Chapter 24 Production and Growth

Test B
1

In the last 100 years U.S. per-capita real GDP grew about a. 2% per year, so that it is about two ti es as high. b. 2% per year, so that it is about eight ti es as high. c. !% per year, so that it is about two ti es as high. ". !% per year, so that it is about eight ti es as high. #$S%&'( b. 2% per year, so that it is about eight ti es as high. )*P&( + ,&*1( D S&-)I.$( 1 ./0&-)I1&( 1 '#$D.+( *
2

Per-capita real GDP in -hina is about e2ual to per-capita real GDP in the Unite" States in a. 1340, an" 152 that in the Unite" States to"ay. b. 1340, an" 153 that in the Unite" States to"ay. c. 1620, an" 152 that in the Unite" States to"ay. ". 1620, an" 153 that in the Unite" States to"ay. #$S%&'( b. 1340, an" 153 that in the Unite" States to"ay. )*P&( + ,&*1( D S&-)I.$( 1 ./0&-)I1&( 1 '#$D.+( *
7

.8 countries liste" in the te9t, the per-capita real GDP growth rates o:er the last 100 years range" 8ro a. 0%-;%. b. 1%-7%. c. 2%-;%. ". 7%-<%. #$S%&'( b. 1%-7%. )*P&( + ,&*1( D S&-)I.$( 1 ./0&-)I1&( 1 '#$D.+( *
!

about

Suppose an econo y that was roughly the si=e o8 #ustralia ha" a population o8 16 illion an" real GDP o8 about 730,000 illion U.S. "ollars in 1663. Suppose 8urther that in 1666 population was about 16.; illion an" real GDP was about !01,;00 illion "ollars. %hat are the appro9i ate growth rates o8 real GDP an" o8 real GDP per-capita> a. ;.4%, ;.7% b. ;.4%, 7% c. 7%, ;.4% ". ;.7%, 7% #$S%&'( b. ;.4%, 7% )*P&( + ,&*1( D S&-)I.$( 1 ./0&-)I1&( 1 '#$D.+( *
;

%hich o8 the 8ollowing is correct> a. I8 a country has a per-capita real GDP growth rate o8 4%, its per-capita real GDP will "ouble about e:ery 1! years. b. )he current le:el o8 per-capita real GDP in the Unite" States is about ?16,!;0. c. #lthough 100 years ago the Unite" ,ing"o ha" greater per-capita real GDP than the Unite" States an" -ana"a, it now has lower per-capita real GDP than both o8 the . ". #ll o8 the abo:e are correct. #$S%&'( c. #lthough 100 years ago the Unite" ,ing"o ha" greater per-capita real GDP than the Unite" States an" -ana"a, it now has lower per-capita real GDP than both o8 the . )*P&( + ,&*1( D S&-)I.$( 1 ./0&-)I1&( 1 '#$D.+( *

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16

20 -hapter 2!5Pro"uction an" Growth

<

Pro"ucti:ity is the a. growth rate o8 real GDP. b. a:erage a ount a worBer pro"uces per hour. c. le:el o8 real GDP. ". $one o8 the abo:e is correct. #$S%&'( b. a:erage a ount a worBer pro"uces per hour. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 2 '#$D.+( * NOTE: THE FOLLOWING QUESTION IS REPEATED FROM THE ON LINE QUI!!ES" #OUR STUDENTS MA# HA$E ALREAD# SEEN THIS QUESTION AND ITS ANSWER"
4

Suppose that 8actory output rose 8ro ;0,000 units to ;;,000 units while labor hours rose 8ro %hich o8 the 8ollowing is true> a. Cabor pro"ucti:ity re aine" unchange". b. Cabor pro"ucti:ity increase" slightly. c. Cabor pro"ucti:ity "ecrease" slightly. ". Cabor pro"ucti:ity increase" sharply. #$S%&'( b. Cabor pro"ucti:ity increase" slightly. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 2 '#$D.+( *
3

1100 to 1200.

)he pro"ucti:ity o8 U.S. worBers is higher than that o8 worBers in any countries that ha:e less capital. %hich o8 the 8ollowing argu ents concerning these 8acts is logically consistent> a. )his contra"icts the i"ea o8 "i inishing arginal pro"uct. I8 U.S. worBers ha:e ore capital, they shoul" ha:e lower pro"ucti:ity. b. Pro"ucti:ity in the Unite" States is higher because the Unite" States has ore worBers than those countries ha:ing low pro"ucti:ity. c. )he Unite" States coul" ha:e greater pro"ucti:ity because its worBers ha:e both ore hu an capital an" physical capital per worBer. ". $one o8 the abo:e is logically consistent. #$S%&'( c. )he Unite" States coul" ha:e greater pro"ucti:ity because its worBers ha:e both ore hu an capital an" physical capital per worBer. )*P&( + ,&*1( - S&-)I.$( 2 ./0&-)I1&( 2 '#$D.+( *
6

&ngineering stu"ents learn long-establishe" etho"s 8or constructing bri"ges, in an" o8 itsel8 this learning increases a. hu an capital. b. physical capital. c. technological Bnowle"ge. ". $one o8 the abo:e is correct. #$S%&'( a. hu an capital. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 7 '#$D.+( *
10

I8 there are constant returns to scale then a. a "oubling o8 all inputs "oubles real GDP. b. technological progress "oes not a88ect per-capita real GDP. c. "oubling labor woul" lea:e per-capita real GDP unchange". ". an increase in capital per worBer woul" lea:e per-capita real GDP unchange". #$S%&'( a. a "oubling o8 all inputs "oubles real GDP. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 7 '#$D.+( *

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-hapter 2!5Pro"uction an" Growth 21

11

%hich o8 the 8ollowing is incorrect> a. /ull"o=ers are an e9a ple o8 physical capital. b. Stu"ents can be :iewe" as worBers who ha:e the i portant Dob o8 pro"ucing hu an capital that will be use" in 8uture pro"uction. c. # 8orest is a non-renewable resource. ". )echnological progress ay re"uce our "epen"ence on nonrenewable resources. #$S%&'( c. # 8orest is a non-renewable resource. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 7 '#$D.+( *
12

Au an capital is a. the nu ber o8 worBers in the econo y. b. the nu ber o8 worBers "i:i"e" by the population. c. the a ount o8 physical capital per worBer. ". societyEs un"erstan"ing o8 the best way to pro"uce output. #$S%&'( ". societyEs un"erstan"ing o8 the best way to pro"uce output. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 7 '#$D.+( *
17

-onsi"er the 8ollowing two sentences. )he wealth o8 so e countries "eri:es pri arily 8ro the natural resources they own. Aowe:er, countries with 8ew natural resources can be highly pro"ucti:e. a. /oth sentences are true. b. .nly the 8irst sentence is true. c. .nly the secon" sentence is true. ". $either sentence is true. #$S%&'( a. /oth sentences are true. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 7 '#$D.+( *
1!

.nce a"Duste" 8or in8lation the price o8 ost natural resources a. rose because o8 increasing "e an" 8ro a growing population. b. rose because their supply is "eclining. c. were stable or 8alling because o8 go:ern ent price controls. ". $one o8 the abo:e is correct. #$S%&'( ". $one o8 the abo:e is correct. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 7 '#$D.+( *
1;

In the long run a higher sa:ings rate lea"s to a. a higher le:el o8 per-capita inco e. b. a higher le:el o8 pro"ucti:ity. c. an increase in the growth rate o8 inco e. ". # an" /, but not -. #$S%&'( ". # an" /, but not -. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
1<

-onsi"er the 8ollowing two sentences. #ccor"ing to the "ata, countries with higher in:est ent relati:e to GDP, ten" to ha:e higher growth rates o8 real GDP per person. )his relation is not per8ect though, because an increase in the physical capital stocB increases output per person ore in a country with uch capital than in a si ilar country with less capital. a. /oth sentences are true. b. /oth sentences are 8alse. c. .nly the 8irst sentence is true. ". .nly the secon" sentence is true. #$S%&'( c. .nly the 8irst sentence is true. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *

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22 -hapter 2!5Pro"uction an" Growth

14

)he catch-up e88ect is the a. ten"ency 8or countries that start o88 poor to grow ore rapi"ly than countries that start o88 rich. b. property whereby the bene8its o8 an e9tra unit o8 an input "eclines as the 2uantity o8 the input increases. c. ten"ency 8or the growth rate o8 the capital stocB o8 a country to atch its population growth rate. ". property whereby the bene8its o8 "i88erent inputs o:e towar" each other o:er ti e. #$S%&'( a. ten"ency 8or countries that start o88 poor to grow ore rapi"ly than countries that start o88 rich. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
13

%hich o8 the 8ollowing is incorrect> a. -ontrolling 8or other :ariables such as the percentage o8 GDP "e:ote" to in:est ent, poor countries ten" to grow 8aster than rich countries. b. )he growth that arises 8ro capital accu ulation is not a 8ree lunch. c. -ountries such as Singapore an" 0apan, that "e:ote" a large share o8 GDP to in:est ent 8ro 16<0-1661 ten"e" to ha:e higher growth rates o:er this perio". ". )he Unite" States an" ,orea "e:ote" si ilar shares o8 real GDP to in:est ent 8ro 16<0-1661, but the Unite" States ha" a higher growth rate. #$S%&'( ". )he Unite" States an" ,orea "e:ote" si ilar shares o8 real GDP to in:est ent 8ro 16<0-1661, but the Unite" States ha" a higher growth rate. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
16

%hich woul" increase the capital stocB o8 &l Sal:a"or an" pro:i"e returns to U.S. in:estors> a. U.S. 8oreign "irect in:est ent in &l Sal:a"or. b. U.S. 8oreign port8olio in:est ent in &l Sal:a"or. c. /oth o8 the abo:e are correct. ". $either o8 the abo:e is correct. #$S%&'( c. /oth o8 the abo:e are correct. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
20

U.S. 8oreign "irect in:est ent a. raises both U.S. GDP an" U.S. G$P. b. raises neither U.S. GDP nor U.S. G$P. c. raises U.S. GDP, but not U.S. G$P. ". raises U.S. G$P, but not U.S. GDP. #$S%&'( ". raises U.S. G$P, but not U.S. GDP. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
21

%hich o8 the 8ollowing is $.) correct> a. +any econo ists woul" a":ise go:ern ents in less-"e:elope" econo ies to i ple ent policies that encourage in:est ent 8ro abroa". b. Cowering population growth rates can increase per-capita real GDP. c. So e econo ists argue that e"ucation is particularly i portant because hu an capital has positi:e e9ternalities. ". In the long run, increases in the sa:ings rate lea" to increases in real GDP growth. #$S%&'( ". In the long run, increases in the sa:ings rate lea" to increases in real GDP growth. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( * NOTE: THE FOLLOWING QUESTION IS REPEATED FROM THE ON LINE QUI!!ES" #OUR STUDENTS MA# HA$E ALREAD# SEEN THIS QUESTION AND ITS ANSWER"

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-hapter 2!5Pro"uction an" Growth 27

22

%hich o8 the 8ollowing state ents is correct> a. In general, a gi:en le:el o8 in:est ent in a poor country will lea" to greater econo ic growth than the sa e le:el o8 in:est ent in a rich country. b. I8 a nation in:ests ore, its econo ic growth rate will be per anently higher. c. # nation ust ha:e abun"ant natural resources i8 it is to e9perience rapi" econo ic growth. ". Increase" econo ic growth through increase" in:est ent "oes not ha:e an opportunity cost. #$S%&'( a. In general, a gi:en le:el o8 in:est ent in a poor country will lea" to greater econo ic growth than the sa e le:el o8 in:est ent in a rich country. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( * NOTE: THE FOLLOWING QUESTION IS REPEATED FROM THE ON LINE QUI!!ES" #OUR STUDENTS MA# HA$E ALREAD# SEEN THIS QUESTION AND ITS ANSWER"
27

Generally speaBing 8ro societyEs :iewpoint, the returns to research an" "e:elop ent un"ertaBen by 8ir s a. is a public goo". b. is a pri:ate goo". c. shoul" ne:er be supporte" by go:ern ent. ". will ne:er occur i8 a syste o8 patents is not put into place. #$S%&'( a. is a public goo". )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
2!

Suppose a Ger an-owne" auto obile co pany opens a new car plant in %ayne, $ebrasBa. a. )his 8oreign "irect in:est ent increases U.S. real GDP ore than it increases U.S. real G$P. b. )his 8oreign "irect in:est ent increases U.S. real G$P ore than it increases U.S. real GDP. c. )his 8oreign port8olio in:est ent increases U.S. real GDP ore than it increases U.S. real G$P. ". )he 8oreign port8olio in:est ent increases U.S. real G$P ore than it increases U.S. real GDP. #$S%&'( a. )his 8oreign "irect in:est ent increases U.S. real GDP ore than it increases U.S. real G$P. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
2;

%hich o8 the 8ollowing can increase real GDP per person> a. a "ecrease in population growth b. 8oreign in:est ent 8ro abroa" c. policies to encourage international tra"e ". #ll o8 the abo:e are correct. #$S%&'( ". #ll o8 the abo:e are correct. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *

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#$S%&'( b. 2% per year, so that it is about eight ti es as high. )*P&( + ,&*1( D S&-)I.$( 1 ./0&-)I1&( 1 '#$D.+( *
2

#$S%&'( b. 1340, an" 153 that in the Unite" States to"ay. )*P&( + ,&*1( D S&-)I.$( 1 ./0&-)I1&( 1 '#$D.+( *
7

#$S%&'( b. 1%-7%. )*P&( + ,&*1( D S&-)I.$( 1 ./0&-)I1&( 1 '#$D.+( *

!

#$S%&'( b. ;.4%, 7% )*P&( + ,&*1( D S&-)I.$( 1 ./0&-)I1&( 1 '#$D.+( *

;

#$S%&'( c. #lthough 100 years ago the Unite" ,ing"o ha" greater per-capita real GDP than the Unite" States an" -ana"a, it now has lower per-capita real GDP than both o8 the . )*P&( + ,&*1( D S&-)I.$( 1 ./0&-)I1&( 1 '#$D.+( *
<

#$S%&'( b. a:erage a ount a worBer pro"uces per hour. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 2 '#$D.+( *
4

#$S%&'( b. Cabor pro"ucti:ity increase" slightly. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 2 '#$D.+( *
3

#$S%&'( c. )he Unite" States coul" ha:e greater pro"ucti:ity because its worBers ha:e both hu an capital an" physical capital per worBer. )*P&( + ,&*1( - S&-)I.$( 2 ./0&-)I1&( 2 '#$D.+( *
6

ore

#$S%&'( a. hu an capital. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 7 '#$D.+( *

10

#$S%&'( a. a "oubling o8 all inputs "oubles real GDP. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 7 '#$D.+( *
11

#$S%&'( c. # 8orest is a non-renewable resource. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 7 '#$D.+( *

12

#$S%&'( ". societyFs un"erstan"ing o8 the best way to pro"uce output. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 7 '#$D.+( *
17

#$S%&'( a. /oth sentences are true. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 7 '#$D.+( *
1!

#$S%&'( ". $one o8 the abo:e is correct. )*P&( + ,&*1( D S&-)I.$( 2 ./0&-)I1&( 7 '#$D.+( *

1;

#$S%&'( ". # an" /, but not -. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
1<

#$S%&'( c. .nly the 8irst sentence is true. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
14

#$S%&'( a. ten"ency 8or countries that start o88 poor to grow o88 rich. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
13

ore rapi"ly than countries that start

#$S%&'( ". )he Unite" States an" ,orea "e:ote" si ilar shares o8 real GDP to in:est ent 8ro 16<0-1661, but the Unite" States ha" a higher growth rate. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
16

#$S%&'( c. /oth o8 the abo:e are correct. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
20

#$S%&'( ". raises U.S. G$P, but not U.S. GDP. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
21

#$S%&'( ". In the long run, increases in the sa:ings rate lea" to increases in real GDP growth. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
22

#$S%&'( a. In general, a gi:en le:el o8 in:est ent in a poor country will lea" to greater econo ic growth than the sa e le:el o8 in:est ent in a rich country. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
27

#$S%&'( a. is a public goo". )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *

2!

#$S%&'( a. )his 8oreign "irect in:est ent increases U.S. real GDP G$P. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *
2;

ore than it increases U.S. real

#$S%&'( ". #ll o8 the abo:e are correct. )*P&( + ,&*1( D S&-)I.$( 7 ./0&-)I1&( ! '#$D.+( *