Question 1

Scenario: In a closed economy without a government, the consumption expenditure equals $5,000 and the investment expenditure equals $2,000.
-Refer to the scenario above.What is the national income of the economy?

Accepted Answer

A)   $2,000
B)   $5,000
C)   $7,000
D)   $10,000 C

Question 2

Scenario: Consider two countries: Country A and Country B. Both countries have the identical aggregate production functions, populations, and efficiency units of labor, but they have different saving rates. The saving rate is higher in Country A than in Country B.
-Refer to the scenario above.If both economies have identical depreciation rates,then Country A's steady-state equilibrium will ________ Country B's steady-state equilibrium.

Accepted Answer

A)   lie to the right and below
B)   lie to the right and above
C)   lie to the left and above
D)   lie to the left and below B

Question 3

Scenario: Consider two countries, Country A and Country B. Both countries have identical aggregate production functions, populations, and efficiency units of labor, but they have different technologies. The technology used in Country B is more advanced than that used in Country A.
-Refer to the scenario above.Which of the following statements will be true?

Accepted Answer

A)   Country A's steady-state equilibrium will lie to the right and below that of Country B.
B)   Country A's steady-state equilibrium will lie to the right and above that of Country B.
C)   Country A's steady-state equilibrium will lie to the left and above that of Country B.
D)   Country A's steady-state equilibrium will lie to the left and below that of Country B. D

Question 4

Consider two countries,Country A and Country B,that are alike in most respects.However,the saving rates in the two countries differ.Country A's saving rate is greater than Country B's saving rate.Which of the following statements is true?

Accepted Answer

A)   The rate of physical capital accumulation will be the same in both economies.
B)   Physical capital accumulation will occur faster in Country A than in Country B.
C)   Physical capital accumulation will occur faster in Country B than in Country A.
D)   The growth rate in Country B is likely to be higher than the growth rate in Country A in the long run.

Question 5

Scenario: In the fictional nation of Gallifrey, the subsistence level of income is $1,000 per year. Currently 3 million people live in Gallifrey, and GDP in Gallifrey is $2 billion.
-Refer to the scenario above.How does the average level of income in Gallifrey compare to the subsistence level?

Accepted Answer

A)   Citizens of Gallifrey currently have incomes above subsistence, on average.
B)   Citizens of Gallifrey currently have incomes equal to subsistence, on average.
C)   Citizens of Gallifrey currently have incomes below subsistence, on average.
D)   It is impossible to answer this question without additional information.

Question 6

The following figure shows the production function and the relationship between investment and physical capital stock for a given saving rate.
 
-Refer to the figure above.If the physical capital stock is fixed at $300,the GDP in this economy is ________.

Accepted Answer

A)   $4,000
B)   $5,000
C)   $6,000
D)   $7,000

Question 7

The following figure shows graphs of various types of growth.
 
-Refer to the figure above.The data in Graph C best represent ________.

Accepted Answer

A)   linear growth
B)   no growth
C)   exponential growth
D)   exponential decline

Question 8

What is the Industrial Revolution? How did it contribute to modern economic growth?

Accepted Answer

The answer of What is the Industrial Revolution? How did...

Question 9

If GDP per capita in year T is represented by YT and the GDP per capita in the following year is represented by YT₊₁,then the formula for calculating the growth rate between these two years is ________.

Accepted Answer

A)   (YT₊₁/YT) /100
B)   (YT₊₁ − YT ) /YT
C)   (YT₊₁ + YT) /YT
D)   (YT₊₁ + YT) /YT₊₁

Question 10

Country A's GDP per capita at the beginning of 2005 was $22,150.At the beginning of 2006,it increased to $27,600.Calculate Country A's growth rate of GDP per capita between 2005 and 2006.

Accepted Answer

The answer of Country A's GDP per capita at the...

Question 11

The following table shows levels of consumption and investment in four countries.
 
-Refer to the table above.Which country has the highest savings rate?

Accepted Answer

A)   Country A
B)   Country B
C)   Country C
D)   Country D

Question 12

Define saving rate.If the aggregate saving in an economy is $10,000 and the aggregate income in the economy is $70,000,what is the saving rate in the economy?

Accepted Answer

The answer of Define saving rate.If the aggregate saving in...

Question 13

GDP per capita in New Zealand grew from $15,000 to $25,000 over 10 years.What formula should you use to find New Zealand's average growth rate (g)over these 10 years?

Accepted Answer

A)   g = (25,000 - 15,000) /10
B)   15,000 × (1 + g) ¹⁰ = 25,000
C)   25,000 × (1 + g) ¹⁰ = 15,000
D)   g¹⁰ = (25,000 - 15,000)

Question 14

If a country's human capital improves,the country will have ________ for a given level of physical capital stock.

Accepted Answer

A)   a higher GDP
B)   a lower GDP
C)   more poverty
D)   more inequality

Question 15

Widespread mobile phone use has helped to reduce poverty in many poor nations.What is the best explanation for this?

Accepted Answer

A)   People are now able to call for help more easily when they are victims of crime.
B)   People can access markets and services that they had no access to previously.
C)   People can write apps for phones and sell them, allowing them to earn their way out of poverty.
D)   People have more access to knowledge, allowing them to gain information and education like never before.

Question 16

If the investment on physical capital stock in an economy during a year is $40,000,the existing capital stock in the economy is $80,000,and the depreciation rate of capital during the year is 10 percent,the physical capital accumulated during the year is ________.

Accepted Answer

A)   $40,000
B)   $112,000
C)   $124,000
D)   $184,000

Question 17

The saving rate in France is currently 6 percent.Which event would most likely decrease the current saving rate?

Accepted Answer

A)   The interest rate in France decreases.
B)   Economists forecast slowing growth in France next year.
C)   The income tax rate in France is expected to increase next year.
D)   French people anticipate strong future growth in France's economy.

Question 18

The Solow growth model is a tool that is used for studying ________.

Accepted Answer

A)   how net exports are determined
B)   how aggregate demand is determined
C)   how aggregate supply is determined
D)   how aggregate income is determined

Question 19

Which of the following statements is true?

Accepted Answer

A)   Growth in technology is linear in nature.
B)   Growth in technology is exponential in nature.
C)   Growth in labor productivity is exponential in nature.
D)   Growth in land productivity is exponential in nature.

Question 20

According to the Solow model,which of the following factors can lead to the sustained growth of a nation?

Accepted Answer

A)   An increase in the saving rate
B)   An increase in physical capital stock
C)   An improvement in the quality of human capital
D)   An improvement in technology

Exam 7: Economic Growth

Scenario: In a closed economy without a government, the consumption expenditure equals $5,000 and the investment expenditure equals $2,000. -Refer to the scenario above.What is the national income of the economy?