23) Which of the following best explains why productivity growth in the United States has been faster
than in other leading industrialized nations?
A) There are fewer government regulations in the United States regarding the way firms can hire and
fire workers.
B) The financial systems of foreign countries are generally more efficient than those in the United States.
C) European countries have more flexible policies regarding the number of hours employees are
permitted to work.
D) Job mobility in the United States is more restricted than it is in many foreign countries.
24) Productivity gains in the United States since 1990 have been ________ productivity gains in other
leading industrial nations.
A) the same as
B) lower than
C) higher than
D) more variable than
25) Between 1990 and 2014, which of these leading industrial countries of the world had the highest
average annual growth rate in GDP per capita?
A) the United States
B) Germany
C) Japan
D) Canada
26) By offering more generous unemployment insurance programs, European countries can expect
A) to pay less in taxes than in the United States.
B) workers to gain new skills quickly in response to fluctuations in the labor market.
C) shorter periods of unemployment for their workers.
D) longer periods of unemployment for their workers.
27) Which of the following is an example of the way the financial markets in the United States can
encourage technological progress more efficiently than other countries?
A) Even when entrepreneurs cannot secure sufficient funding for projects from banks, venture capital
firms may be willing to lend money.
B) The level of legal protection for investors in the United States is relatively low.
C) Because the financial market in the United States is so large, the quantity of trading in corporate
stocks and bonds makes those investments less liquid.
D) Banks in the United States are more willing to take on risk because the government guarantees each
bank cannot lose more than $100,000 on any given loan that defaults.
28) The economic growth model predicts that
A) GDP per capita of rich countries will grow more rapidly than in poor countries.
B) GDP per capita of poor countries will grow more rapidly than in rich countries.
C) Governments must centrally direct the economy for growth to occur.
D) GDP per capita of poor countries will never change.
29) Empirical evidence from 1960 to 2011 shows that convergence in economic growth is occurring in
which of the following cases?
A) Low-income industrial countries are catching up to high-income industrial countries.
B) Low-income developing countries are catching up to high-income industrial countries.
C) Low-income industrial countries are catching up to high-income developing countries.
D) All low-income countries are catching up to all high-income countries.
30) Which of the following countries actually experienced negative economic growth from 1960 to 2011?
A) Israel
B) Singapore
C) Niger
D) Malaysia
31) Which of the following accurately describes the impact of the rule of law on a country’s economic
growth rate?
A) Countries with a strong rule of law have faster economic growth.
B) Countries with a weak rule of law have faster economic growth.
C) Countries that enforce property rights through lawsuits have slower economic growth.
D) Countries where favoritism and bribery are common have stronger rates of growth.
32) Which of the following is not a reason why low-income countries might experience low economic
growth?
A) The country has endured extended periods of war.
B) The country fails to enforce a rule of law.
C) The country has a good education system.
D) The country has a low rate of saving and investment.
33) There has been catch-up among ________, but there has not been catch-up among ________.
A) developing countries such as Niger; industrialized countries such as Japan
B) industrialized countries such as Japan; all countries of the world
C) developing countries such as Niger; all countries of the world
D) all countries of the world together; industrialized countries such as Japan
34) ________ save a ________ of their income. This ________ capital in their economy and raises
economic growth.
A) Developing countries; large proportion; decreases
B) Developing countries; small proportion; increases
C) High-income countries; large proportion; increases
D) High-income countries; small proportion; increases
35) Lack of investment in strong education and health care systems
A) causes a deterioration in human capital and a decline in labor productivity.
B) causes a decline in physical capital and a decline in labor productivity.
C) increases human capital and cause a decline in labor productivity.
D) causes a deterioration in human capital and an increase in physical capital.
36) Which of the following is an example of foreign portfolio investment?
A) the purchase of a U.S. stock by a U.S. citizen
B) the purchase of a U.S. Treasury bond by a German citizen
C) the purchase of a U.S. mutual fund by a U.S. citizen
D) the purchase of a Japanese factory by a Korean citizen
37) Georg, a German citizen, just purchased 10 shares of stock in Microsoft, a U.S. company. This
purchase is an example of
A) foreign direct investment.
B) foreign public investment.
C) foreign portfolio investment.
D) contractual globalization.
38) Which of the following is an example of foreign direct investment?
A) You purchase a plane ticket to China on American Airlines.
B) American Airlines builds a hub in China.
C) You buy a plane that was made in China.
D) A stock broker from China sells you a Chinese government savings bond.
39) What is the difference between foreign direct investment and foreign portfolio investment?
A) Foreign direct investment involves purchases of foreign stock or bonds by individuals or firms,
while foreign portfolio investment involves a firm purchasing or building a facility in a foreign country.
B) Individuals engage in foreign portfolio investment, but only firms can engage in foreign direct
investment.
C) Foreign direct investment only takes place when governments make official purchases or foreign
investments, while foreign portfolio investment takes place when firms, individuals, or the government
purchase foreign investments.
D) Foreign direct investment can give a low-income country access to funds and technology it would
not otherwise have, but foreign portfolio investment does not expand that access.
40) Foreign direct investment occurs when a Chinese corporation
A) purchases stock issued in China.
B) opens a new Chinese factory.
C) purchases 1,000 shares of stock issued by an American company.
D) opens a new factory in France.
41) Until recently, many developing countries
A) were quite open to foreign investment.
B) encouraged foreign direct investment but discouraged foreign portfolio investment.
C) sealed themselves off from foreign investment.
D) encouraged foreign portfolio investment but discouraged foreign direct investment.
42) Foreign investment can give a low-income country
A) access to funds for investment and access to technology.
B) the means to slow down growth.
C) a path to dependency and low growth.
D) no hope to break the vicious cycle of poverty.
43) Globalization is positively associated with
A) poverty.
B) declining rates of investment.
C) declining standards of living.
D) economic growth.
44) Globalization is defined as the process of countries becoming ________ open to foreign trade and
________ open to foreign investment.
A) more; less
B) more; more
C) less; more
D) less; less
45) The economic growth model predicts that ________ across countries will converge over time.
A) income levels
B) GDP per capita
C) foreign direct investment rates
D) growth rates
46) Which of the following has been suggested as reasons for Mexico’s slow economic growth?
A) Mexico’s Spanish colonial background
B) Mexico’s long-ruling PRI political party
C) Mexico’s legal restrictions on the financial sector
D) all of the above
47) Of the following countries, which had the highest level of GDP per capita in 2014?
A) Japan
B) France
C) Italy
D) the United States
48) Unemployment insurance is usually available to workers in ________ for a shorter period of time
than it is in ________.
A) the United States; Canada
B) Canada and some Western European countries; the United States
C) Canada; some Western European countries
D) some Western European countries; the United States
49) By offering less generous unemployment insurance programs, the United States can expect
A) citizens to pay more in taxes than citizens pay in Europe.
B) workers to be slow in gaining new skills in response to fluctuations in the labor market.
C) shorter periods of unemployment for their workers.
D) longer periods of unemployment for their workers.
50) The U.S. economy has seen a faster increase in productivity since the mid-1990s as compared to the
economies of many Western European countries. Which of the following explains this?
A) U.S. unions impose stricter work rules as compared to unions in Western European countries.
B) U.S. government regulations impose stricter work rules as compared to government regulations in
Western Europe.
C) The United States has a higher rate of job mobility than do many Western European countries.
D) U.S. workers can obtain unemployment insurance for a longer period of time as compared to
workers in most Western European countries.
51) To what do economists attribute the rapid growth of labor productivity in the United States relative
to other countries?
A) the flexibility of U.S. labor markets and the efficiency of the U.S. financial system
B) the strict government rules in the United States that regulate a firm’s ability to hire and fire workers
C) the low rate of job mobility in the United States
D) the high level of unemployment benefits the United States pays relative to other countries like
Canada
52) The lower-income industrial countries are catching up to the higher-income industrial countries in
terms of economic growth.
53) The developing countries have been catching up to the lower-income industrial countries in terms of
economic growth.
54) One reason why many low-income countries experience low rates of growth is because of low rates
of saving and investment in those countries.
55) As predicted by the economic growth model, countries that start with lower levels of GDP per capita
always grow faster than countries that start with higher levels of GDP per capita.
56) One reason why many low-income countries experience low rates of growth is because of poor
public education and health.
57) The purchase of stocks and bonds issued in another country is known as foreign direct investment.
58) Of all industrialized nations, real GDP per capita was the highest in Japan in 2014.
59) Explain the meaning of the word “convergence” in the context of economic growth and standards of
living.
60) List two ways the labor force experience is different between workers in Europe and in the United
States. How do these differences influence productivity?
Table 11-5
Country
Real GDP per Capita
in 1960 (1996 dollars)
Growth in Real GDP
per Capita
1960-2000
Belgium
$7,778
5.02%
France
7,824
4.53%
Canada
10,383
3.88%
Denmark
10,988
3.47%
61) Refer to Table 11-5. Consider the statistics in the table above in describing the industrialized
countries. Are these consistent with the economic growth model? Briefly explain.
Table 11-6
Country
Real GDP per Capita
in 1960 (1996 dollars)
Average Annual
Growth in Real GDP
per Capita between
1960 and 2000
India
$847
4.70%
Bangladesh
1,057
1.45%
Honduras
1,700
0.50%
Bolivia
2,354
0.38%
62) Refer to Table 11-6. Consider the statistics in the table above in describing the developing countries.
Are these consistent with the economic growth model? Briefly explain.
Table 11-7
Country
Real GDP per
Capita
in 1960
(1996 dollars)
Growth in Real
GDP per
Capita
1960-2000
India
$847
4.70%
Bangladesh
1,057
1.45%
Honduras
1,700
0.50%
Bolivia
2,353
0.38%
Belgium
7,778
5.02%
France
7,824
4.53%
Canada
10,383
3.88%
Denmark
10,988
3.47%
63) Refer to Table 11-7. Consider the statistics in the table above in describing the following
industrialized and developing countries. Are these consistent with the economic growth model? Briefly
explain.