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Chapter 24 Production and Growth

Test A
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A nations standard of living is measured by its a. real GDP. b. real GDP per person. c. nominal GDP. d. nominal GDP per person. ANSWE ! b. real GDP per person. "#PE! $ %E#1! D &'(E)"*+E! 1 AND&$! #
,

&ver t-e past century in t-e .nited States/ average income as measured by real GDP per person -as gro0n about a. 1 percent per year/ 0-ic- implies a doubling about every ,2 years. b. 3 percent per year/ 0-ic- implies a doubling about every ,4 years. c. , percent per year/ 0-ic- implies a doubling about every 34 years. d. 1 percent per year/ 0-ic- implies a doubling about every 54 years. ANSWE ! c. , percent per year/ 0-ic- implies a doubling about every 34 years. "#PE! $ %E#1! D &'(E)"*+E! 1 AND&$! #
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*n t-e lengt- of one generation/ 0-ic- of t-e follo0ing countries -as gone from being among t-e poorest countries in t-e 0orld to being among t-e ric-est6 a. )-ad b. Et-iopia c. G-ana d. Singapore ANSWE ! d. Singapore "#PE! $ %E#1! D &'(E)"*+E! 1 AND&$! #
1

*n comparison to ot-er countries/ (apan -ad a -ig- gro0t- rate over t-e last 122 years. (apans average annual gro0t- rate of real GDP per person 0as a bit less t-an a. 2.4 percent. b. 1.2 percent. c. ,.2 percent d. 3.2 percent. ANSWE ! d. 3.2 percent. "#PE! $ %E#1! D SE)"*&N! 1 &'(E)"*+E! 1 AND&$! #
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)ompounding refers to t-e a. geometric smoot-ing of productivity data. b. accumulation of a gro0t- rate over a period of time. c. increase in a gro0t- rate over a period of time. d. ad7ustment made to GDP meant to ta8e out t-e effects of inflation. ANSWE ! b. accumulation of a gro0t- rate over a period of time. "#PE! $ %E#1! D SE)"*&N! 1 &'(E)"*+E! 1 AND&$! #

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11 )-apter ,1;Production and Gro0t5

W-en 'en <ran8lin died -e left =4/222 to be invested for a period of ,22 years to benefit medical students and scientific researc-. According to t-e >rule of ?2/@ -o0 often 0ould t-is money -ave doubled if it gre0 ? percent per year every year6 a. about every 12 years b. about every ? years c. about every 4 years d. about every 3.4 years ANSWE ! a. about every 12 years "#PE! $ %E#1! E SE)"*&N! 1 &'(E)"*+E! 1 AND&$! #
?

According to t-e rule of ?2/ if some variable gro0s at a rate of g percent per year/ t-en t-at variable doubles in approAimately a. ?2;g years. b. ?2g years. c. ?2;,g years. d. ,g;?2 years. ANSWE ! a. ?2;g years. "#PE! $ %E#1! E SE)"*&N! 1 &'(E)"*+E! 1 AND&$! #
B

'ot- Elmo and Anna 0or8 eig-t -ours a day. Elmo can produce four bas8ets of goods per -our 0-ile Anna can produce t-ree bas8ets of t-e same goods per -our. *t follo0s t-at Elmos a. productivity is greater t-an Annas. b. output is greater t-an Annas. c. standard of living is -ig-er t-an Annas. d. All of t-e above are correct. ANSWE ! d. All of t-e above are correct. "#PE! $ %E#1! D SE)"*&N! , &'(E)"*+E! , AND&$! #
C

W-ic- of t-e follo0ing 0ould be considered p-ysical capital6 a. paper used to ma8e cardboard for boAes of c-ocolate b. t-e s8ills and 8no0ledge of a film director c. boats o0ned by a s-rimp company d. All of t-e above are correct. ANSWE ! c. boats o0ned by a s-rimp company "#PE! $ %E#1! D SE)"*&N! , &'(E)"*+E! 3 AND&$! #
12

W-ic- of t-e follo0ing is -uman capital6 a. a companys cafeteria b. employees 8no0ledge of t-e production process c. t-e eAercise eDuipment in a companys gym d. All of t-e above are correct. ANSWE ! b. employees 8no0ledge of t-e production process "#PE! $ %E#1! D SE)"*&N! , &'(E)"*+E! 3 AND&$! #
11

*n a mar8et economy/ scarcity of resources is reflected in a. supply only. b. demand only. c. prices. d. t-e Duantity traded. ANSWE ! c. prices. "#PE! $ %E#1! D SE)"*&N! , &'(E)"*+E! 3 AND&$! #

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)-apter ,1;Production and Gro0t- 14


1,

#our company discovers a better 0ay to produce D+Ds/ but -o0 you do t-is is not apparent from t-e D+Ds t-emselves. #our 8no0ledge of -o0 to more efficiently produce D+Ds is a. common tec-nological 8no0ledge. b. common/ but not tec-nological 8no0ledge. c. proprietary tec-nological 8no0ledge. d. proprietary/ but not tec-nological 8no0ledge. ANSWE ! c. proprietary tec-nological 8no0ledge. "#PE! $ %E#1! D SE)"*&N! , &'(E)"*+E! 3 AND&$! #
13

*f t-ere are constant returns to scale/ t-e production function can be 0ritten as a. A# E ,AA<FG/ %/ :/ NH. b. #;G E A <FAG/ A%/ A:/ ANH. c. G E A<F#/ %/ :/ NH. d. #;G E A <F 1/ %;G/ :;G/ N;GH. ANSWE ! d. #;G E A <F 1/ %;G/ :;G/ N;GH. "#PE! $ %E#1! D SE)"*&N! , &'(E)"*+E! 3 AND&$! #
11

W-ic- of t-e follo0ing 0ould increase productivity6 a. an increase in t-e amount of eDuipment perI0or8er b. an increase in t-e 8no0ledge and s8ills of 0or8ers c. t-e discovery of ne0 ra0 materials d. All of t-e above are correct. ANSWE ! d. All of t-e above are correct. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
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Across countries/ investment and gro0t- rates are a. unrelated. b. negatively related. c. negatively related for ric- countries/ but positively related for poor countries. d. positively related. ANSWE ! d. positively related. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
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*f t-ere are diminis-ing returns to capital/ a. capital produces fe0er goods as it ages. b. increases in t-e capital stoc8 eventually decrease output. c. t-e smaller t-e capital stoc8/ t-e less an increase in t-e capital stoc8 increases output. d. t-e larger t-e capital stoc8/ t-e less an increase in t-e capital stoc8 increases output. ANSWE ! d. t-e larger t-e capital stoc8/ t-e less an increase in t-e capital stoc8 increases output. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
1?

"-e logic be-ind t-e catc-Iup effect is t-at a. 0or8ers in countries 0it- lo0 income 0ill 0or8 -arder t-an 0or8ers in countries 0it- -ig- incomes. b. ne0 capital adds more to production in a country t-at doesnt -ave muc- capital t-an in a country t-at already -as muc- capital. c. t-e capital stoc8 in ric- countries deteriorates more rapidly t-an t-e capital stoc8 in poor countries. d. None of t-e above is correct. ANSWE ! b. ne0 capital adds more to production in a country t-at doesnt -ave muc- capital t-an in a country t-at already -as muc- capital. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #

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15 )-apter ,1;Production and Gro0t1B

*n t-e 1B22s/ Europeans purc-ased stoc8 in American companies t-at used t-e funds to build railroads and factories. "-e Europeans made a. foreign portfolio investments. b. indirect domestic investments. c. bilateral domestic investments. d. foreign indirect investments. ANSWE ! a. foreign portfolio investments. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
1C

W-ic- of t-e follo0ing is generally an opportunity cost of investment in -uman capital6 a. forgone 0ages at present b. increased earning potential c. future 7ob security d. All of t-e above are correct. ANSWE ! a. forgone 0ages at present "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
,2

Generally/ t-e main cause of famine is a. a s-ortage of food. b. eAcessive population. c. an inadeDuate distribution of food. d. None of t-e above is correct. ANSWE ! c. an inadeDuate distribution of food. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
,1

&ut0ardIoriented policies a. -ave led to -ig- gro0t- rates for t-e countries t-at pursued t-em. b. prevent countries from ta8ing advantage of gains from trade. c. seem good in t-eory/ but -ave not increased economic gro0t- in practice. d. None of t-e above is correct. ANSWE ! a. -ave led to -ig- gro0t- rates for t-e countries t-at pursued t-em. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
,,

A large and sudden increase in t-e number of 0or8ers is li8ely to a. raise real GDP per person/ but decrease real GDP. b. decrease bot- real GDP and real GDP per person. c. raise bot- real GDP and real GDP per person. d. raise real GDP/ but decrease real GDP per person. ANSWE ! d. raise real GDP/ but decrease real GDP per person. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
,3

"-e primary reason t-at ..S. living standards are -ig-er today t-an t-ey 0ere a century ago is t-at a. -uman capital -as increased. b. p-ysical capital per 0or8er -as increased. c. tec-nological 8no0ledge -as increased. d. more productive natural resources -ave been discovered. ANSWE ! c. tec-nological 8no0ledge -as increased. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #

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)-apter ,1;Production and Gro0t- 1?


,1

<rom 1C?3 to 1CCB/ ..S. productivity gro0t- 0as slo0er t-an from 1C4C to 1C?3. W-ic- of t-e follo0ing is correct6 a. "-is continues a do0n0ard trend as output gro0t- 0as -ig-er in periods before 1C4C. b. *t appears t-at t-is may be attributed to a slo0do0n in tec-nological progress. c. "-is slo0do0n is uniDue to t-e .nited States. d. All of t-e above are correct. ANSWE ! b. *t appears t-at t-is may be attributed to a slo0do0n in tec-nological progress. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
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"ypically/ countries in Africa a. -ave -ig- taA rates. b. -ave la0s and geograp-y t-at ma8e international trade easy. c. -ad lo0 but positive gro0t- of real GDP per person bet0een 1C?B and 1CC1. d. All of t-e above are correct. ANSWE ! a. -ave -ig- taA rates. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #

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ANSWE ! b. real GDP per person. "#PE! $ %E#1! D &'(E)"*+E! 1 AND&$! #


,

ANSWE ! c. , percent per year/ 0-ic- implies a doubling about every 34 years. "#PE! $ %E#1! D &'(E)"*+E! 1 AND&$! #
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ANSWE ! d. Singapore "#PE! $ %E#1! D &'(E)"*+E! 1 AND&$! #


1

ANSWE ! d. 3.2 percent. "#PE! $ %E#1! D SE)"*&N! 1 &'(E)"*+E! 1 AND&$! #


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ANSWE ! b. accumulation of a gro0t- rate over a period of time. "#PE! $ %E#1! D SE)"*&N! 1 &'(E)"*+E! 1 AND&$! #
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ANSWE ! a. about every 12 years "#PE! $ %E#1! E SE)"*&N! 1 &'(E)"*+E! 1 AND&$! #


?

ANSWE ! a. ?2;g years. "#PE! $ %E#1! E SE)"*&N! 1 &'(E)"*+E! 1 AND&$! #


B

ANSWE ! d. All of t-e above are correct. "#PE! $ %E#1! D SE)"*&N! , &'(E)"*+E! , AND&$! #
C

ANSWE ! c. boats o0ned by a s-rimp company "#PE! $ %E#1! D SE)"*&N! , &'(E)"*+E! 3 AND&$! #
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ANSWE ! b. employees 8no0ledge of t-e production process "#PE! $ %E#1! D SE)"*&N! , &'(E)"*+E! 3 AND&$! #
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ANSWE ! c. prices. "#PE! $ %E#1! D SE)"*&N! , &'(E)"*+E! 3 AND&$! #


1,

ANSWE ! c. proprietary tec-nological 8no0ledge. "#PE! $ %E#1! D SE)"*&N! , &'(E)"*+E! 3 AND&$! #


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ANSWE ! d. #;G E A <F 1/ %;G/ :;G/ N;GH. "#PE! $ %E#1! D SE)"*&N! , &'(E)"*+E! 3 AND&$! #
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ANSWE ! d. All of t-e above are correct. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
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ANSWE ! d. positively related.

"#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #


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ANSWE ! d. t-e larger t-e capital stoc8/ t-e less an increase in t-e capital stoc8 increases output. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
1?

ANSWE ! b. ne0 capital adds more to production in a country t-at doesnt -ave muc- capital t-an in a country t-at already -as muc- capital. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
1B

ANSWE ! a. foreign portfolio investments. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #


1C

ANSWE ! a. forgone 0ages at present "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #


,2

ANSWE ! c. an inadeDuate distribution of food. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #


,1

ANSWE ! a. -ave led to -ig- gro0t- rates for t-e countries t-at pursued t-em. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
,,

ANSWE ! d. raise real GDP/ but decrease real GDP per person. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
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ANSWE ! c. tec-nological 8no0ledge -as increased. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
,1

ANSWE ! b. *t appears t-at t-is may be attributed to a slo0do0n in tec-nological progress. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #
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ANSWE ! a. -ave -ig- taA rates. "#PE! $ %E#1! D SE)"*&N! 3 &'(E)"*+E! 1 AND&$! #