69) Which of the following would typically be considered a cost of economic growth?
A) increased illiteracy
B) decreased levels of health
C) increased poverty
D) urban congestion
70) A small increase in the annual rate of economic growth can lead to a larger increase in
growth over time due to the effects of
A) the money supply.
B) compounding.
C) regression towards the mean.
D) averaging.
71) The definition of economic growth is the annual percentage
A) increase in the per capita real GDP.
B) increase in the per capita nominal GDP.
C) increase in the total nominal GDP.
D) increase in total exports.
72) Economic growth will
A) shift the production possibilities curve inward.
B) shift the production possibilities curve outward.
C) shift along the production possibilities curve toward the X-axis.
D) be a movement from inside the productions possibilities curve to the curve itself.
73) Suppose per capita real GDP grows by 2% per year. Based on the Rule of 70, approximately
how many years will it take for the level of per capita real GDP to double (i.e., increase by
100%)?
A) 3.5 years
B) 20 years
C) 35 years
D) 70 years
74) Assume a country produces two types of goods: manufactured goods and agricultural goods.
When this country experiences economic growth, we know that
A) the production possibilities curve will shift outward.
B) the production possibilities curve will shift inward.
C) there will be a movement along the curve toward more manufactured goods.
D) there will be movement along the curve toward more agricultural goods.
75) When looking at economic growth in a country, the distribution of output and income
A) generally follows predictable patterns.
B) is not taken into consideration.
C) is skewed toward the lowest quintile of the population.
D) is shared equally.
76) Which of the following is NOT a benefit of economic growth?
A) urban congestion
B) reduction in illiteracy
C) improved health
D) longer lives
77) Which of the following is a negative effect of economic growth?
A) higher inflation
B) higher unemployment
C) environmental pollution
D) all of the above
78) A change in the growth rate of a country of one percentage point annually has
A) very little impact on the economy of a country.
B) a large impact in the future due to compounding.
C) a small impact in the current year, and smaller impact in the future because of compounding.
D) a large impact on the economy in the current year, but not in the future.
79) The modification of manufacturing processes so as to reduce the resulting environmental
damage is an endeavor that requires capital investment, labor inputs, and technology. What then
follows from this statement?
A) Economic growth can benefit the environment.
B) Environmental damage is a regrettable but necessary side effect of economic growth.
C) The condition of the environment will be better in slower-growing countries.
D) The way to reduce pollution is to educate people about its effects.
80) What is the real GDP after four years if Country Utopia’s average annual growth rate is 8.6
percent and the initial real GDP was $2,756.0 million?
A) $2,993.0 million
B) $3,833.5 million
C) $1,077.5 million
D) $3,250.4 million
81) Suppose that the per capita GDP for Japan in 2016 was $48,500 and in 2017 was $49,470.
How much did the Japanese per capita GDP grow between 2016 and 2017?
A) -2 percent
B) 3 percent
C) 2 percent
D) Cannot be determined without further information
82) A constant rate of U.S. economic growth over a given period of years would involve
A) adding the same amount of nominal dollars to real GDP per capita each year.
B) adding the same amount of real dollars to real GDP per capita each year.
C) compounding the percentage increase in real GDP per capita over the years.
D) None of the above are correct.
83) When economic growth is compared between countries, the best measure to use is
A) nominal GDP.
B) real GDP.
C) chain-weighted GDP.
D) real GDP per capita.
84) What is economic growth and why are growth rates so important?
85) “There is a direct relationship between economic growth rates and the wealth of a nation.”
Do you agree or disagree? Why?
86) What are the shortcomings of using changes in per capita real GDP to measure economic
growth?
9.2 Productivity Growth, Saving, and New Technologies: Fundamental Determinants of
Economic Growth
1) If population growth is greater than the growth of real output
A) real per capita Gross Domestic Product (GDP) growth will be less than the growth of real
Gross Domestic Product (GDP).
B) the production possibilities curve is shifting to the left.
C) real per capita Gross Domestic Product (GDP) growth will be greater than the growth of real
Gross Domestic Product (GDP).
D) real per capita Gross Domestic Product (GDP) and real Gross Domestic Product (GDP) will
be growing at the same rate.
2) Labor productivity can best be calculated as
A) real Gross Domestic Product (GDP) / Gross Domestic Product (GDP) price index.
B) real Gross Domestic Product (GDP) / number of workers.
C) number of workers / hours of work.
D) real wages / hours of work.
3) Which resource is the main contributor to economic growth in the United States, Latin
America, and South Asia?
A) growth in physical capital
B) growth in human capital
C) growth in labor
D) growth in natural resources
4) Which of the following variables can be used to measure labor productivity?
A) real GDP
B) number of workers
C) number of labor hours
D) all of the above
5) The majority of evidence points to the fact that, in the last decade in the United States, labor
productivity has
A) decreased.
B) increased.
C) stayed the same.
D) decreased in the manufacturing sector but increased in the service sector.
6) Labor productivity rises when
A) average worker output falls.
B) business investment falls.
C) average worker output rises.
D) nominal wages fall.
7) Labor productivity increases when
A) the average number of hours people work goes up.
B) the unemployment rate decreases.
C) the average output produced per worker during a specified time period increases.
D) the average output produced per worker during a specified time period decreases.
8) Suppose a country experiences an increase in output per worker. Such a development
represents which of the following?
A) a decrease in economic growth
B) an increase in labor productivity
C) a reduction in the saving rate
D) an increase in population growth
9) Which of the following will cause an increase in economic growth?
A) an increase in human capital
B) a reduction in the stock of physical capital
C) a reduction in the unemployment rate
D) a reduction in labor force participation
10) Labor productivity is computed as
A) per capita real GDP divided by the number of workers.
B) real GDP divided by population.
C) per capita real GDP divided by population.
D) real GDP divided by the number of workers.
11) Labor productivity is
A) the average amount produced times the number of workers.
B) the average amount produced times the number of people in the labor force.
C) the average amount produced per worker.
D) the rate of change in the total amount produced per worker.
12) The most important thing about higher labor productivity is that it means
A) we are doing better than anyone else is.
B) we can compete well with other nations.
C) we can achieve a happier population.
D) we can have a higher standard of living.
13) Economic growth can be defined as
A) the rate of growth in the productivity of labor.
B) the rate of growth in the productivity of capital.
C) the rate of growth of labor plus the rate of depreciation of capital.
D) the rate of growth of labor plus the rate of growth of capital plus the rate of growth in the
productivity of labor and capital.
14) Productivity relates to
A) working harder over time.
B) working longer over time.
C) producing the same output with fewer labor hours.
D) producing the same output with more labor hours.
15) Which of the following is an example of a measure of labor productivity?
A) Factory workers produce 100 units of TVs per worker per day.
B) Autos get 20 gallons to the mile.
C) A household’s income increased by 3 percent last year.
D) Wages increase by 3 percent per year for 5 years.
16) Labor productivity increases when
A) the population increases.
B) output increases even if the labor force has decreased.
C) output increases at the same rate as the labor force increases.
D) output increases faster than population increases.
17) In the United States, the main contributor to economic growth is due to the growth in
A) physical capital.
B) education (human capital).
C) labor resources.
D) capital and labor productivity.
18) Improvements in labor productivity
A) affect the level of wages, but do not affect the rate of economic growth.
B) affect the level of profit, but do not affect the rate of economic growth.
C) hinder economic growth, because they cause unemployment.
D) contribute to economic growth.
19) Labor productivity is commonly measured as
A) the number of workers divided by real GDP.
B) the change in real GDP divided by change in number of workers.
C) nominal GDP divided by number of workers.
D) real GDP divided by number of workers.
20) An increase in human capital will tend to cause which of the following?
A) increase economic growth
B) increase the standard of living
C) increase labor productivity
D) all of the above
21) Which one of the following does NOT contribute to economic growth?
A) the growth of capital and labor productivity
B) the growth of the capital stock
C) the growth of the labor force
D) increases in the price level
22) The formula for the computation of labor productivity is
A) real GDP/population.
B) real GDP/number of workers.
C) nominal GDP/population.
D) nominal GDP/number of workers.
23) Labor productivity is defined as
A) the amount of output per worker.
B) the amount of input per worker.
C) the amount of workers per unit of input.
D) the increase in output per unit of machinery.
24) Labor productivity can be increased if
A) people spend less time developing skills before entering the workforce.
B) the government mandates it.
C) there is an increase in capital goods.
D) the standard of living declines.
25) Labor productivity measures
A) the growth of per capita real GDP.
B) the growth of real output.
C) real output per labor hour.
D) the growth in the quantity of labor.
26) Labor productivity can be increased with
A) education and training of the workforce.
B) an increase in capital goods used.
C) improvements in management.
D) all of the above
27) By dividing a country’s value of total domestic output by its number of workers, economists
can measure
A) the net domestic product.
B) labor productivity.
C) the size of the labor force.
D) the rate of capital accumulation.
28) Whenever average output produced per worker during a specific time-period increases, then
A) leisure time increases.
B) nominal GDP decreases.
C) labor productivity increases.
D) the standard of living goes down.
29) Improvements in information technology over the past decade have enhanced labor
productivity. What has been a likely result of this change?
A) Capital productivity has declined.
B) Unemployment has increased.
C) The rate of economic growth has increased.
D) Entrepreneurs no longer have an incentive to invest in information technology.
30) Which of the following contributes to economic growth?
A) increase in labor productivity
B) increase in consumer spending
C) increase in labor regulations restricting the hours of overtime allowed
D) increase in environmental protection policies
31) Giving up consumption today for consumption tomorrow accelerates economic growth by
A) having the economy produce no consumer goods.
B) increasing saving out of disposable income.
C) increasing the expected rate of inflation.
D) rapid expansion of the money supply.
32) One important factor that affects economic growth is
A) the amount of money supply.
B) the rate of saving.
C) which political party is in power.
D) the number of workers in heavy industry.
33) According to the text, Ethiopia probably has a low per capita real Gross Domestic Product
(GDP) because
A) it has too many resources.
B) it has a corrupt government.
C) it has a low rate of saving.
D) there are too many skilled workers in the country.
34) Economic growth occurs as a result of all of the following EXCEPT
A) more labor hours.
B) growth of capital.
C) technological progress.
D) less saving.
35) A higher rate of saving should lead to
A) higher current consumption.
B) less growth.
C) more investment, higher capital growth, and more future consumption.
D) a higher price level and reduced future consumption.
36) The rate of economic growth will be faster if
A) the rate of growth of the money supply is higher.
B) the rate of saving is higher.
C) the rate of growth of the population is higher.
D) consumption spending is greater.
37) Other things being equal, a higher saving rate
A) leads to higher interest rates.
B) means higher standards of living in the future.
C) means higher standards of living today.
D) is associated with a decline in the rate of growth of the population.
38) Other things being equal, an increase in consumption spending implies
A) a decline in saving.
B) a decline in government spending.
C) a higher standard of living in the future.
D) that economic growth will soon increase.
39) Economic growth tends to be higher in a country that
A) has a low saving rate.
B) has an open economy that encourages the rapid spread of technology.
C) has an undeveloped system of property rights.
D) does not grant patents to investors.
40) When comparing across countries, the higher the rate of saving
A) the lower the level of per capita real Gross Domestic Product (GDP).
B) the higher the level of per capita real Gross Domestic Product (GDP).
C) the less industrialized the country.
D) the lower the productivity rates.
41) An important factor in determining a country’s rate of economic growth is
A) the diversity of its population.
B) its rate of saving.
C) the size of its labor force.
D) the proportion of the adult population that is working.
42) Other things held constant, higher saving rates lead to
A) a lower standard of living.
B) increases in the number of hours workers work.
C) decreases in real per capita GDP.
D) higher living standards.
43) Saving is important for economic growth because
A) a higher saving rate reduces investment spending.
B) a higher saving rate increases investment spending.
C) more saving increases consumption immediately.
D) a higher saving rate will decrease the standard of living in the future.
44) A reduction in a country’s saving rate will tend to cause which of the following in the long
run?
A) an increase in the standard of living
B) a reduction in economic growth
C) an increase in labor productivity
D) an increase in per capita real GDP
45) The relationship between the rate of saving and per capita real GDP is
A) positive.
B) negative.
C) constant.
D) not stable.
46) There has been some concern in the United States that people are NOT saving enough. This
is a concern because
A) decreases in saving lead to decreases in labor productivity.
B) decreases in saving lead to decreases in investment.
C) decreases in saving lead to increases in the capital stock.
D) decreases in saving lead to increases in consumption in the future.
47) If all income is consumed in a year, then
A) investment spending will increase.
B) income next year will increase.
C) investment spending will be zero.
D) any investment spending will be done by the government.
48) Many countries find it difficult to achieve economic growth. This is because economic
growth
A) is not understood well by economists, so it is difficult to advise policy makers on the best
policies to pursue.
B) requires saving, and saving means less consumption today. A poor country may find it
difficult to consume less today.
C) appears to be predetermined and not subject to factors that policy makers can have any affect
on.
D) depends on technological change and technological change depends on noneconomic factors
such as the growth rate of scientific knowledge.
49) It is likely that a small increase in a country’s saving rate will have
A) a large effect on per capita real GDP many years later because the increase in saving leads to
a slightly higher rate of economic growth which has large effects over time.
B) a large effect on per capita real GDP immediately because the increase in saving leads to a
much larger rate of economic growth.
C) a small effect on per capita real GDP many years later because the increase in saving will
have very little effect on the growth rate.
D) a small effect on per capita real GDP many years later because the increase in saving will be
offset in later years by a decrease in the saving rate.