True / False
1. Small differences in economic growth rates translate into significant differences in living standards.
a.
True
b.
False
True
Easy
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Goal of Economic Growth
2. The production function shows the volume of output that can be produced from given inputs.
a.
True
b.
False
True
Easy
economics
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Capacity to Produce: Potential GDP and The Production Function
3. Given the labor force, either more capital or better technology will shift the production function downward.
a.
True
b.
False
False
Difficult
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Capacity to Produce: Potential GDP and The Production Function
4. Technological change and labor productivity are negatively related.
a.
True
b.
False
False
Moderate
DISC: Productivity and growth
5. As capital goods depreciate, the growth of labor productivity will increase.
a.
True
b.
False
False
Moderate
6. Labor productivity measures output per hour of work.
a.
True
b.
False
True
Easy
7. A nation’s standard of living depends on its population and labor productivity.
a.
True
b.
False
True
Easy
8. Economists generally assume that faster economic growth is negative for society.
a.
True
b.
False
False
Easy
9. The growth rate in potential GDP is equal to the growth rate in the population.
a.
True
b.
False
False
Moderate
10. The growth of the labor force and the growth of labor productivity help determine the rate of GDP growth.
a.
True
b.
False
True
Moderate
11. The costs of unemployment to an individual out of work are larger now than in the 1930s.
a.
True
b.
False
False
Moderate
12. Unemployment rates differ widely among various groups in the population.
a.
True
b.
False
True
Easy
13. The unemployment rate for married men is usually higher than the rate for teenagers.
a.
True
b.
False
False
Easy
14. Frictional unemployment will typically be a short-term problem for someone between jobs.
a.
True
b.
False
True
Moderate
15. Frictional unemployment is a “necessary” cost of a dynamic economy.
a.
True
b.
False
True
Moderate
16. Someone unemployed for a long period of time due to technological change would be described as structurally
unemployed.
a.
True
b.
False
True
Moderate
17. Cyclical unemployment occurs when real GDP falls below potential GDP.
a.
True
b.
False
True
Moderate
18. Full employment is defined by all economists as precisely 5 percent of the labor force.
a.
True
b.
False
False
Moderate
19. Unemployment insurance benefits the macroeconomy by supporting purchasing power.
a.
True
b.
False
True
Moderate
20. Unemployment insurance cannot eliminate the national costs of lost output due to unemployed labor.
a.
True
b.
False
True
Moderate
21. Inflation is a serious problem because inflation causes real wages to decline.
a.
True
b.
False
False
Moderate
22. Real wages more accurately reflect the payment to labor because they are adjusted for the effects of inflation.
a.
True
b.
False
True
Moderate
23. Changes in relative prices usually lead to increases in real income because prices have changed.
a.
True
b.
False
False
Moderate
24. Inflation tends to redistribute real income from lenders to borrowers.
a.
True
b.
False
True
Moderate
25. To protect themselves from the effects of inflation, lenders try to estimate the expected rate of inflation.
a.
True
b.
False
True
Moderate
26. Inflation is a very minor problem for lenders because it is relatively easy to estimate future rates of inflation.
a.
True
b.
False
False
Difficult
27. The nominal rate of interest is the difference between the real rate and the expected rate of inflation.
a.
True
b.
False
False
Easy
28. The most important determinant of the decisions to lend or borrow is the real rate of interest.
a.
True
b.
False
True
Moderate
29. The incentive to lend increases as the real rate of interest decreases.
a.
True
b.
False
False
Moderate
30. Businesses will want to borrow more funds as the real rate of interest decreases.
a.
True
b.
False
True
Moderate
31. The public often overestimates the negative effects of inflation due to a focus on nominal rates of interest.
a.
True
b.
False
True
Moderate
32. Taxes on capital gains and interest decline as inflation rates increase.
a.
True
b.
False
False
Moderate
33. Due to the distortionary effects of inflation, capital investment may be reduced due to higher price levels.
a.
True
b.
False
True
Difficult
34. A principal benefit of inflation is that it makes economic decisions easier.
a.
True
b.
False
False
Moderate
35. Low inflation rates and high inflation rates impose different costs on society.
a.
True
b.
False
True
Moderate
36. Variable inflation rates may be more costly socially than low but predictable rates of inflation.
a.
True
b.
False
True
Moderate
37. Low inflation rates tend to accelerate into higher and higher rates of inflation.
a.
True
b.
False
False
Moderate
economics
38. The United States has never suffered through periods of hyperinflation in its history.
a.
True
b.
False
True
Moderate
39. The basic data source to track the number of unemployed comes from a calculation of applications for new
unemployment benefits.
a.
True
b.
False
False
Moderate
40. According to the U.S. Bureau of Labor Statistics, the term “employed” includes all full time workers and part-time
workers.
a.
True
b.
False
True
Moderate
41. The term “unemployed” includes all people who want a job, but don’t have one.
a.
True
b.
False
False
Difficult
42. Policy should create an environment in which the economy can expand its productive capacity rapidly, because that is
the ultimate source of higher living standards. This task is the realm of
a.
growth policy.
b.
stabilization policy.
c.
labor policy.
d.
inflation policy.
a
Easy
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Goal of Economic Growth
43. Policy makers should manage aggregate demand so that it grows in line with the economy’s capacity to produce. This
task is the realm of
a.
growth policy.
b.
stabilization policy.
c.
labor policy.
d.
inflation policy.
Easy
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Goal of Economic Growth
44. Economists generally assume that ____ economic growth is better for society.
a.
slower
b.
faster
c.
stable
d.
declining
Easy
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Goal of Economic Growth
45. The fastest growing economy between 1870 and 1979 was
a.
the United Kingdom.
b.
the United States.
c.
Japan.
d.
Brazil.
c
Easy
DISC: Measuring the Economy
United States – BPROG: Analytic
Measuring the Economy
The Goal of Economic Growth
46. Labor productivity is defined as
a.
the amount of output a typical worker turns out in an hour of work.
b.
the amount of output the best worker turns out in a day of work.
c.
the amount of output improvement in a year of work.
d.
the amount of average output improvement for a team in a year of work.
a
Easy
DISC: Measuring the Economy
United States – BPROG: Analytic
Measuring the Economy
The Goal of Economic Growth
47. The production function has ____ on the horizontal axis.
a.
real GDP
b.
capital stock
c.
technology
d.
labor input
Easy
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Capacity to Produce: Potential GDP and The Production Function
48. An increase in capital stock will shift the production function
a.
downward.
b.
rightward.
c.
upward.
d.
outward.
c
Moderate
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Capacity to Produce: Potential GDP and The Production Function
49. If the capital stock increases, then the economy can produce ____ output with the ____ amount of labor.
a.
same, same
b.
less, same
c.
more, same
d.
less, less
c
Difficult
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Capacity to Produce: Potential GDP and The Production Function
50. If the capital stock decreases, then the economy will produce ____ output with the ____ amount of labor.
a.
same, same
b.
less, same
c.
more, same
d.
more, decreased
Difficult
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Capacity to Produce: Potential GDP and The Production Function
51. An increase in the capital stock has the same effect on the production function as an increase in
a.
labor.
b.
output.
c.
GDP.
d.
technology.
Moderate
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Capacity to Produce: Potential GDP and The Production Function
52. A decrease in the capital stock would be expected to
a.
decrease the labor force.
b.
increase the level of output.
c.
decrease real GDP per capita.
d.
increase real GDP per capita.
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Capacity to Produce: Potential GDP and The Production Function
53. An increase in the capital stock would be expected to
a.
decrease the labor force.
b.
increase the level of output.
c.
decrease real GDP per capita.
d.
increase real GDP per capita.
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Capacity to Produce: Potential GDP and The Production Function
54. Potential GDP is an estimate of the economy’s ability to produce goods and services if the
a.
labor force is fully employed.
b.
price level is stable.
c.
trade balance is zero.
d.
federal budget is balanced.
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Capacity to Produce: Potential GDP and The Production Function
55. The amount of goods and services the economy could produce if the labor force is fully employed is called
a.
nominal GDP.
b.
real GDP.
c.
actual GDP.
d.
potential GDP.
Easy
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Capacity to Produce: Potential GDP and The Production Function
56. In the analysis of potential GDP, labor and capital are considered
a.
inputs.
b.
final goods and services.
c.
byproducts of economic growth.
d.
outputs.
a
Easy
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Capacity to Produce: Potential GDP and The Production Function
57. An economy could produce above its potential GDP for a short period of time by
a.
reducing the size of the labor force.
b.
increasing the price of final goods and services.
c.
adding extra shifts of work, such as overtime or night shifts.
d.
increasing the money supply.
c
Moderate
DISC: Labor markets
United States – BPROG: Analytic
Labor markets
The Capacity to Produce: Potential GDP and The Production Function
58. The estimate of potential GDP would decrease if
a.
the rate of capital depreciation increased.
b.
the labor force decreased.
c.
the price level grew.
d.
All of the above would increase potential GDP.
Easy
DISC: Labor markets
United States – BPROG: Analytic
Labor markets
The Capacity to Produce: Potential GDP and The Production Function
59. Real GDP is the product of the
a.
total hours of work times the labor force.
b.
labor force times the output per hour.
c.
nation’s capital stock times the output per hour.
d.
total hours of work times the output per hour.
Moderate
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Growth Rate of Potential GDP
60. Environmentalists worry that economic growth imposes costs on society. Among these costs are
a.
pollution.
b.
crowding.
c.
waste disposal.
d.
All of the above are costs.
Easy
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
The Growth Rate of Potential GDP
61. The growth rate of potential GDP depends, among other factors, on the
a.
rate of technological progress.
b.
unemployment rate.
c.
size of the labor force.
d.
rate of capital stock depreciation.
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Growth Rate of Potential GDP
62. Economists and psychologists are often on opposite sides of the economic growth debate. The nature of the debate is
such that
a.
economists emphasize the benefits of growth to finance valuable programs, and psychologists question
whether more goods make people happier.
b.
economists emphasize that more money means more income for the government, and psychologists believe
poorer people are happier.
c.
economists believe that economic growth imposes no serious costs on the economy, and psychologists
question the statistical reliability of GDP numbers.
d.
economists stress the importance of money relative to leisure, and psychologists stress the importance of an
unstructured life.
United States – Analytic – BB-Legal
Productivity and growth
The Growth Rate of Potential GDP
63. According to economists, one of the signs of an unhealthy economy is a(n)
a.
rising labor productivity.
b.
increasing real GDP.
c.
declining real GDP.
d.
declining unemployment.
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Growth Rate of Potential GDP
64. If the rate of technical progress decreases, then the growth
a.
of the labor force will decrease.
b.
of the capital stock will decrease.
c.
rate of potential GDP will decrease.
d.
rate of unemployment will decrease.
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Growth Rate of Potential GDP
65. Faster economic growth in the United States may lead to the serious macroeconomic problem of higher
a.
levels of unemployment.
b.
federal budget deficits.
c.
levels of inflation.
d.
levels of poverty.
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
The Growth Rate of Potential GDP
66. Increasing economic growth may be beneficial because
a.
mass poverty is a serious problem in the United States.
b.
most Americans do not have the basic goods and services necessary for a decent life.
c.
the price level falls only if the economy is growing.
d.
most of the world is still below the poverty level of income.
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Growth Rate of Potential GDP
67. Economists oppose limiting economic growth possibilities because such limits would inevitably involve
a.
some expansion of private sector production.
b.
an increase in government spending.
c.
some form of mandatory controls on economic activity.
d.
mandated balanced federal budgets.
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Growth Rate of Potential GDP
68. One of the determinants of real GDP is output per hour of labor. This statistic is called labor
a.
force growth.
b.
productivity.
c.
force participation.
d.
force input.
Easy
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Growth Rate of Potential GDP
69. One of the key factors that determine an economy’s real GDP is labor productivity, which is a measure of
a.
output per hour of work.
b.
labor force per hour.
c.
input per hour worked.
d.
total hours worked.
a
Moderate
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Growth Rate of Potential GDP
70. An economy can increase its total output of goods and services if it
a.
increases the hours of work or output per hour.
b.
increases the hours of work or decreases output per hour.
c.
decreases hours of work or decreases output per hour.
d.
decreases hours of work and decreases output per hour.
a
Moderate
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Growth Rate of Potential GDP