25

Production and Growth
A nations standard of living is measured by its

a. nominal GDP.
b. nominal GDP per person.
c. real GDP.
d. real GDP per person.
The income per person in rich countries like Japan, the United States, and West Germany
is about how many times that in developing countries such as India and Indonesia?
a. no more than 2
b. 4
c. 6
d. 10 or more
Over the past century in the United States, real GDP per person has grown by about
a. 2 percent per year.
b. 4 percent per year.
c. 6 percent per year.
d. 10 percent per year.
e. None of the above are correct.
Over the past century in the United States, average income as measured by real GDP per
person has grown at an average annual rate that implies should double about every
a. 20 years.
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
b.
c.
d.
25 years.
35 years.
45 years.
Over the past century in the United States, average income as measured by real GDP per
person has grown about
a. 1 percent per year, which implies a doubling about every 65 years.
b. 2 percent per year, which implies a doubling about every 35 years.
c. 4 percent per year, which implies a doubling about every 20 years.
d. None of the above are correct.
In the United States, as measured by real GDP, average income is about how many times
as high as average income a century ago?
a. 4
b. 8
c. 12
d. 16
In recent decades, average income in some East Asian countries, such as Hong Kong,
Singapore, and Taiwan, has risen about
b. 2 percent per year.
c. 4 percent per year.
In some East Asian countries, average income, as measured by real GDP per person, has
grown at an average annual rate that implies output should double about every
a. 10 years.
b. 15 years.
c.
d.
.
25 years.
35 years.
In the length of one generation, which of the following countries has gone from being
among the poorest countries in the world to being among the richest?
a. Chad
b. Ethiopia
c. South Korea
d. All of the above are correct.
Average income has been stagnant for many years in

a. Ethiopia.
b. Ireland.
c. Singapore.
Which of the following is not true?

a. Growth rates of real GDP per person vary substantially from country to country.
b. GDP measures total expenditures and total income.
c. Richer countries have more televisions, better nutrition, better health care, and longer
life expectancy.
d. Productivity is not closely linked to government policies.
Which of the following is measured by real GDP?

a. total real output
b. productivity
c. macroeconomic prices
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d.
All of the above are correct.
The amount of goods and services produced from each hour of a worker's time is called
a. per capita GDP.
b. per capita GNP.
c. the standard of production.
d. productivity.
A nation's standard of living is determined by

a. productivity.
b. gross domestic product.
c. national income.
d. how much it has relative to others.
Which of the following is correct?

a. Both levels and growth rates of real GDP per person are diverse across countries.
b. People in countries where real GDP growth was higher over the last 100 years have
higher standards of living than people in all countries where real GDP growth was
smaller.
c. The typical citizen of China has about as much real income as the typical American in
1950.
In 1997, the typical Pakistani had about how many times the income of the typical
American in 1870?
a. 1/3
b. 1/2
c. 2
d. 3
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In 1997, the typical citizen of China had about as much real income as the typical
American in
a. 1870.
b. 1920.
c. 1945.
d. 1970.
Of the following countries, which had the highest growth rate over the last 100 years?
a. Brazil
b. Germany
c. United Kingdom
d. United States
Countries that grew the fastest over the last 100 years had growth rates of about
a. 0.3 percent.
b. 1.0 percent.
c. 3.0 percent.
d. 5.0 percent.

a. Countries with the highest growth rates are the ones that had the highest level of real
GDP 100 years ago.
b. The ranking of countries by income changes substantially over time.
c. Most countries have had little fluctuation around their average growth rates.
d. Over the last 100 years, Japan had the highest real GDP growth rate, and now has the
highest real GDP per person.
Over the last 100 years which of the following had growth rates higher than that of the
United States?
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a.
b.
c.
d.
Brazil
Japan
China
Which of the following nations experienced average rates of economic growth of less than
1.0 percent over the last 100 years?
a. Bangladesh
b. China
c. United States
d. India
In 1870, the richest country in the world was

a. Germany.
b. the United Kingdom.
c. the United States.
d. Russia.
In 2000, Erehwon had a population of 4,000 and real GDP of about 12,000,000. In 1999 it
had a population of 3,500 and real GDP of about 9,625,000. What was the growth rate of
real GDP per person in Erehwon between 1999 and 2000?
a. about 25 percent
b. about 14 percent
c. about 9 percent
Compounding refers to
a. the adjustment made to GDP meant to take out the effects of inflation.
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b.
c.
d.
the geometric smoothing of productivity data.

the accumulation of a growth rate over a period of time.
the increase in a growth rate over a period of time.
Using the "rule of 70," calculate how many years it would take for John's income to double
if he were to experience a 4 percent increase in income per year.
a. 35 years
b. 28 years
c. 22 years
d. 17.5 years
If James expects to have a 10 percent salary increase each year, how long will it take for his
salary to double according to the rule of 70?
a. 5 years
b. 7 years
c. 14 years
d. 20 years
According to the rule of 70, if a country has a growth rate of about .70 percent per year it
will take about
a. 100 years for their output to double, but only take about 49 years to double if their
growth rate was 3 percent.
b. 100 years for their output to double, but only take about 23 years to double if their
c. 49 years for their output to double, but only take about 23 years to double if their
d. 49 years for their output to double, but only take about 10 years to double if their
According to the rule of 70, about how many more years does it take the output of a
country to double if its output grows at 2 percent per year instead of 3 percent per year?
a. 23 years
b. 21 years
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c.
d.
12 years
7 years
Ben Franklin died and left $5,000 to be invested for a period of 200 years to benefit medical
students and scientific research. According to the rule of 70, how often would this
money have doubled if it grew 10 percent per year every year?
a. every 10 years
b. every 7 years
c. every 5 years
d. every 3.5 years
According to the rule of 70, if some variable grows at a rate of x percent per year, then that
variable doubles in approximately
a. 70x years.
b. 70/x years.
c. x/70 years.
d. 70(1 x) years.
Productivity
a. is the same across countries and so provides no help explaining differences across
countries in the standard of living.
b. explains very little of the differences across countries in the standard of living.
c. explains some, but not most of the differences across countries in the standard of
living.
d. explains most of the differences across countries in the standard of living.
Which of the following is a correct way to measure productivity?

a. compute output growth
b. divide the change in output by the change in number of hours worked
c. divide the number of hours worked by output
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d.
divide output by the number of hours worked
Robin lives on a deserted island. If she spends 8 hours fishing, she catches 24 fish. Her
productivity of fishing is
a. 192 fish.
b. 1/3 hour per fish.
c. 3 fish per hour.
d. The answer cannot be computed using the information provided.
Which of the following is not correct?

a. A countrys standard of living and its productivity are closely related.
b. Productivity refers to output produced per hour of work.
c. Increases in productivity can be used to increase output or leisure.
d. Countries that have had higher output growth per person have typically not
experienced higher productivity growth.
Both Tom and Jerry work eight hours a day. Tom can produce six baskets of goods per
hour while Jerry can produce just four baskets of the same goods per hour. It follows that
Toms
a. productivity is greater than Jerrys.
b. output is greater than Jerrys.
c. standard of living is higher than Jerrys.
Which of the following is a determinant of productivity?

a. human capital
b. physical capital
c. natural resources
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The inputs used to produce goods and services are called

a. the production function.
b. the consumption function.
c. the factors of production.
The equipment and structures that are available to produce goods and services are called
a. the production function.
b. technology.
c. physical capital.
d. human capital.
The saws, lathes, and drill presses that woodworkers use to produce goods and services
are
a. physical capital.
b. human capital.
c. natural resources.
d. technological knowledge.
Which of the following would not be considered physical capital?

a. a new factory
b. a new computer used in a restaurant
c. a desk used in an accountant's office
d. on-the-job training
Which of the following would be considered physical capital?
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a.
b.
c.
d.
the copy machines in a copy shop

the produce used to make salads at a restaurant
the skills and knowledge of a stock broker
Human capital is
a. the stock of equipment and structures that is used to produce goods and services.
b. the knowledge and skills that workers acquire through education, training, and
experience.
c. land, rivers, and mineral deposits.
d. technological knowledge.
Which of the following is considered human capital?

a. knowledge acquired from early childhood programs
b. knowledge acquired from grade school
c. knowledge acquired from on-the-job training
Human capital is a produced factor of production. Producing human capital requires

inputs in the form of
a. teachers.
b. libraries.
c. on-the-job-training.
Which of the following is human capital?

a. breakfasts served in a companys cafeteria
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b.
c.
d.
the exercise equipment in a companys gym

understanding how to use a companys accounting software
Which of the following is considered human capital?

a. the education you are pursuing
b. your comfortable office chair
c. the wrist rest for your computer
Which of the following is a part of your Economics professors human capital?

a. her copy of Mankiws text
b. her chalk holder
c. the degree she earned from some prestigious university
Natural resources
a. are inputs provided by nature.
b. are inputs such as land, rivers, and mineral deposits.
c. take two forms: renewable and nonrenewable.
Which of the following is an example of a nonrenewable resource?

a. oil
b. lumber
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c.
d.
livestock
Natural resources are

a. produced factors of production.
b. included as part of physical capital.
c. the nonrenewable resources that are gone once used.
d. the renewable and nonrenewable inputs of production provided by nature.
In a market economy, scarcity of resources is reflected in

a. supply.
b. demand.
c. the stock of the resource.
d. market prices.
In a market economy, the real, or inflation adjusted, price of a resource measures its
a. contribution to revenue.
b. relative scarcity.
c. relative importance.
d. contribution to efficiency.
The market prices of most natural resources (adjusted for inflation) have been
a. rising.
b. stable or rising.
c. stable or falling.
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d.
falling.
Market prices show that natural resources

a. are a limit to economic growth.
b. are unrelated to economic growth.
c. are not a limit to economic growth.
d. are limiting productivity because of increased scarcity.

a. There are no renewable natural resources.
b. Technology requires greater use of natural resources.
c. Human capital is equivalent to technology.
d. The relative prices of most natural resources are stable or falling.
Technological knowledge refers to

a. the knowledge and skills that workers acquire through education, training, and
experience.
b. the stock of equipment and structures that are used to produce goods and services.
c. the understanding of the best ways to produce goods and services.
Proprietary technology is knowledge that is

a. obsolete.
b. known by everyone.
c. known by all in the profession.
d. known only by the company that discovers it.
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Your instructor discovers a way to teach you economics more efficiently. He publishes his
findings in a journal. His findings
a. are not included in technological knowledge.
b. become common knowledge.
c. become proprietary knowledge.
Your company discovers a better way to produce mousetraps, but your better methods are
not apparent from the mousetraps themselves. Your knowledge of how to more efficiently
produce mousetraps is
a. proprietary technological knowledge.
b. proprietary, but not technological knowledge.
c. common technological knowledge.
d. common, but not technological knowledge.
Technological knowledge refers to

a. the amount of time the population has devoted to reading society's textbooks.
b. available information on how to produce things.
c. resources expended transmitting society's understanding to the labor force.
d. All of the above are technological knowledge.
Although technological knowledge and human capital are closely related, there is an
important difference. A relevant metaphor would be
a. technological knowledge is the quality of society's textbooks, whereas human capital
is the amount of time that the population has devoted to reading them.
b. technological knowledge is the textbook, whereas human capital is the ink.
c. technological knowledge is the thought process, whereas human capital is the calorie
burn.
d. None of the above are relevant.
The relationship between the quantity of output created and the quantity of inputs needed
to create it is called
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a.
b.
c.
d.
the capital accumulation function.

the production function.
technological knowledge.
human capital.
If your firm has constant returns to scale, then if you doubled all your inputs your firms
output would
a. not change.
b. increase, but by less than double.
c. double.
d. more than double.
You bake cookies. One day you double the time you spend, double the number of
chocolate chips, flour, eggs, and all your other inputs, and bake twice as many cookies.
Your cookie production function
a. has decreasing returns to scale.
b. has zero returns to scale.
c. has constant returns to scale.
d. has increasing returns to scale.
If there are constant returns to scale, the production function can be written as
a. xY = 2xAF(L, K, H, N).
b. Y/L = A F(xL, xK, xH, xN).
c. Y/L = A F( 1, K/L, H/L, N/L).
d. L = AF(Y, K, H, N).
Using the production function and notation employed by Mankiw, K/L measures
a. output per worker.
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b.
c.
d.
natural resources per worker.

technological knowledge per worker.
physical capital per worker.
The constant returns production function given in the text is xY = A F(xL, xK, xH, xN). If
we let x = 1/L, then the equation becomes Y/L = A F(1, K/L, H/L, N/L) where Y is the
quantity of output, A is the level of available production technology, L is the quantity of
labor, H is the quantity of human capital, and N is the quantity of natural resources. The
equation Y/L = A F(1, K/L, H/L, N/L) provides a
a. measure of gross domestic product.
b. summary for the four determinants of productivity.
c. foundation for measuring inflation.
d. measure of the availability of natural resources.
Which of the following would increase productivity?

a. an increase in the physical capital stock per worker
b. an increase in human capital per worker
c. an increase in natural resources per worker
One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs. The
growth that arises from capital accumulation is not a free lunch: It requires that society
a. conserve resources for future generations.
b. recycle resources so that future generations can produce goods and services with the
accumulated capital.
c. sacrifice consumption goods and services now in order to enjoy more consumption in
the future.
Capital accumulation
a. requires that society sacrifice consumption goods in the present.
b. allows society to consume more in the present.
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c.
d.
decreases saving rates.

has no tradeoffs.
One way that government can encourage growth and, in the long run, raise the economy's
standard of living is by encouraging
a. population growth.
b. saving and investment.
c. consumption.
d. spending.
Across countries, investment and growth rates are

a. unrelated.
b. positively related.
c. negatively related.
d. positively related for rich countries, but negatively related for poor countries.
The traditional view of the production process is that capital is subject to

a. increasing returns.
b. diminishing returns.
c. constant returns.
d. diminishing returns for low levels of capital, and increasing returns for high levels of
capital.
If there are diminishing returns to capital,

a. increases in the capital stock eventually decrease output.
b. increases in the capital stock increase output by ever smaller amounts.
c. capital produces fewer goods as it ages.
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d.
new ideas are not as useful as old ideas.
In the long run, a higher saving rate

a. cannot increase the capital stock.
b. increases productivity.
c. means that people must consume less in the future.
In the long run, a higher saving rate increases the

a. level of income.
b. growth rate of output.
c. growth rate of productivity.
According to studies of international data on economic growth, increasing the saving rate
a. increases the need for capital.
b. reduces the need for capital.
c. leads to somewhat higher GDP growth for a few years.
d. can lead to substantially higher GDP growth for a period of several decades.
Other things equal, relatively poor countries tend to

a. grow slower than relatively rich countries; this is called the fall-behind effect.
b. grow slower than relatively rich countries; this is called the Malthus effect.
c. grow faster than relatively rich countries; this is called the catch-up effect.
d. grow faster than relatively rich countries; this is called the constant-returns-to-scale
effect.
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The catch-up effect refers to the idea that

a. rich countries aid relatively poor countries so as to "catch them up."
b. savings will always "catch-up" with investment spending.
c. it is easier for a country to grow fast if it starts out relatively poor.
d. if investment spending is low, increased saving will help investment to "catch-up."
The logic behind the catch-up effect is that

a. workers in countries with low income will work harder than workers in countries with
high incomes.
b. the capital stock in rich countries deteriorates more rapidly than the capital stock in
poor countries.
c. new capital adds more to production in a country that doesnt have much capital than
in a country that already has much capital.
In the second half of the twentieth century, which of the following nations benefited a lot
from the catch-up effect?
a. Ethiopia
b. Germany
c. South Korea
d. the United States
Which of the following is consistent with the catch-up effect?

a. The United States had a higher growth rate before 1900 than after.
b. After World War II the United States had lower growth rates than war-ravaged
European countries.
c. Although the United States has a relatively high level of output per person, its growth
rate is rather modest compared to some countries.
If your American-based firm opens and operates a new plastics factory in Ireland, your
firm is engaging in
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a.
b.
c.
d.
foreign portfolio investment.

foreign financial investment.
indirect foreign investment.
foreign direct investment.
In the 1800s, Europeans purchased stock in American companies that used the funds to
build railroads and factories. The Europeans made
a. foreign direct investments.
b. foreign indirect investments.
c. foreign portfolio investments.
d. indirect domestic investments.
Foreign saving is used for domestic investment when foreigners engage in

a. foreign direct investment.
b. foreign investment.
c. either a or b.
d. neither a nor b.
Suppose Ford builds a new car factory in Mexico. Future production from such an
investment would
a. increase Mexico's GNP more than it would increase Mexico's GDP.
b. increase Mexico's GDP more than it would increase Mexico's GNP.
c. not affect Mexico's GNP, but increase Mexico's GDP.
d. have no affect on either GDP or GNP.
The opening of a new American-owned factory in Liberia would tend to increase Liberias
GDP more than it increases Liberias GNP because
a. some of the income from the factory accrues to people who do not live in Liberia.
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b.
c.
d.
gross domestic product is income earned within a country by both residents and
nonresidents, whereas gross national product is the income earned by residents of a
country while producing both at home and abroad.
all of the income from the factory is included in Liberias GDP.
If Japanese-owned Honda opens a factory in Ohio,

a. U.S. GNP rises more than U.S. GDP.
b. Japanese GDP rises more than Japanese GNP.
c. Both of the above are correct.
Investment from abroad

a. is a way for poor countries to learn the state-of-the-art technologies developed and
used in richer countries.
b. is encouraged by economists.
c. often requires removing restrictions that governments have imposed on foreign
ownership of domestic capital.
An organization that tries to encourage the flow of investment to poor countries is the
a. World Bank.
b. Organization of Less Developed Countries.
c. Alliance of Developing Countries.
d. International Development Alliance.
On average, each year of schooling raises a person's wage by about

a. 1 percent.
b. 5 percent.
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c.
d.
10 percent.
15 percent.
Which of the following is generally an opportunity cost of investment in human capital?

a. increased earning potential
b. future job security
c. forgone wages at present
An educated person might generate ideas to increase production. These ideas

a. produce external benefits.
b. produce a return to society from education that is greater than the return to the
individual.
c. could justify government subsides for education.
The term "brain drain" refers to

a. the emigration of many of the most highly educated workers from poor to rich
countries.
b. the loss of knowledge due to a poor educational system in a country.
c. a situation where the population grows faster than the level of education.
d. a situation where one country robs technological knowledge from another country.
Property rights refer to

a. the ability of people to exercise authority over the resources they own.
b. the ability of government to exercise authority over property owners.
c. a document stating the rights of ownership that accompany owning property.
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d.
None of the above are correct.
Generally, the main cause of famine is

a. excessive population.
b. an inadequate distribution of food.
c. a shortage of food.
d. All of the above are generally the causes of famine.
Inward-oriented policies
a. have generally increased productivity and growth in the countries that pursued them.
b. include imposing tariffs and other trade restrictions.
c. promote production of goods and services within a country that they can produce
most efficiently.
Inward-oriented policies
a. primarily concern the development of human capital.
b. in some ways are like prohibiting the use of certain technologies.
c. are generally supported by economists.
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Outward-oriented policies
a. prevent countries from taking advantage of gains from trade.
b. have led to high growth for the countries that pursued them.
c. receive little support from economists, despite such policies success.
When a country removes trade barriers and exports pork chops and imports stereos,
a. it is essentially transforming pork chops into stereos.
b. its productivity decreases.
c. its growth slows.
d. its economic well-being decreases while that of the country that sells stereos increases.
Which of the following would not be a good measure of economic well-being, particularly
the standard of living?
a. productivity
b. GDP per person
c. GDP
d. All of the above are good measures of the standard of living.
Real GDP per person

a. is found as population divided by GDP.
b. provides for more meaningful comparisons across time and countries than real GDP.
c. minus real GDP per person from the previous period equals the growth rate.
All else equal, which of the following would tend to cause GDP per person to rise?
a. high population growth
b. investment in human capital
c. rapid growth in the number of workers
A rapid increase in the number of workers is likely to
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a.
b.
c.
d.
raise both real GDP and real GDP per person.

raise real GDP, but decrease real GDP per person.
raise real GDP per person, but decrease real GDP.
decrease both real GDP and real GDP per person.
Which of the following is not correct?

a. Educational attainment tends to be lowest in countries with the highest population
growth.
b. Economists generally believe that decreasing population growth rates can increase
output growth rates.
c. China allows only one child per family and couples that violate this rule are subject to
substantial fines.
d. In developed countries, population growth is 3 percent; in many developing countries
it is 5 percent.
The primary reason that U.S. living standards are higher today than they were a century
ago is that
a. human capital has increased.
b. technological knowledge has increased.
c. physical capital per worker has increased.
d. more productive natural resources have been discovered.
Once one person discovers an idea, the idea generally enters society's pool of knowledge,
which many other people can use. Therefore, knowledge is generally a
a. private good.
b. public good.
c. normal good.
d. societal good.
Most technological progress comes from

a. private research by firms.
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b.
c.
d.
individual inventors.
government research.
Both a and b are correct.
National defense and knowledge are considered

a. private goods.
b. public goods.
c. normal goods.
d. inappropriate for the government to provide.
Patents turn new ideas into

a. private goods, and increase the incentive to engage in research.
b. private goods, but decrease the incentive to engage in research.
c. public goods, and increase the incentive to engage in research.
d. public goods, and decrease the incentive to engage in research.
Other things the same, a country is likely to have a lower growth rate than other countries
if it
a. has a small population.
b. pursues inward-looking policies.
c. encourages foreign investment.
d. protects property rights.
From 1959 to 1973, productivity, as measured by output per worker hour worked in U.S.
businesses, grew at a rate of
a. 4.0 percent.
b. 3.2 percent.
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c.
d.
2.5 percent.
1.8 percent.
From 1973 to 1994, U.S. productivity grew by

a. 3.2 percent.
b. 2.5 percent.
c. 2.0 percent.
d. 1.3 percent.
From 1973 to 1998, U.S. productivity growth was slower than from 1959 to 1973. Which of
the following is correct?
a. Most other developed countries did not experience similar slow downs.
b. The slowdown is primarily due to reduced growth in human capital.
c. The slowdown is primarily due to reduced growth in physical capital.
From 1973 to 1998, U.S. productivity growth was slower than from 1959 to 1973. Which of
the following is correct?
a. It appears that this may be attributed to a slowdown in technological progress.
b. This continues a downward trend as output growth was higher in periods prior to
1959 to 1973.
c. This slowdown is unique to the United States.
Typically, countries in Africa

a. had low but positive growth of real GDP per person between 1978 and 1994.
b. have laws and geography that encourage trade.
c. have high tax rates.
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d.
While Africa should have grown faster than other developing areas because of relatively
low income per capita, Africa has grown more slowly. This can be explained in part by
a. high trade barriers.
b. low tax rates.
c. excessive saving rates.
Which of the following have been suggested as remedies for low growth in many African
countries?
a. reduced corporate taxes
b. cutting import tariffs and ending export taxes on agricultural products
c. focus government spending on basic public health, education, and internal order
Economists differ in their views of the role of the government in promoting economic
growth. According to the text, at the very least, the government should
a. impose trade restrictions to protect the interests of domestic producers and
consumers.
b. subsidize key industries.
c. lend support to the invisible hand by maintaining property rights and political
stability.
d. limit foreign investment.
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ANSWERS
1
ANSWER:
d. real GDP per person.
TYPE: M KEY1: D OBJECTIVE: 1 RANDOM: Y
2
~ANSWER:
d. 10 or more
3
ANSWER:
4
ANSWER:
c. 35 years.
5
~ANSWER:
b. 2 percent per year, which implies a doubling about every 35 years.
6
ANSWER:
b. 8
7
~ANSWER:
8
~ANSWER:
a. 10 years.
9
ANSWER:
c. South Korea
10
~ANSWER:
a. Ethiopia.

11
ANSWER:
d. Productivity is not closely linked to government policies.
12
ANSWER:
a. total real output
13
ANSWER:
b. productivity.
14
ANSWER:
a. productivity.
15
ANSWER:
a. Both levels and growth rates of real GDP per person are diverse across countries.
TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y
16
~ANSWER:
b. 1/2
17
~ANSWER:
a. 1870.
18
ANSWER:
a. Brazil
19
~ANSWER:
c. 3.0 percent.
20
~ANSWER:
b. The ranking of countries by income changes substantially over time.
21
~ANSWER:
22
ANSWER:
a. Bangladesh
23
~ANSWER:
b. the United Kingdom.
24
~ANSWER:
c. about 9 percent
TYPE: M DIFFICULTY: 3 KEY1: E SECTION: 1 OBJECTIVE: 1 RANDOM: Y
25
~ANSWER:
c. the accumulation of a growth rate over a period of time.
26
~ANSWER:
d. 17.5 years
TYPE: M KEY1: E SECTION: 1 OBJECTIVE: 1 RANDOM: Y
27
~ANSWER:
b. 7 years
28
~ANSWER:
b. 100 years for their output to double, but only take about 23 years to double if their growth rate was 3
percent.
29
~ANSWER:
c. 12 years
30
~ANSWER:
b. every 7 years
31
~ANSWER:
b. 70/x years.
32
ANSWER:
d. explains most of the differences across countries in the standard of living.
33
~ANSWER:
d. divide output by the number of hours worked
34
~ANSWER:
c. 3 fish per hour.
35
~ANSWER:
d. Countries that have had higher output growth per person have typically not experienced higher productivity
growth.
36
~ANSWER:
37
~ANSWER:
38
~ANSWER:
c. the factors of production.
39
~ANSWER:
c. physical capital
40
~ANSWER:
a. physical capital.
41
~ANSWER:
d. on-the-job training
42
~ANSWER:
a. the copy machines in a copy shop
43
~ANSWER:
b. the knowledge and skills that workers acquire through education, training, and experience.
44
~ANSWER:
45
~ANSWER:
46
~ANSWER:
c. understanding how to use a companys accounting software
47
~ANSWER:
a. the education you are pursuing
48
~ANSWER:
c. the degree she earned from some prestigious university
49
~ANSWER:
50
~ANSWER:
a. oil
51
~ANSWER:
d. the renewable and non-renewable inputs of production provided by nature.
52
~ANSWER:
d. market prices.
53
~ANSWER:
b. relative scarcity.
54
~ANSWER:
c. stable or falling.
55
~ANSWER:
c. are not a limit to economic growth.
56
~ANSWER:
d. The relative prices of most natural resources are stable or falling.
57
~ANSWER:
c. the understanding of the best ways to produce goods and services.
58
~ANSWER:
d. known only by the company that discovers it.
59
~ANSWER:
b. become common knowledge.
60
~ANSWER:
a. proprietary technological knowledge.
61
~ANSWER:
b. available information on how to produce things.
TYPE: Ml KEY1: D SECTION: 2 OBJECTIVE: 3 RANDOM: Y
62
~ANSWER:
a. technological knowledge is the quality of society's textbooks, whereas human capital is the amount of time
that the population has devoted to reading them.
63
~ANSWER:
b. the production function.
64
~ANSWER:
c. double.
65
~ANSWER:
c. has constant returns to scale.
66
~ANSWER:
c. Y/L = A F( 1, K/L, H/L, N/L)
67
~ANSWER:
d. physical capital per worker.
68
~ANSWER:
b. a summary for the four determinants of productivity.
69
~ANSWER:
70
~ANSWER:
c. sacrifice consumption goods and services now in order to enjoy more consumption in the future.
71
~ANSWER:
a. requires that society sacrifice consumption goods in the present.
72
~ANSWER:
b. saving and investment
73
~ANSWER:
b. positively related.
74
~ANSWER:
b. diminishing returns.
75
~ANSWER:
b. increases in the capital stock increase output by ever smaller amounts.
76
~ANSWER:
b. increases productivity.
77
~ANSWER:
a. level of income.
78
~ANSWER:
d. can lead to substantially higher GDP growth for a period of several decades.
79
~ANSWER:
c. grow faster than relatively rich countries, this is called the catch-up effect.
80
~ANSWER:
c. it is easier for a country to grow fast if it starts out relatively poor.
81
~ANSWER:
c. new capital adds more to production in a country that doesnt have much capital than in a country that
already has much capital.
82
~ANSWER:
c. South Korea
83
~ANSWER:
84
~ANSWER:
d. foreign direct investment.
85
~ANSWER:
c. foreign portfolio investment.
86
~ANSWER:
c. Either a or b.
87
~ANSWER:
b. increase Mexico's GDP more than it would increase Mexico's GNP.
88
~ANSWER:
89
~ANSWER:
90
~ANSWER:
91
~ANSWER:
a. World Bank.
92
~ANSWER:
c. 10 percent.
93
~ANSWER:
c. forgone wages at present
94
~ANSWER:
95
~ANSWER:
a. the emigration of many of the most highly educated workers from poor to rich countries.
96
~ANSWER:
a. the ability of people to exercise authority over the resources they own.
97
~ANSWER:
b. an inadequate distribution of food.
98
~ANSWER:
b. include imposing tariffs and other trade restrictions.
99
~ANSWER:
b. in some ways are like prohibiting the use of certain technologies.
100
~ANSWER:
b. have led to high growth for the countries that pursued them.
101 ANSWER:
a. it is essentially transforming pork chops into stereos.
102
~ANSWER:
c. GDP
103
~ANSWER:
b. provides for more meaningful comparisons across time and countries than real GDP.
104
~ANSWER:
b. investment in human capital
105
~ANSWER:
b. raise real GDP, but decrease real GDP per person.
106
~ANSWER:
d. in developed countries population growth is 3 percent, in many developing countries it is 5 percent.
107
~ANSWER:
b. technological knowledge has increased.
108
~ANSWER:
b. public good.
109
~ANSWER:
d. Both a and b are correct.
110
~ANSWER:
b. public goods.
111
~ANSWER:
a. private goods, and increase the incentive to engage in research.
112
~ANSWER:
b. pursues inward-looking policies.
113
~ANSWER:
b. 3.2 percent.
114
~ANSWER:
d. 1.3 percent.
115
~ANSWER:
116
~ANSWER:
a. It appears that this may be attributed to a slowdown in technological progress.
117
~ANSWER:
c. have high tax rates.
118
~ANSWER:
a. high trade barriers.
119
~ANSWER:
120
~ANSWER:
c. lend support to the invisible hand by maintaining property rights and political stability.

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Production and Growth

A nations standard of living is measured by its

Average income has been stagnant for many years in

Which of the following is not true?

Which of the following is measured by real GDP?

All of the above are correct.

A nation's standard of living is determined by

Which of the following is correct?

Which of the following is correct?

In 1870, the richest country in the world was

the geometric smoothing of productivity data.

Which of the following is a correct way to measure productivity?

divide output by the number of hours worked

Which of the following is not correct?

Which of the following is a determinant of productivity?

The inputs used to produce goods and services are called

Which of the following would not be considered physical capital?

Which of the following would be considered physical capital?

the copy machines in a copy shop

Which of the following is considered human capital?

Human capital is a produced factor of production. Producing human capital requires

Which of the following is human capital?

the exercise equipment in a companys gym

Which of the following is considered human capital?

Which of the following is a part of your Economics professors human capital?

Which of the following is an example of a nonrenewable resource?

Natural resources are

In a market economy, scarcity of resources is reflected in

Market prices show that natural resources

Which of the following is correct?

Technological knowledge refers to

Proprietary technology is knowledge that is

Technological knowledge refers to

the capital accumulation function.

natural resources per worker.

Which of the following would increase productivity?

decreases saving rates.

Across countries, investment and growth rates are

The traditional view of the production process is that capital is subject to

If there are diminishing returns to capital,

new ideas are not as useful as old ideas.

In the long run, a higher saving rate

In the long run, a higher saving rate increases the

Other things equal, relatively poor countries tend to

The catch-up effect refers to the idea that

The logic behind the catch-up effect is that

Which of the following is consistent with the catch-up effect?

foreign portfolio investment.

Foreign saving is used for domestic investment when foreigners engage in

If Japanese-owned Honda opens a factory in Ohio,

Investment from abroad

On average, each year of schooling raises a person's wage by about

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

An educated person might generate ideas to increase production. These ideas

The term "brain drain" refers to

Property rights refer to

None of the above are correct.

Generally, the main cause of famine is

Real GDP per person

A rapid increase in the number of workers is likely to