Question 1

Other things the same, a country that increases its savings rate will have

Accepted Answer

A)  higher future capital and higher future real GDP per person. 
B)  higher future capital but not higher future real GDP per person. 
C)  higher future real GDP per person but not higher future capital. 
D)  neither higher future capital nor higher future real GDP per person.

Question 2

Suppose a country increases trade restrictions. This country would be pursing an

Accepted Answer

A)  inward policy, which most economists believe has beneficial effects on the economy. 
B)  inward policy, which most economists believe has adverse effects on the economy. 
C)  outward policy, which most economists believe has beneficial effects on the economy. 
D)  outward policy, which most economists believe has adverse effects on the economy.

Question 3

Country A and country B both increase their capital stock by one unit. Output in country A increases by 10 while output in country B increases by 8. Other things the same, diminishing returns implies that country A is

Accepted Answer

A)  richer than Country B. If Country A adds another unit of capital, output will increase by more than 10 units. 
B)  richer than Country B. If Country A adds another unit of capital, output will increase by less than 10 units. 
C)  poorer than Country B. If Country A adds another unit of capital, output will increase by more than 10 units. 
D)  poorer than Country B. If Country A adds another unit of capital, output will increase by less than 10 units.

Question 4

Which of the following would, by itself, reveal the most about a country's standard of living?

Accepted Answer

A)  its level of capital 
B)  the number of hours worked 
C)  its availability of natural resources 
D)  its productivity

Question 5

Two countries are the same, except one is poorer. Assuming the traditional assumption about the production function is made there are

Accepted Answer

A)  diminishing returns to capital so the poor country grows slower. 
B)  increasing returns to capital so the poor country grows slower. 
C)  diminishing returns to capital so the poor country grows faster. 
D)  increasing returns to capital so the poor country grows faster.

Question 6

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.

Question 7

In which of the following countries did real GDP per person fall by about 38% from 1991 to 2011?

Accepted Answer

A)  India 
B)  Singapore 
C)  Zimbabwe 
D)  None of the above are correct.

Question 8

Industrial machinery is an example of

Accepted Answer

A)  a factor of production that in the past was an output from the production process. 
B)  physical capital. 
C)  something that influences productivity. 
D)  All of the above are correct.

Question 9

The long-run effects of an increase in the saving rate include

Accepted Answer

A)  a higher level of productivity. 
B)  a higher growth rate of productivity. 
C)  a higher growth rate of income. 
D)  All of the above are correct.

Question 10

An increase in capital will increase real GNP per person

Accepted Answer

A)  more in a poor country than a rich country. The increase in real GNP per person will be larger if the addition to capital is from domestic rather than foreign investment. 
B)  more in a poor country than a rich country. The increase in real GNP per person will be larger if the addition to capital is foreign rather than from domestic investment. 
C)  less in a poor country than a rich country. The increase in real GNP per person will be larger if the addition to capital is from domestic rather than foreign investment. 
D)  less in a poor country than a rich country. The increase in real GNP per person will be larger if the addition to capital is foreign rather than from domestic investment.

Question 11

In the U.S., each additional year of schooling has historically raised a person's wage on average by about

Accepted Answer

A)  2 percent. 
B)  5 percent. 
C)  10 percent. 
D)  15 percent.

Question 12

Suppose that a country increased its saving rate. In the long run it would have

Accepted Answer

A)  higher productivity, and another unit of capital would increase output by more than before. 
B)  higher productivity, but another unit of capital would increase output by less than before. 
C)  lower productivity, and another unit of capital would increase output by more than before. 
D)  lower productivity, but another unit of capital would increase output by less than before.

Question 13

In addition to investment in physical and human capital, what other public policies might a country adopt to increase productivity?

Accepted Answer

The answer of In addition to investment in physical and...

Question 14

Other things the same, an increase in population growth

Accepted Answer

A)  increases capital per worker. Further, there is some evidence that a higher population growth rate may increase the pace of technological progress. 
B)  increases capital per worker. However, there is some evidence that a higher population growth rate may decrease the pace of technological progress. 
C)  decreases capital per worker. Further, there is some evidence that a higher population growth rate may decrease the pace of technological progress. 
D)  decreases capital per worker. However, there is some evidence that a higher population growth rate may increase the pace of technological progress.

Question 15

Suppose over the last five years that the price of recycled aluminum increased from $800 a ton to $900 a ton. Over the same time a measure of the overall price level increased from 120 to 138. The real price of recycled aluminum

Accepted Answer

A)  increased, so it became scarcer 
B)  increased, so it became less scarce 
C)  decreased, so it became scarcer 
D)  decreased, so it became less scarce

Question 16

The average income in a rich country

Accepted Answer

A)  is about 5 times that in a poor country. Further, people in rich countries have longer life expectancy. 
B)  is about 5 times that in a poor country. However, people in rich countries have about the same life expectancy as those in poor countries. 
C)  is more than ten times that in a poor country. Further, people in rich countries have longer life expectancy. 
D)  is more than ten times that in poor country. However, people in rich countries have about the same life expectancy as those in poor countries.

Question 17

Which of the following best illustrates the human capital of a survivor stranded on an island?

Accepted Answer

A)  the fishing poles she has produced 
B)  the invention of a better fishing lure 
C)  the fresh fruit and fish on and around the island 
D)  her previous training in a survival course

Question 18

Country A had a population of 2,000, of whom 1,300 worked an average of 8 hours a day and had a productivity of 5.Country B had a population of 2,500, of whom 1,700 worked 8 hours a day and had productivity of 4. Country

Accepted Answer

A)  A had the higher level of real GDP and real GDP per person. 
B)  A had the higher level of real GDP and Country B had the higher level of real GDP per person 
C)  B had the higher level of real GDP and Country A had the higher level of real GDP per person 
D)  B had the higher level of real GDP and real GDP per person.

Question 19

Which of the following is not correct?

Accepted Answer

A)  China allows only one child per family and couples that violate this rule are subject to substantial fines. 
B)  In developed countries, population growth is consistently about 3 percent per year; in developing countries it is consistently about 5 percent per year. 
C)  Educational attainment tends to be lowest in countries with the highest population growth. 
D)  Economists generally believe that a country that decreases a high population growth rate can increase its economic growth rate.

Question 20

The catch-up effect refers to the idea that poor countries, despite their best efforts, are not likely ever to experience the economic growth rates of wealthier countries.

Accepted Answer

A) True 
 B)False

Exam 25: Production and Growth