Question 1

Investment in human capital

Accepted Answer

A)   shifts the aggregate production function downward.
B)   shifts the LRAS to the left.
C)   shifts the aggregate production function upward.
D)   decreases the aggregate demand for labor. C

Question 2

If population increases at an average rate of 2% per year and output increases at an average rate of 5% per year, then output per capita will double in

Accepted Answer

A)   14.4 years.
B)   18 years.
C)   24 years.
D)   36 years. C

Question 3

Suppose a country's potential level of real GDP grows at a rate of 6% per year. Use the rule of 72 to calculate how long it takes for the country's potential output to double.

Accepted Answer

A)   6 years
B)   12 years
C)   24 years
D)   30 years B

Question 4

Why is the long-run aggregate supply curve vertical? Explain the factors that determine the position of the long-run aggregate supply curve.

Accepted Answer

The answer of Why is the long-run aggregate supply curve...

Question 5

Which of the following statements is true?
I. Small differences in rates of economic growth can lead to large differences in levels of potential output over time.
II. From the perspective of the rule of 72, small differences in rates of economic growth between two countries will not significantly affect their respective standards of living.
III. Countries that have higher population growth rates are likely to see higher economic growth rates because increases in population lead to increases in the size of the labor force.

Accepted Answer

A)   I and III
B)   II and III
C)   I only
D)   II only
E)   III only

Question 6

Which of the following occurred during the industrial revolution in the United States?
I. More and more firms shifted toward mass production and automation.
II. More and more firms substituted capital investment and technology for labor, leading to a decrease in the demand for labor.
III. Technological change and capital investment displaced workers in some industries, although for the economy as a whole, the demand for labor increased.

Accepted Answer

A)   I only
B)   I and II only
C)   I and III only
D)   II only
E)   III only

Question 7

If the rate of growth of output is 8% and the rate of growth of population is 2%, what is the rate of growth of output per capita?

Accepted Answer

A)   2%
B)   4%
C)   6%
D)   8%

Question 8

Economists do not use actual values of real GDP to measure economic growth because

Accepted Answer

A)   real GDP holds price level constant, but in reality price level changes from year to year.
B)   changes in real GDP could be due to fluctuations in the level of economic activity.
C)   economic growth encompasses more than just growth in output.
D)   changes in real GDP do not provide any information about income distribution.

Question 9

Real GDP tends to fluctuate around potential output.

Accepted Answer

A) True 
 B)False

Question 10

Holding all else constant, a country's standard of living will rise if its

Accepted Answer

A)   nominal GDP grows at a faster rate than real GDP.
B)   nominal GDP grows at a slower rate than real GDP.
C)   rate of population growth exceeds the rate of growth of real GDP.
D)   rate of population growth is less than the rate of growth of real GDP.

Question 11

Use the following to answer questions.
Exhibit: Aggregate Production Function, Labor Market, and LRAS 
-(Exhibit: Aggregate Production Function, Labor Market, and LRAS) If a change in technology moves the aggregate production function in Panel (a) upwards, what happens to the economy's potential output?

Accepted Answer

A)   Potential output remains unchanged.
B)   Potential output increases.
C)   Potential output decreases.
D)   Potential output could increase or decrease depending on what happens in the labor market.

Question 12

During the industrial revolution, the United States saw increases in the demand for labor and increases in the supply of labor. The increase in real wages rose during this period is consistent with which of the following statements?

Accepted Answer

A)   The rightward shift in the labor demand curve was greater than the rightward shift of the labor supply curve.
B)   The rightward shift in the labor supply curve was greater than the rightward shift of the labor demand curve.
C)   The rightward shift in the labor demand curve was greater than the leftward shift of the labor supply curve.
D)   The leftward shift in the labor supply curve was greater than the rightward shift of the labor demand curve.

Question 13

Define economic growth. Why is it described as a process rather than an event?

Accepted Answer

The answer of Define economic growth. Why is it described...

Question 14

Use the following to answer questions .
Exhibit: Economic Growth, AD and AS Analysis 
-(Exhibit: Economic Growth, AD and AS Analysis) Assume that the economy is initially in long-run equilibrium. What happens if investment spending increases?

Accepted Answer

A)   The short-run aggregate supply curve shifts right and the price level decreases.
B)   The long-run aggregate supply curve shifts right and the price level decreases.
C)   The long-run aggregate supply curve and the short-run aggregate supply curve shift right and the price level decreases.
D)   The aggregate demand curve shifts right and the price level increases.

Question 15

Use the following to answer question .
Exhibit: Economics Growth and the LRAS Curve 
-(Exhibit: Economics Growth and the LRAS Curve) Exponential economic growth can be depicted by

Accepted Answer

A)   a series of leftward shifts by constant amounts of the LRAS curve.
B)   a series of rightward shifts by constant amounts of the LRAS curve.
C)   shifts in the LRAS curve to the right in which the successive increases are larger and larger.
D)   shifts in the LRAS curve to the left in which the successive decreases are larger and larger.

Question 16

To assess changes in average standards of living,

Accepted Answer

A)   we examine the difference between the percentage rate of growth of output per capita and the percentage rate of growth of population.
B)   we subtract the percentage rate of growth of population from the percentage rate of growth of output per capita to get the percentage rate of growth of output.
C)   we subtract the percentage rate of growth of population from the percentage rate of growth of output to get the percentage rate of growth of output per capita.
D)   we divide the percentage rate of growth of output by the percentage rate of growth of population to get the percentage rate of growth of output per capita.

Question 17

If the rate of growth of output is 10% and the rate of growth of per capita real GDP is 6%, what is the rate of growth of population?

Accepted Answer

A)   2
B)   4
C)   6
D)   8

Question 18

For economic growth to occur, the citizens of an economy must

Accepted Answer

A)   sacrifice future consumption for current consumption.
B)   sacrifice current consumption for future consumption.
C)   accept lower real wages today for higher real wages in the future.
D)   sacrifice leisure today for leisure in the future.

Question 19

The position of the long-run aggregate supply curve is determined by
I. the aggregate production function
II. the labor demand curve
III. the labor supply curve
IV. the prevailing average price level

Accepted Answer

A)   I, II, III, and IV
B)   I, II, and III only
C)   I and IV only
D)   III, III, and IV

Question 20

In the long run, economic growth will lead to
I. the opportunity to produce more consumer goods.
II. the opportunity to produce more capital goods.
III. a higher material standard of living.
IV. a more equitable distribution of income.

Accepted Answer

A)   III and IV only
B)   I, II, and III only
C)   I, III, and IV only
D)   I, II, III, and IV

Exam 8: Economic Growth