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True / False
1. If the annual growth rate in Real GDP is 2 percent, then it will take 50 years for the economy to double in size.
a.
True
b.
False
2. The term economic growth can be used in reference to absolute real economic growth or to per- capita real economic
growth.
a.
True
b.
False
3. The term human capital refers to education, training and experience.
a.
True
b.
False
4. Property rights are a tangible factor in producing economic growth.
a.
True
b.
False
5. According to economist Benjamin Friedman, sustained economic growth can make people more willing to work toward
improving the environment and reducing poverty.
a.
True
b.
False
6. Economists Barro and McCleary’s research regarding the impact of religious beliefs on economic growth noted that a
belief in hell matters more to economic growth than the belief in heaven.
a.
True
b.
False
7. The concept that economic growth can do more than just give us more goods and services goes back to Adam Smith.
a.
True
b.
False
8. Production functions used in economic growth theory are always limited to two inputs: labor and capital.
a.
True
b.
False
9. In the production function Real GDP = T (L, K), the T represents the tax coefficient.
a.
True
b.
False
10. In the production function Real GDP = T (L, K), the T stands for tax coefficient.
a.
True
b.
False
11. When income taxes fall, the supply of labor curve shifts rightward, ultimately leading to the LRAS curve shifting
rightward (economic growth).
a.
True
b.
False
12. In the production function, the variable K represents human capital.
a.
True
b.
False
KEYWORDS:
Bloom's: Comprehension
Multiple Choice
13. "Absolute real economic growth" is defined as an increase in __________ from one period to the next.
a.
GDP
b.
Real GDP
c.
Real GDP per person
d.
the inflation rate
14. An increase in nominal GDP
a.
is absolute real economic growth.
b.
is per capita real economic growth.
c.
is both per capita and absolute real economic growth.
d.
does not necessarily mean either absolute or per capita real economic growth.
15. A useful rule of thumb called the "Rule of 70" states that if something grows at a constant rate of Z percent per year, it
doubles in size approximately every __________ years.
a.
70 - Z
b.
70/Z
c.
Z/70
d.
70 × (Z/100)
16. An economy growing at a steady rate of 2.3 percent per year doubles in size approximately every __________ years.
a.
50
b.
35
c.
30
d.
43
17. An economy growing at a steady rate of 3.1 percent per year doubles in size approximately every __________ years.
a.
40
b.
23
c.
32
d.
16
18. An economy doubles in size every 35 years if it maintains a steady annual growth rate of about __________ percent.
a.
4.0
b.
2.8
c.
3.5
d.
2.0
19. If an economy can increase its steady annual growth rate from 2 percent to 3 percent, this reduces the time it takes for
the economy to double in size by __________ years.
a.
5
b.
8
c.
12
d.
17
e.
20
20. If an economy's steady annual growth rate falls from 2.5 percent to 2.0 percent, this adds __________ years to the
time it takes for the economy to double in size.
a.
24.0
b.
7.0
c.
5.3
d.
10.2
21. Real GDP in a small country is worth $8 billion. The population of the country is 200,000. What is per capita Real
GDP?
a.
$30,000
b.
$40,000
c.
$60,000
d.
$300,000
22. Suppose the population of a country falls, but its Real GDP remains constant. As a result, there is __________
economic growth.
a.
both absolute economic growth and per-capita real
b.
absolute economic growth, but not per-capita real
c.
per-capita real economic growth, but not absolute
d.
neither absolute economic growth nor per-capita real
23. Technological advances make it possible to
a.
produce goods without using any resources.
b.
obtain the same output by using more resources.
c.
obtain the same output by using fewer resources.
d.
lower labor productivity.
24. Compare a property rights system in which people are allowed to keep one-third of the monetary rewards of their
labor with a system in which they keep two-thirds. We should expect more entrepreneurship under the __________
system and faster real economic growth under the __________ system.
a.
former; former
b.
former; latter
c.
latter; former
d.
latter; latter
25. The range of laws, rules, and regulations that define the allowed forms of use and transfer of resources is called the
__________ structure of the economy.
a.
monetary
b.
property rights
c.
microeconomic
d.
macroeconomic
26. Compare a property rights system in which people are allowed to keep one-third of the monetary rewards of their
labor with a system in which they keep two-thirds. We should expect harder work under the __________ system and less
risk taking under the __________ system.
a.
former; former
b.
former; latter
c.
latter; former
d.
latter; latter
27. Neoclassical growth theory emphasized how __________ contribute to growth.
a.
the resources labor and capital
b.
technological changes
c.
government policies
d.
factors limiting population growth
28. Neoclassical growth theory does not emphasize how __________ contribute to growth.
a.
the quantity of capital
b.
technological changes
c.
the quantity of labor
d.
factors limiting population growth
e.
a and c
29. In 1961, President Kennedy committed the United States to a manned lunar mission by the end of the decade. Few
thought it could actually be done, but of course it did, with five months to spare. This story might illustrate a __________
growth theory argument that technological change __________.
a.
new; can be deliberately accelerated
b.
new; relies on government policy
c.
neoclassical; can be deliberately accelerated
d.
neoclassical; relies on government policy
30. The economist credited with pioneering the "new growth theory" is
a.
Milton Friedman.
b.
Jia-Tzu Weng.
c.
Paul Romer.
d.
Julian Simon.
31. Meta-ideas involve
a.
the methods of producing ideas.
b.
persuading others of the validity of one's ideas.
c.
putting ideas in a form capable of approval in a "yes" or "no" vote.
d.
the expression of ideas in mathematical form.
32. Stan Laurel and Oliver Hardy acted separately in comedy shorts for the Hal Roach Studio for over a decade without
greatly distinguishing themselves from hundreds of other screen comedians. Then in 1927, Roach writer-director Leo
McCarey tried them out as a comedy team in one more routine short. Only then was the fantastic chemistry between "the
fiddle and the bow" realized. The rest is immortality. This story relates to the "new growth theory" idea of
a.
employee involvement.
b.
rearranging.
c.
exogeneity.
d.
objects and ideas.
33. If Real GDP is $6 billion and the population is 300,000, per-capita Real GDP is
a.
$30,000.
b.
$20,000.
c.
$33,333.
d.
$39,434.
34. Absolute real economic growth is an increase in __________ from one period to the next.
a.
GDP
b.
Real GDP
c.
per-capita Real GDP
d.
per-capita GDP
e.
none of the above
35. If a country's economic growth rate is 4 percent a year, approximately how many years will it take to double its Real
GDP?
a.
22.2
b.
25.0
c.
15.6
d.
17.5
e.
8.8
36. __________ rights refer to the range of laws, rules, and regulations that define rights for the use and transfer of
resources.
a.
Individual
b.
Constitutional
c.
Property
d.
Economic
e.
none of the above
37. Neoclassical growth theory placed emphasis on two resources:
a.
capital and entrepreneurship.
b.
natural resources and capital.
c.
capital and labor.
d.
labor and entrepreneurship.
e.
labor and natural resources.
38. New growth theory holds that technology is __________ and that the more resources that go to develop technology,
the __________ technology that is produced.
a.
exogenous; more and better
b.
exogenous; less
c.
endogenous; more and better
d.
endogenous; less
39. According to new growth theory, discovering and implementing new __________ is what causes economic growth.
a.
ways of managing personnel
b.
manufacturing techniques
c.
ideas
d.
resource sources
e.
none of the above
40. New growth theory holds technology to be __________; neoclassical growth theory holds technology to be
__________.
a.
exogenous; endogenous
b.
endogenous; endogenous
c.
endogenous; exogenous
d.
exogenous; exogenous
41. According to new growth theory, technological advances can be promoted
a.
from within the economy.
b.
if only the right fiscal and monetary policies are in place.
c.
in a few rare cases.
d.
through industrial policy.
e.
none of the above
42. New growth theory puts emphasis on
a.
ideas.
b.
experimenting with new ways of doing things.
c.
rearranging resources in ways that are more valuable.
d.
b and c
e.
a, b, and c
43. In contrast to neoclassical growth theory, new growth theory lays more emphasis on
a.
intangibles than tangibles.
b.
tangibles than intangibles.
c.
changes in the money supply than changes in taxes.
d.
fiscal policy than monetary policy.
e.
objects than ideas.
44. Per-capita real economic growth refers to an increase from one period to the next in
a.
per-capita GDP.
b.
GDP.
c.
Real GDP.
d.
per-capita Real GDP.
e.
none of the above
45. The Real GDP of country X doubled in 20 years. It follows that the annual growth rate in country X during this time
period was
a.
4.0 percent.
b.
5.0 percent.
c.
2.8 percent.
d.
3.5 percent.
46. The Real GDP of country X doubled in 10 years. It follows that
a.
the per-capita Real GDP doubled during this time, too.
b.
the per-capita Real GDP remained stable during this time.
c.
the per-capita Real GDP fell during this time.
d.
disposable income also doubled during this time.
e.
none of the above
47. Country X experiences an increase in Real GDP and an increase in per-capita Real GDP. It follows that
a.
the residents of country X are happier than they used to be.
b.
the benefits of economic growth outweigh the costs of economic growth.
c.
the costs of economic growth outweigh the benefits of economic growth.
d.
all the residents of country X are "richer" in terms of goods and services than they used to be.
e.
none of the above
48. According to Paul Romer, one way to produce more ideas and knowledge is by
a.
investing in research and development.
b.
giving the federal government more control over the direction of research.
c.
giving businesses less control over federal research monies.
d.
a, b and c
49. Research by Harvard economists Barro and McCleary revealed that church attendance and economic growth have a(n)
_______________ relationship. They also found that specific religious beliefs (in heaven, hell, and afterlife) and
economic growth have a(n) ___________ relationship.
a.
inverse; inverse
b.
direct; direct
c.
inverse; direct
d.
direct; inverse
50. Two Harvard economists, Robert Barro and Rachel McCleary, have researched the role that ________________ plays
in economic growth.
a.
religion
b.
meta-ideas
c.
technology
d.
human resource development
51. _______________________ specifies the relation between technology and the factor inputs to output.
a.
Neoclassical growth theory
b.
Meta-ideas
c.
The LRAS curve
d.
A production function
