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SOLUTIONS TO TEXT PROBLEMS:
Quick Quizzes
1. The approximate growth rate of real GDP per person in the United States is 1.8
2. The four determinants of a country’s productivity are: (1) physical capital, which
3. Ways in which a government policymaker can try to raise the growth in living
standards in a society include: (1) investing more current resources in the
production of capital, which has the drawback of reducing the resources used for
Chapter Quick Quiz
1. b
Questions for Review
1. The level of a nation’s GDP measures both the total income earned in the
economy and the total expenditure on the economy’s output of goods and
2. The four determinants of productivity are: (1) physical capital, which is the stock
412
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website,
in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise
on a password-protected website or school-approved learning management system for classroom use.
Chapter 25/Production and Growth ❖ 413
3. A college degree is a form of human capital. The skills learned in earning a
4. Higher saving means fewer resources are devoted to consumption and more to
5. A higher rate of saving leads to a higher growth rate temporarily, not
permanently. In the short run, increased saving leads to a larger capital stock and
6. Removing a trade restriction, such as a tariF, would lead to more rapid economic
7. The higher the rate of population growth, the lower is the level of GDP per person
8. The U.S. government tries to encourage advances in technological knowledge by
Problems and Applications
1. The facts that countries import many goods and services yet must produce a
2. a. More investment would lead to faster economic growth in the short run.
b. The change would bene7t many people in society who would have higher
3. a. Private consumption spending includes buying food and buying clothes;
private investment spending includes people buying houses and 7rms buying
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website,
in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise
on a password-protected website or school-approved learning management system for classroom use.
Chapter 25/Production and Growth ❖ 414
b. Government consumption spending includes paying workers to administer
4. The opportunity cost of investing in capital is the loss of consumption that results
from redirecting resources toward investment. Over-investment in capital is
5. a. The United States bene7ted from the Chinese and Japanese investment
b. It would have been better for Americans to make the investments because
6. Greater educational opportunities for women could lead to faster economic
7. Answers will vary. For example, countries with high scores include (2014 GDP per
8. a. Individuals with higher incomes have better access to clean water, medical
b. Healthier individuals are likely to be more productive.
c. Understanding the direction of causation will help policymakers place proper
9. Peace would promote economic growth because it is an indication that property
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website,
in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise
on a password-protected website or school-approved learning management system for classroom use.
Chapter 25/Production and Growth ❖ 415
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website,
in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise
on a password-protected website or school-approved learning management system for classroom use.
