

The president of a poor country has announced that he will implement the following measures which 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 B

Question 3

Which of the following countries had the highest level of real GDP per person in 2010?

Accepted Answer

A)  Germany 
B)  Canada 
C)  United States 
D)  Japan 
A)  Germany 
B)  Canada 
C)  United States 
D)  Japan C

Question 4

Suppose that there are diminishing returns to capital. Suppose also that two countries are the same except one has less capital and so less real GDP per person. Suppose that both increase their saving rate from 3 percent to 4 percent. In the long run

Accepted Answer

A)  both countries will have permanently higher growth rates of real GDP per person, and the growth rate will be higher in the country with more capital. 
B)  both countries will have permanently higher growth rates of real GDP per person, and the growth rate will be higher in the country with less capital. 
C)  both countries will have higher levels of real GDP per person, and the temporary increase in growth in the level of real GDP per person will have been greater in the country with more capital. 
D)  both countries will have higher levels of real GDP per person, and the temporary increase in growth in the level of real GDP per person will have been greater in the country with less capital. 
A)  both countries will have permanently higher growth rates of real GDP per person, and the growth rate will be higher in the country with more capital. 
B)  both countries will have permanently higher growth rates of real GDP per person, and the growth rate will be higher in the country with less capital. 
C)  both countries will have higher levels of real GDP per person, and the temporary increase in growth in the level of real GDP per person will have been greater in the country with more capital. 
D)  both countries will have higher levels of real GDP per person, and the temporary increase in growth in the level of real GDP per person will have been greater in the country with less capital.

Question 5

In an economy where net exports are zero, if saving rises in some period, then in that period

Accepted Answer

A)  consumption and investment fall. 
B)  consumption falls and investment rises. 
C)  consumption rises and investment falls. 
D)  consumption rises and investment rises. 
A)  consumption and investment fall. 
B)  consumption falls and investment rises. 
C)  consumption rises and investment falls. 
D)  consumption rises and investment rises.

Question 6

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

Accepted Answer

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

Question 7

Which of the following is an example of a renewable natural resource?

Accepted Answer

A)  the knowledge possessed by scientists 
B)  carpenters' labor services 
C)  lumber 
D)  All of the above are correct. 
A)  the knowledge possessed by scientists 
B)  carpenters' labor services 
C)  lumber 
D)  All of the above are correct.

Question 8

When Chile experiences investment from abroad, it experiences, as a result,

Accepted Answer

A)  an increase in productivity. 
B)  a decrease in Gross National Product GNP). 
C)  lower wages for Chilean workers. 
D)  None of the above is correct. 
A)  an increase in productivity. 
B)  a decrease in Gross National Product GNP). 
C)  lower wages for Chilean workers. 
D)  None of the above is correct.

Question 9

Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of real GDP per person during the year?

Accepted Answer

A)  12 percent 
B)  10 percent 
C)  4 percent 
D)  2 percent 
A)  12 percent 
B)  10 percent 
C)  4 percent 
D)  2 percent

Question 10

A professor at a university finds a way to reduce the costs of producing automobile glass. The method is very easy for anyone to copy. A company develops a substance which prevents eyeglasses from smudging. It receives a patent on the formula. Which of these are common technological knowledge?

Accepted Answer

A)  the method to reduce costs of producing automobile glass, and the formula for the substance that prevents smudging 
B)  the method to reduce costs of producing automobile glass, but not the formula for the substance that prevents smudging 
C)  the formula for the substance that prevents smudging, but not the method to reduce costs of producing automobile glass 
D)  neither the method to reduce costs of producing automobile glass nor the formula for the substance that prevents smudging 
A)  the method to reduce costs of producing automobile glass, and the formula for the substance that prevents smudging 
B)  the method to reduce costs of producing automobile glass, but not the formula for the substance that prevents smudging 
C)  the formula for the substance that prevents smudging, but not the method to reduce costs of producing automobile glass 
D)  neither the method to reduce costs of producing automobile glass nor the formula for the substance that prevents smudging

Question 11

In some countries in Sub-Saharan Africa real GDP per person has been stagnant for many years.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is correct?

Accepted Answer

A)  Once adjustment is made for inflation, the prices of most natural resources have been about steady or falling. 
B)  Technological progress has allowed us to substitute renewable resources for some nonrenewable resources. 
C)  Technological progress has made once-crucial natural resources less necessary. 
D)  All of the above are correct. 
A)  Once adjustment is made for inflation, the prices of most natural resources have been about steady or falling. 
B)  Technological progress has allowed us to substitute renewable resources for some nonrenewable resources. 
C)  Technological progress has made once-crucial natural resources less necessary. 
D)  All of the above are correct.

Question 13

Inward-oriented policies

Accepted Answer

A)  are generally supported by economists. 
B)  are primarily concerned with the development of human capital. 
C)  in some ways are like prohibiting the use of certain technologies. 
D)  All of the above are correct. 
A)  are generally supported by economists. 
B)  are primarily concerned with the development of human capital. 
C)  in some ways are like prohibiting the use of certain technologies. 
D)  All of the above are correct.

Question 14

Which of the following is an observation made by economist Michael Kremer?

Accepted Answer

A)  World growth rates increased as the population increased. 
B)  Technological progress allows for increasing population because of advances in agriculture. 
C)  World population is growing so rapidly that soon it will outstrip natural resources and our standard of living will decline. 
D)  All of the above are observations made by Kremer. 
A)  World growth rates increased as the population increased. 
B)  Technological progress allows for increasing population because of advances in agriculture. 
C)  World population is growing so rapidly that soon it will outstrip natural resources and our standard of living will decline. 
D)  All of the above are observations made by Kremer.

Question 15

Alexis and Tara both mine salt. Alexis mines 300 pounds in 20 hours. Tara mines 400 pounds in 40 hours. Which of the following is correct?

Accepted Answer

A)  Alexis's productivity is greater than Tara's. This difference could be explained by Alexis having more physical capital than Tara. 
B)  Alexis's productivity is greater than Tara's. This difference cannot be explained by a difference in the physical capital each has. 
C)  Tara's productivity is greater than Alexis's. This difference could be explained by Tara having more physical capital than Alexis. 
D)  Tara's productivity is greater than Alexis's. This difference cannot be explained by a difference in the physical capital each has. 
A)  Alexis's productivity is greater than Tara's. This difference could be explained by Alexis having more physical capital than Tara. 
B)  Alexis's productivity is greater than Tara's. This difference cannot be explained by a difference in the physical capital each has. 
C)  Tara's productivity is greater than Alexis's. This difference could be explained by Tara having more physical capital than Alexis. 
D)  Tara's productivity is greater than Alexis's. This difference cannot be explained by a difference in the physical capital each has.

Question 16

Which of the following can be measured by the level of real GDP per person?

Accepted Answer

A)  productivity and the standard of living 
B)  productivity but not the standard of living 
C)  the standard of living but not productivity 
D)  neither the standard of living nor productivity 
A)  productivity and the standard of living 
B)  productivity but not the standard of living 
C)  the standard of living but not productivity 
D)  neither the standard of living nor productivity

Question 17

In 2012, the imaginary nation of Kanmiw had a population of 8,044 and real GDP of 36,198,000. In 2013 it had a population of 7,800 and real GDP of 35,880,000. What was the growth rate of real GDP per person in Kanmiw between 2012 and 2013?

Accepted Answer

A)  -2.2 percent 
B)  -0.7 percent 
C)  2.2 percent 
D)  4.5 percent 
A)  -2.2 percent 
B)  -0.7 percent 
C)  2.2 percent 
D)  4.5 percent

Question 18

Last year the imaginary nation of Panglossia had real GDP of 400 billion. This year it had real GDP of 472.5 billion. Which of the following changes in population is consistent with a 5 percent growth rate of real GDP per person over the last year?

Accepted Answer

A)  The population decreased from 75 million to 72 million. 
B)  The population decreased from 60 million to 50 million. 
C)  The population increased from 70 million to 80 million. 
D)  The population increased from 80 million to 90 million. 
A)  The population decreased from 75 million to 72 million. 
B)  The population decreased from 60 million to 50 million. 
C)  The population increased from 70 million to 80 million. 
D)  The population increased from 80 million to 90 million.

Question 19

Figure 25-1.
On the horizontal axis, K/L represents capital K) per worker L). On the vertical axis, Y/L represents output Y) per worker L).  
-Refer to Figure 25-1. The shape of the curve is consistent with which of the following statements about the economy to which the curve applies?

Accepted Answer

A)  In the long run, a higher saving rate leads to a higher growth rate of productivity. 
B)  In the long run, a higher saving rate leads to a higher growth rate of income. 
C)  Returns to capital become increasingly smaller as the amount of capital per worker increases. 
D)  All of the above are correct. 
A)  In the long run, a higher saving rate leads to a higher growth rate of productivity. 
B)  In the long run, a higher saving rate leads to a higher growth rate of income. 
C)  Returns to capital become increasingly smaller as the amount of capital per worker increases. 
D)  All of the above are correct.

Question 20

Which of the following is generally an opportunity cost of investment in human capital?

Accepted Answer

A)  future job security 
B)  forgone present wages 
C)  increased earning potential 
D)  All of the above are correct. 
A)  future job security 
B)  forgone present wages 
C)  increased earning potential 
D)  All of the above are correct.

Exam 17: Production and Growth

Foreign direct investment and domestic investment have the same effect on all measures of economic prosperity.

Which of the following countries had the highest level of real GDP per person in 2010?

Suppose that there are diminishing returns to capital. Suppose also that two countries are the same except one has less capital and so less real GDP per person. Suppose that both increase their saving rate from 3 percent to 4 percent. In the long run

In an economy where net exports are zero, if saving rises in some period, then in that period

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

Which of the following is an example of a renewable natural resource?

When Chile experiences investment from abroad, it experiences, as a result,

Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of real GDP per person during the year?

A professor at a university finds a way to reduce the costs of producing automobile glass. The method is very easy for anyone to copy. A company develops a substance which prevents eyeglasses from smudging. It receives a patent on the formula. Which of these are common technological knowledge?

In some countries in Sub-Saharan Africa real GDP per person has been stagnant for many years.

Which of the following is correct?

Inward-oriented policies

Which of the following is an observation made by economist Michael Kremer?

Alexis and Tara both mine salt. Alexis mines 300 pounds in 20 hours. Tara mines 400 pounds in 40 hours. Which of the following is correct?

Which of the following can be measured by the level of real GDP per person?

In 2012, the imaginary nation of Kanmiw had a population of 8,044 and real GDP of 36,198,000. In 2013 it had a population of 7,800 and real GDP of 35,880,000. What was the growth rate of real GDP per person in Kanmiw between 2012 and 2013?

Last year the imaginary nation of Panglossia had real GDP of 400 billion. This year it had real GDP of 472.5 billion. Which of the following changes in population is consistent with a 5 percent growth rate of real GDP per person over the last year?

Figure 25-1. On the horizontal axis, K/L represents capital K) per worker L). On the vertical axis, Y/L represents output Y) per worker L). -Refer to Figure 25-1. The shape of the curve is consistent with which of the following statements about the economy to which the curve applies?

Which of the following is generally an opportunity cost of investment in human capital?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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