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| Chapter 25: Production and Growth |
1. If one wants to
know how the material well-being of the average person has changed over time
the appropriate measure to look at is the growth
a. rate of real GDP.
b. rate of nominal GDP.
c. rate of per capita real GDP.
d. in the percentage of the labor force that is employed.
2. Per capita real
GDP differs from per capita nominal GDP in that real GDP
a. measures the opportunity cost of growth.
b. has been adjusted for the time value of money.
c. has been adjusted for inflation.
d. has been discounted to the present.
3. Poor countries are
poor for all of the following reasons except
a. their technology is less than modern.
b. their labor productivity is low.
c. foreign investment funds are difficult to attract.
d. their labor force is too small.
4. Of the following,
which country experienced the fastest growth rate for the period 1900–1998?
a. United States
b. Japan
c. Canada
d. Brazil
5. Which of the
following represents a productivity-enhancing investment in human capital?
a. a new labor-saving technology
b. a new health clinic
c. a new factory that will employ 1,000 workers
d. an increase in fringe benefits, such as paid vacations
and overtime pay
6. If the capital
stock increases faster than employment, then we would expect
a. both output and labor productivity to rise.
b. output to rise but labor productivity to fall.
c. both output and labor productivity to fall.
d. output to fall but labor productivity to rise.
7. As its capital
stock increases, a nation will
a. move to the right along a fixed production function.
b. move to the left along a fixed production function.
c. find its production function shifting up.
d. find its production function shifting down.
8. An increase in the
capital stock causes labor productivity to
a. decrease and the standard of living to increase.
b. increase and the standard of living to increase.
c. decrease and the standard of living to decrease.
d. increase while the standard of living remains constant.
9. If 100 lumberjacks
generate $5,000 in real GDP, the output per laborer would be
a. .02
b. .05
c. 50
d. 100
10. Labor
productivity, measuring the output per worker,
a. increases with increases in technology.
b. decreases with increases in technology.
c. increases with increases in capital stock.
d. is impossible to measure since so many workers are
involved in the service sector.
11. Investments in
human capital are often opposed because
a. investments in plant and machinery are more important.
b. the increase in productivity comes with opportunity costs
to workers and firms.
c. investments in plant and machinery will have greater
monetary payoffs.
d. they rarely lead to long-term economic growth.
12. One reason the
prices of some exhaustible natural resources have fallen is
a. their supply has decreased rapidly.
b. the demand for them has increased quite rapidly.
c. technical progress has increased their supply.
d. they are not subject to diminishing returns.
13. Historical
evidence indicates that scarcity of natural resources has
a. caused slower world economic growth.
b. nearly stopped economic growth in most countries
throughout the world.
c. not limited economic growth.
d. limited economic growth, but only in high-growth countries.
14. The data on U.S.
growth rates during the last half of the 20th century suggest that when the
savings rate increases the rate of
a. growth can increase or decrease depending on the phase of
the business cycle the economy is in.
b. economic growth increases.
c. economic growth decreases.
d. economic growth is unaffected.
15. The most direct
opportunity cost of having large families in a poor country such as Egypt is
the
a. loss of its customs and traditions.
b. benefit of having more hands to help in agricultural
production.
c. larger tax revenues government will collect from
families.
d. sacrifice of per capita material goods and services
needed in the development process.
16. Poor countries
often have a difficult time attracting foreign investment funds because
a. wages are low in poor countries.
b. investment risks are quite low in poor countries so rates
of return are low.
c. property rights are not protected so investors fear their
property may be confiscated.
d. All of the above are correct.
17. Which of the
following would decrease the likelihood that foreign business firms will invest
in a country?
a. a low corporate profit tax rate
b. political stability
c. a well-established legal system
d. political instability
18. Which of the
following countries achieved economic growth, in part, by mandating a reduction
in population growth?
a. the former Soviet Union
b. Great Britain
c. China
d. Hong Kong
19. Most countries
that are developing with slow growth rates are characterized by
a. inadequate labor forces.
b. a high proportion of the population under the age of 15.
c. unfertile and uncultivable soil.
d. low total productivity but high per capita productivity.
20. A high proportion
of the population under the age of 15 undermines economic growth because
a. the young require more infrastructure than older people.
b. the young require more capital goods than older people.
c. they present such a huge increase in human capital.
d. the young consume but they do not produce.
21. Countries like
South Korea and Singapore have shown tremendous growth rates in recent years
because
a. of diminishing returns.
b. of the catch-up effect.
c. of lower levels of domestic investment in recent years.
d. they have limited international trade.
22. Inward-oriented
policies stall economic growth because
a. international trade leads to lower domestic employment.
b. they encourage the brain-drain.
c. infant industries are unable to compete with the rest of
the world.
d. they do not allow a country to take advantage of the
gains from trade.
23. Suppose everyone
working the land in Exland knows the usefulness of investing in land irrigation
systems but those who work the land may choose not to invest in these
profitable irrigations systems as long as
a. the investment is too expensive.
b. the natural climate, such as abundant rain, makes the
irrigation projects unnecessary.
c. their property rights, with respect to the land, are
subject to change.
d. the government dictates the choice of investment.
24. A singular
important link between politics and economics in countries that are attempting
to increase their economic growth rates is that
a. democracies are more productive than non democracies.
b. democracies must constantly make difficult budgetary
choices.
c. political instability is incompatible with long-term
private investment.
d. conservative governments tend to focus development on
military industries.
25. The main reason
that some countries have serious reservations about increasing foreign direct
investment in their countries is because they
a. think this will cause political instability.
b. believe that tax revenues will fall.
c. anticipate many of their most productive workers will
leave the country.
d. fear a return to colonialism.
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