Question 1

The question of whether economic growth is desirable is a positive question,easily settled by economic analysis.

Accepted Answer

A) True 
 B)False  False

Question 2

Relative to productivity growth in the United States,which of the following countries experienced the largest decline in productivity growth from 1990 to 2014?

Accepted Answer

A) Canada 
B) Japan 
C) Germany 
D) the United Kingdom 
A) Canada 
B) Japan 
C) Germany 
D) the United Kingdom B

Question 3

You have been hired as an economic advisor for a developing country.You have been asked to focus on education as a means for the country's development.Explain to the prime minister how improving education and training can contribute to his country's economic growth,and why it is important for the government to take a proactive role in promoting education.

Accepted Answer

Education raises the level of human capital in an economy.Human capital is the accumulated knowledge and skills that workers acquire from education and training or from their life experiences.Human capital raises a worker's productivity.The increase in productivity increases growth,per capita GDP,and standards of living.Human capital is one of the main sources of technological change.One of the lessons of the economic growth model is that technological change is more important for raising productivity than are increases in capital.It is an important ingredient for rapid economic growth.
The government's role in promoting investment in human capital is important,as the market might not provide the optimal amount of investment in human capital.Nobel laureate Robert Lucas argues that there are increasing returns to investments in human capital.These returns are not entirely captured by the individual,so if left to their own devices,individuals may not invest enough in education.Having the government invest in education will provide the country with a higher and more efficient level of education and training.

Question 4

When additions of input to a fixed quantity of another input lead to progressively smaller increases in output,we say we are facing

Accepted Answer

A) diminishing returns. 
B) negative returns. 
C) accelerating returns. 
D) decreasing production. 
A) diminishing returns. 
B) negative returns. 
C) accelerating returns. 
D) decreasing production.

Question 5

Globalization refers to

Accepted Answer

A) the process of establishing a common world currency. 
B) the willingness of individuals within a given country to share knowledge with one another. 
C) the process of countries becoming more open to foreign trade and investment. 
D) the reduction in growth rates of real GDP per capita as a result of trade with foreign countries. 
A) the process of establishing a common world currency. 
B) the willingness of individuals within a given country to share knowledge with one another. 
C) the process of countries becoming more open to foreign trade and investment. 
D) the reduction in growth rates of real GDP per capita as a result of trade with foreign countries.

Question 6

The purchase by an individual or firm of stock or bonds issued in another country is called

Accepted Answer

A) foreign exchange arbitrage. 
B) foreign direct investment. 
C) foreign portfolio investment. 
D) global stock exchange. 
A) foreign exchange arbitrage. 
B) foreign direct investment. 
C) foreign portfolio investment. 
D) global stock exchange.

Question 7

When firms benefit from the results of research and development they didn't pay for,we say firms

Accepted Answer

A) are litigious. 
B) free ride. 
C) invest in knowledge capital. 
D) maintain a level playing field. 
A) are litigious. 
B) free ride. 
C) invest in knowledge capital. 
D) maintain a level playing field.

Question 8

A patent grants an inventor exclusive rights to a product for how long?

Accepted Answer

A) 14 years 
B) 17 years 
C) 20 years 
D) the lifetime of the product 
A) 14 years 
B) 17 years 
C) 20 years 
D) the lifetime of the product

Question 9

Figure 22-4  
-Refer to Figure 22-4.Using the per-worker production function in the figure above,the largest changes in an economy's standard of living would be achieved by a movement from

Accepted Answer

A) A to B to C. 
B) E to B to D. 
C) C to B to A. 
D) D to B to E. 
A) A to B to C. 
B) E to B to D. 
C) C to B to A. 
D) D to B to E.

Question 10

The opportunity cost of being unemployed tends to be the highest in which of the following countries?

Accepted Answer

A) Canada 
B) the United States 
C) France 
D) the United Kingdom 
A) Canada 
B) the United States 
C) France 
D) the United Kingdom

Question 11

In a small European country,it is estimated that a $10,000 increase in capital per hour worked will increase real GDP per hour worked by $300.Based on this information,what is the slope of the per-worker production function in this range?

Accepted Answer

A) 0.03 
B) 3.3 
C) 33.3 
D) 333 
A) 0.03 
B) 3.3 
C) 33.3 
D) 333

Question 12

According to the text,there are three ways the government can help increase the accumulation of knowledge capital.What are they?

Accepted Answer

A) protecting intellectual property rights,subsidizing research and development,and subsidizing education 
B) increasing taxes on firms,eliminating patents,and increasing the minimum wage 
C) encouraging the use of trade secrets,expanding student loan programs,and increasing the minimum wage 
D) reducing taxes on capital,increasing Social Security payments,and lowering the exchange rate 
A) protecting intellectual property rights,subsidizing research and development,and subsidizing education 
B) increasing taxes on firms,eliminating patents,and increasing the minimum wage 
C) encouraging the use of trade secrets,expanding student loan programs,and increasing the minimum wage 
D) reducing taxes on capital,increasing Social Security payments,and lowering the exchange rate

Question 13

Which of the following policies is designed specifically to directly promote technological change in an economy?

Accepted Answer

A) government subsidization of research and development 
B) tax incentives to promote investment in 401K plans 
C) laws to strengthen property rights 
D) a vaccination program to combat infectious diseases 
A) government subsidization of research and development 
B) tax incentives to promote investment in 401K plans 
C) laws to strengthen property rights 
D) a vaccination program to combat infectious diseases

Question 14

According to new growth theory,firms accumulate the efficient level of both physical and knowledge capital.

Accepted Answer

A) True 
 B)False

Question 15

If the slope of the per-worker production function is 1/4 in a given range,how will a $10,000 increase in capital per hour worked affect real GDP per hour worked in the same given range?

Accepted Answer

A) Real GDP per hour worked will increase by $2,500. 
B) Real GDP per hour worked will increase by $40,000. 
C) Real GDP per hour worked will increase by $10,000. 
D) Real GDP per hour worked will decrease by $40.000. 
A) Real GDP per hour worked will increase by $2,500. 
B) Real GDP per hour worked will increase by $40,000. 
C) Real GDP per hour worked will increase by $10,000. 
D) Real GDP per hour worked will decrease by $40.000.

Question 16

Creative destruction means that

Accepted Answer

A) firms develop new products that replace old products in the economy,thereby encouraging economic growth. 
B) economic growth can only be sustained if capital depreciates rapidly. 
C) knowledge capital can be created through a system of government subsidies for education and research and development. 
D) research and development should only be financed if research and development is incremental (a result of making small changes to existing products). 
A) firms develop new products that replace old products in the economy,thereby encouraging economic growth. 
B) economic growth can only be sustained if capital depreciates rapidly. 
C) knowledge capital can be created through a system of government subsidies for education and research and development. 
D) research and development should only be financed if research and development is incremental (a result of making small changes to existing products).

Question 17

Your friend owns a snow cone stand that he works by himself.He produces about 25 snow cones per hour.He wants to be able to produce twice as many snow cones per hour so he buys a second machine.He notices that he can only produce 10 more snow cones an hour.He jokes that he could have doubled his output with the second machine if he only had four hands.Using your knowledge of the production process,explain to your friend what you think has happened when he added more capital to his production process.

Accepted Answer

The second machine does not add as much

Question 18

Which of the following is not a reason why China is unlikely to maintain high enough rates of productivity growth to catch up with the standard of living in the United States?

Accepted Answer

A) The United States invests more in research and development than does China. 
B) Much of China's growth is likely due to the transition from a centrally-planned economy to a market economy. 
C) Because of the low birth rate in China,the labor force will soon decline. 
D) The Chinese migration of rural workers to more productive urban jobs. 
A) The United States invests more in research and development than does China. 
B) Much of China's growth is likely due to the transition from a centrally-planned economy to a market economy. 
C) Because of the low birth rate in China,the labor force will soon decline. 
D) The Chinese migration of rural workers to more productive urban jobs.

Question 19

Figure 22-4  
-Refer to Figure 22-4.Many countries in Africa strongly discouraged and prohibited foreign direct investment in the 1950s and 1960s.By doing so,these countries were essentially preventing a moment from

Accepted Answer

A) B to A. 
B) E to B. 
C) A to E. 
D) D to B. 
A) B to A. 
B) E to B. 
C) A to E. 
D) D to B.

Question 20

Which of the following is an example of the way the financial markets in the United States can encourage technological progress more efficiently than other countries?

Accepted Answer

A) Even when entrepreneurs cannot secure sufficient funding for projects from banks,venture capital firms may be willing to lend money. 
B) The level of legal protection for investors in the United States is relatively low. 
C) Because the financial market in the United States is so large,the quantity of trading in corporate stocks and bonds makes those investments less liquid. 
D) Banks in the United States are more willing to take on risk because the government guarantees each bank cannot lose more than $100,000 on any given loan that defaults. 
A) Even when entrepreneurs cannot secure sufficient funding for projects from banks,venture capital firms may be willing to lend money. 
B) The level of legal protection for investors in the United States is relatively low. 
C) Because the financial market in the United States is so large,the quantity of trading in corporate stocks and bonds makes those investments less liquid. 
D) Banks in the United States are more willing to take on risk because the government guarantees each bank cannot lose more than $100,000 on any given loan that defaults.

Exam 22: Long-Run Economic Growth: Sources and Policies

The question of whether economic growth is desirable is a positive question,easily settled by economic analysis.

Relative to productivity growth in the United States,which of the following countries experienced the largest decline in productivity growth from 1990 to 2014?

When additions of input to a fixed quantity of another input lead to progressively smaller increases in output,we say we are facing

Globalization refers to

The purchase by an individual or firm of stock or bonds issued in another country is called

When firms benefit from the results of research and development they didn't pay for,we say firms

A patent grants an inventor exclusive rights to a product for how long?

Figure 22-4 -Refer to Figure 22-4.Using the per-worker production function in the figure above,the largest changes in an economy's standard of living would be achieved by a movement from

The opportunity cost of being unemployed tends to be the highest in which of the following countries?

In a small European country,it is estimated that a $10,000 increase in capital per hour worked will increase real GDP per hour worked by $300.Based on this information,what is the slope of the per-worker production function in this range?

According to the text,there are three ways the government can help increase the accumulation of knowledge capital.What are they?

Which of the following policies is designed specifically to directly promote technological change in an economy?

According to new growth theory,firms accumulate the efficient level of both physical and knowledge capital.

If the slope of the per-worker production function is 1/4 in a given range,how will a $10,000 increase in capital per hour worked affect real GDP per hour worked in the same given range?

Creative destruction means that

Which of the following is not a reason why China is unlikely to maintain high enough rates of productivity growth to catch up with the standard of living in the United States?

Figure 22-4 -Refer to Figure 22-4.Many countries in Africa strongly discouraged and prohibited foreign direct investment in the 1950s and 1960s.By doing so,these countries were essentially preventing a moment from

Which of the following is an example of the way the financial markets in the United States can encourage technological progress more efficiently than other countries?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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