Macroeconomics Australia in The Global Environment Australian 1st Edition Parkin Test Bank

Macroeconomics Australia in the
Global Environment Australian 1st

Edition Parkin Test Bank
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Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Economic growth is defined as
A) a sustained expansion of production possibilities.
B) a decrease in the rate of inflation.
C) an increase in employment.
D) an increase in the wage rate.
E) an increase in the nation's population.
Answer: A
Diff: 0 Type: MC
Skill: Level 1
A-Head: 8.1 The Basics of Economic Growth
AACSB: Reflective thinking
2) Economic growth is a sustained expansion of production possibilities, as measured by the increase in ________ over
time.
A) inflation
B) real GDP
C) the price level
D) employment
E) the population
Answer: B
Diff: 0 Type: MC
Skill: Level 1
3) Which of the following variables is used to determine a country's economic growth?

i. Real GDP
ii. Wages
iii. Inflation
A) i and iii
B) i only
C) i, ii and iii
D) ii and iii
E) i and ii only
Answer: B
Diff: 0 Type: MC
Skill: Level 2
4) The growth rate of real GDP equals

A) [(real GDP in previous year - real GDP in current year) ÷ real GDP in previous year] × 100.
B) [(real GDP in current year - real GDP in previous year) ÷ real GDP in current year] × 100.
C) [(employment in the current year - employment in previous year)/employment in previous year] × 100.
D) [(real GDP in current year - real GDP in previous year) ÷ real GDP in previous year] × 100.
E) (real GDP in current year - real GDP in previous year) × 100.
Answer: D
Copyright © 2016 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781488611117/ Parkin, Macroeconomics 1e
Diff: 0 Type: MC
Skill: Level 1
AACSB: Analytical thinking
5) If real GDP was $13.1 trillion in 2014 and $13.3 trillion in 2015, what is the growth rate?
A) 2.1 per cent
B) 15.0 per cent
C) -1.5 per cent
D) 1.5 per cent
E) $0.2 trillion
Answer: D
Diff: 0 Type: MC
Skill: Level 2
6) Suppose France's real GDP grew from $750 billion in 2014 to $821 billion in 2015. What was the growth rate of France's
real GDP?
A) 8.6 per cent
B) $71 billion
C) 9.1 per cent
D) 10 per cent
E) 9.5 per cent
Answer: E
Diff: 0 Type: MC
Skill: Level 2
7) If real GDP in year 1 is $72 million and real GDP in year 2 is $87 million, then the growth rate of real GDP is
A) 15 per cent.
B) 20.8 per cent.
C) 17 per cent.
D) 83 per cent.
E) $15 million.
Answer: B
Diff: 0 Type: MC
Skill: Level 2
8) Using the data in the table above, the growth rate of real GDP for 2010 is equal to
A) 4.76 per cent.
B) 9.09 per cent.
C) 5.00 per cent.
D) 7.00 per cent.
E) 10.0 per cent.
Answer: D
Diff: 0 Type: MC
Skill: Level 2
9) Using the data in the table above, real GDP per person in 2009 is
A) $70 trillion.
B) $75,000.
C) $71,429.
D) 7 per cent.
E) $70,000.
Answer: E
Diff: 0 Type: MC
Skill: Level 2
10) Using the data in the table above, the growth rate of real GDP has
A) slowed from year to year.
B) increased from year to year.
C) increased more rapidly from year to year.
D) remained constant from year to year.
E) probably changed, but more information is needed about the price level to determine by how much it has changed.
Answer: B
Diff: 0 Type: MC
Skill: Level 3
11) Suppose China wants to measure how much the standard of living has changed over the last decade. Which piece of
data should China use?
A) Wages
B) Real GDP
C) Inflation
D) Real GDP per person
E) Population
Answer: D
Diff: 0 Type: MC
Skill: Level 1
12) To measure the change in the standard of living, it is best to use the growth rate
A) of the price level.
B) of real GDP per person.
C) of the population.
D) of real GDP.
E) from the Rule of 70.
Answer: B
Diff: 0 Type: MC
Skill: Level 1
13) If real GDP grows at a faster rate than population, then the standard of living, as measured by real GDP per person,
A) worsens.
B) cannot be measured.
C) improves.
D) remains the same.
E) either improves, worsens or stays the same, depending on the size of the population and the actual level of real GDP.
Answer: C
Diff: 0 Type: MC
Skill: Level 2
14) The population in the current year is 31.5 million and the real GDP is $814 million. The previous year's statistics were a
population of 31 million and a real GDP of $800 million. The change in the standard of living, measured by growth in real
GDP per person, is
A) 0.13 per cent.
B) 0 per cent.
C) 7.75 per cent.
D) 1.6 per cent.
E) 6 per cent.
Answer: A
Diff: 0 Type: MC
Skill: Level 3
15) Assume the population growth rate is 2 per cent and the real GDP growth rate is 5 per cent. The change in standard of
living, as measured by the growth rate in real GDP per person, is
A) 5 per cent.
B) 7 per cent.
C) -3 per cent.
D) 3 per cent.
E) 2.5 per cent.
Answer: D
Diff: 0 Type: MC
Skill: Level 3
16) Real GDP in the country of Oz is growing at 5 per cent and its population is growing at 2 per cent. In the country of
Lilliput, real GDP is growing at 4 per cent and its population is growing at 0.5 per cent. Thus,
A) real GDP per person in Lilliput is growing at a faster rate than in Oz.
B) real GDP per person in Lilliput is growing at a rate that is not comparable to that in Oz.
C) real GDP per person in Lilliput is growing at the same rate as in Oz.
D) real GDP per person in Oz is growing at a faster rate than in Lilliput.
E) We need more information to determine if real GDP per person in Lilliput is growing faster or slower than real GDP per
person in Oz.
Answer: A
Diff: 0 Type: MC
Skill: Level 3
17) If real GDP grows at a rate of 6 per cent and population grows at a rate of 2 per cent, then real GDP per person grows at
a rate of
A) 8 per cent.
B) 0.5 per cent.
C) 4 per cent.
D) 2 per cent.
E) -3 per cent.
Answer: C
Diff: 0 Type: MC
Skill: Level 3
18) If a country experiences a real GDP growth rate of 1 per cent and population growth of 2 per cent, then the growth rate
of real GDP per person is
A) 2 per cent.
B) 0 per cent.
C) 3 per cent.
D) 1 per cent.
E) -1 per cent.
Answer: E
Diff: 0 Type: MC
Skill: Level 3
19) The Rule of ________ can be used to calculate the number of years that it takes for the level of a variable to ________.
A) 20; double
B) 20; triple
C) 70; double
D) 70; triple
E) thumb; double
Answer: C
Diff: 0 Type: MC
Skill: Level 1
20) The Rule of 70 states that the level of a variable will double in
A) the number of years equal to the variable's annual growth rate minus 70.
B) the number of years equal to the variable's annual rate of growth divided by 70.
C) 70 years.
D) the number of years equal to 70 multiplied by the variable's annual growth rate expressed as a decimal.
E) the number of years equal to 70 divided by the variable's annual growth rate.
Answer: E
Diff: 0 Type: MC
Skill: Level 2
21) The Rule of 70 can be used to calculate the

A) number of years it would take for the level of any variable to double.
B) population growth rate per year.
C) economic growth rate per year.
D) 70 per cent level of the economic growth rate.
E) economic growth rate per month.
Answer: A
Diff: 0 Type: MC
Skill: Level 1
22) Approximately how long will it take Ethiopia to double its real GDP per person of $100 if its growth rate of real GDP
per person is 0.9 per cent?
A) 77.7 years
B) 109 years
C) 70 years
D) 63 years
E) 100 years
Answer: A
Diff: 0 Type: MC
Skill: Level 3
23) If Country A's real GDP grows at a rate of 14 per cent per year, about how many years will it take for Country A's real
GDP to double?
A) 10
B) 5
C) 30
D) 7
E) 14
Answer: B
Diff: 0 Type: MC
Skill: Level 3
24) According to the Rule of 70, if a country grows at 2.0 per cent per year instead of 1.5 per cent per year, how years less
will it take to double its level of real GDP?
A) It will take 35 less years.
B) It will take 58.3 less years.
C) It will take 17.9 less years.
D) It will take 20 less years.
E) It will take 11.6 less years.
Answer: E
Diff: 0 Type: MC
Skill: Level 3
25) The annual growth rate of an economy is 10 per cent. The economy's GDP will double in about ________ years.
A) 14
B) 10
C) 7
D) 20
E) 12
Answer: C
Diff: 0 Type: MC
Skill: Level 3
26) A nation's annual growth rate of real GDP per person is 2 per cent. Its standard of living will
A) double in 35 years.
B) fall because of its population growth.
C) double in 10 years.
D) not change because its population is growing.
E) double in 50 years.
Answer: A
Diff: 0 Type: MC
Skill: Level 3
27) This year, real GDP per person in Country A is eight times that of real GDP per person in Country B. If Country B's real
GDP per person grows at a rate of 5 per cent, about how many years will it take for Country B to reach the level of real GDP
per person in Country A in this year?
A) 56 years
B) 14 years
C) 42 years
D) 28 years
E) It will never reach Country A's level of GDP per person.
Answer: C
Diff: 0 Type: MC
Skill: Level 3
28) If it took 20 years for real GDP to double, what was the growth rate of real GDP?
A) 4.5 per cent
B) 5 per cent
C) 4 per cent
D) 3.5 per cent
E) 3.0 per cent
Answer: D
Diff: 0 Type: MC
Skill: Level 3
29) In this year, Country A has a real GDP per person that is 4 times greater than that of Country B. Country B's growth rate
of real GDP per person is 3.5 per cent per year. How many years will it take for Country B's real GDP per person to reach
the same level that Country A had in this year?
A) 60 years
B) 40 years
C) 10 years
D) 20 years
E) 56 years
Answer: B
Diff: 0 Type: MC
Skill: Level 2
30) For the world, what period of time experienced the fastest growth rate of real GDP per person?
A) Around 500 B.C.
B) Between 1500 A.D. and 1850 A.D.
C) After about 1850 A.D.
D) Between 1000 A.D. and 1500 A.D.
E) Around 400 A.D.
Answer: C
Diff: 0 Type: MC
Skill: Level 1
31) Real GDP per person averaged $150 a year (in 2009 dollars) from 1,000,000 BC until 1620. During this time there was a
period when it rose to ________ around ________ because ________.
A) $210; 1492; Columbus sailed to the Americas
B) $140; 400 BC; the Roman Empire collapsed
C) a 1-million year high; the 1340s; the Black Death gripped Europe
D) $190; 500 BC; of the gains from human capital while Aristotle and Plato were teaching in Athens
E) $210; 1620; the Pilgrim Fathers began to arrive in the Americas
Answer: D
Diff: 0 Type: MC
Skill: Level 1
32) Real GDP per person averaged $150 a year (in 2009 dollars) from 1,000,000 BC until 1620. Then in ________ real GDP
began to increase without limit and by 1850 had risen to twice its 1650 level because ________.
A) 1650; the Pilgrims arrived in the Americas
B) 1776; the United States was founded
C) 1650; of the Industrial Revolution
D) 1750; Columbus arrived in the Americas
E) 1750; of the Industrial Revolution
Answer: E
Diff: 0 Type: MC
Skill: Level 1
33) Since the beginning of the 20th century the decade with the slowest real GDP per person growth rate other than the
1930s was ________ because of ________.
A) 1990-2000; fear of Y2K
B) 2000-2010; the 2008/2009 deep recession
C) 2010-2020; Keynesian economic policies being used more frequently than in the 1930s
D) 1930-1940; the Great Depression
E) 2000-2010; the war on terror
Answer: B
Diff: 0 Type: MC
Skill: Level 1
34) Economic growth is a sustained expansion of production possibilities measured as the increase in ________ over a
given period.
A) real GDP per person
B) real GDP
C) capital per person
D) population
E) the standard of living
Answer: B
Diff: 0 Type: MC
Skill: Level 1
35)
The table above gives information about the economy of Japan. The economic growth rate in 1997 was ________ per cent.
A) 4
B) 8.0
C) 0.008
D) 0.08
E) 0.8
Answer: E
Diff: 0 Type: MC
Skill: Level 2
36) Suppose that, in the future, real GDP per person grows 2 per cent a year in Australia and 4 per cent a year in China. It
will take real GDP per person approximately ________ years to double in Australia and approximately ________ years to
double in China.
A) 35; 17.5
B) 70; 35
C) 20; 10
D) 50; 25
E) 35; 8.75
Answer: A
Diff: 0 Type: MC
Skill: Level 2
37) The level of real GDP the economy produces at full employment is
A) real GDP.
B) called the Lucas level.
C) potential GDP.
D) never reached in reality.
E) nominal GDP.
Answer: C
Diff: 0 Type: MC
Skill: Level 1
A-Head: 8.2 The Mechanics of Economic Growth
38) Suppose that Australia has fully employed all of its resources. This situation means that Australia
A) is operating above potential GDP.
B) is growing at a faster rate than the United States.
C) is operating at its potential GDP.
D) is experiencing zero unemployment.
E) None of the above.
Answer: C
Diff: 0 Type: MC
Skill: Level 2
39) Potential GDP is the level of

A) nominal GDP that the economy would produce if it was at full employment.
B) real GDP that the economy would produce if there was no unemployment.
C) nominal GDP that the economy would produce if there was no inflation.
D) real GDP that the economy would produce if it was at full employment.
E) real GDP that the economy would produce if there was no inflation.
Answer: D
Diff: 0 Type: MC
Skill: Level 1
40) The factors of production that produce real GDP are

A) labour, human capital, physical capital, land and entrepreneurship.
B) labour, physical capital and entrepreneurship.
C) labour, human productivity, physical capital and entrepreneurship.
D) money, labour and capital productivity.
E) labour, human capital and entrepreneurship.
Answer: A
Diff: 0 Type: MC
Skill: Level 1
41) The production function is a relationship between the amount of labour employed and
A) all other resources at different levels of employment.
B) the wage rate paid to the workers.
C) the maximum quantity of real GDP that can be produced.
D) the amount of labour workers supply.
E) the maximum quantity of nominal GDP that can be produced.
Answer: C
Diff: 0 Type: MC
Skill: Level 1
42) The production function describes the relationship between

A) the real wage and the quantity of labour supplied.
B) potential GDP and the real wage rate.
C) real GDP and the quantity of labour employed.
D) real and potential GDP.
E) real and nominal GDP.
Answer: C
Diff: 0 Type: MC
Skill: Level 1
43) The production function shows that potential GDP increases when the
A) price level rises.
B) the wage rate falls.
C) inflation rate falls.
D) price level falls.
E) quantity of labour employed increases.
Answer: E
Diff: 0 Type: MC
Skill: Level 2
44) The production function displays

A) increasing returns.
B) diminishing returns.
C) normal returns.
D) real returns.
E) average returns.
Answer: B
Diff: 0 Type: MC
Skill: Level 1
45) Diminishing returns means that

A) hiring more labour must lower the real wage rate.
B) each additional unit of labour produces successively less real GDP.
C) each extra unit of real GDP produced requires less labour.
D) each additional unit of labour produces successively more real GDP.
E) hiring more labour results in less real GDP.
Answer: B
Diff: 0 Type: MC
Skill: Level 1
46) The idea of "diminishing returns" means that real GDP ________ as the quantity of labour increases.
A) does not change
B) decreases at a faster rate
C) increases at a slower rate
D) increases at a faster rate
E) decreases at a slower rate
Answer: C
Diff: 0 Type: MC
Skill: Level 1
47) According to the production function, as the quantity of labour employed increases, real GDP increases
A) at a constant rate.
B) at a decreasing rate.
C) at an increasing rate.
D) until it reaches potential GDP, and then it no longer changes.
E) and then eventually decreases.
Answer: B
Diff: 0 Type: MC
Skill: Level 2
48) As additional units of labour hours are employed, holding all other factors constant, along the production function,
A) nominal GDP decreases at an increasing rate.
B) real GDP increase at a constant rate.
C) real GDP increases at a decreasing rate.
D) real GDP increases at an increasing rate.
E) real GDP initially decreases and then starts to increase.
Answer: C
Diff: 0 Type: MC
Skill: Level 2
49) Diminishing returns along a production function means that each additional hour of labour employed
A) does not produce any additional real GDP.
B) produces a successively larger additional amount of real GDP.
C) produces a constant additional amount of real GDP.
D) forces the real wage rate to rise.
E) produces a successively smaller additional amount of real GDP.
Answer: E
Diff: 0 Type: MC
Skill: Level 1
50) The production function shows that, as employment increases, real GDP
A) decreases at a decreasing rate.
B) increases until it reaches potential GDP and then it starts to decrease.
C) increases at a constant rate.
D) increases at a decreasing rate.
E) increases at an increasing rate.
Answer: D
Diff: 0 Type: MC
Skill: Level 2
51) As more labour is hired, moving along the production function, diminishing returns occur because
A) there are fixed quantities of other resources.
B) the real wage rate must increase in order to hire additional workers.
C) real GDP increases more rapidly the more workers that are hired.
D) the wage rate paid is too low and so workers decrease their work effort.
E) workers are overworked and so their productivity decreases.
Answer: A
Diff: 0 Type: MC
Skill: Level 2
52) The above figure shows a nation's production function. Point A is
A) unattainable given the state of the economy.
B) attainable if the nation uses resources efficiently.
C) the maximum amount of real GDP the nation can produce.
D) the labour market equilibrium quantity of employment and real GDP.
E) attainable if the economy is inefficient.
Answer: A
Diff: 0 Type: MC
Skill: Level 3
53) The above figure shows a nation's production function. Point B is

A) unattainable.
B) attainable if the nation uses resources inefficiently.
C) the maximum amount of real GDP the nation can ever produce.
D) attainable if the nation uses resources efficiently.
E) Both answers C and D are correct.
Answer: D
Diff: 0 Type: MC
Skill: Level 3
54) The above figure shows a nation's production function. Point C is

A) the labour market equilibrium point.
B) the maximum amount of real GDP the nation can produce.
C) attainable if the nation uses resources efficiently.
D) attainable if the nation uses resources inefficiently.
E) unattainable given the nation's resource level.
Answer: D
Diff: 0 Type: MC
Skill: Level 3
55) The above figure shows a nation's production function. Point B is ________ and ________ because ________.
A) unattainable; inefficient; the nation is using resources inefficiently
B) unattainable; efficient; the nation would be using resources efficiently if it could attain this level of production
C) unattainable; inefficient; the nation is using resources efficiently but it could be more efficient
D) attainable; efficient; the nation is using resources efficiently
E) attainable; inefficient; the nation is using resources inefficiently
Answer: D
Diff: 0 Type: MC
Skill: Level 3
56) The above figure shows a nation's production function. Point C is ________ and ________ because ________.
A) unattainable; efficient; the nation would be using resources efficiently if it could attain this level of production
B) attainable; efficient; the nation is using resources efficiently
C) unattainable; inefficient; the nation is using resources inefficiently
D) attainable; inefficient; the nation is using resources inefficiently
E) unattainable; inefficient; the nation is using resources efficiently but it could be more efficient
Answer: D
Diff: 0 Type: MC
Skill: Level 3
57)
The figure above that most accurately shows a production function is
A) Figure A.
B) Figure B.
C) Figure C.
D) Figure D.
E) Both Figure A and Figure B; Figure A for an economy with an excess of labour and Figure B for an economy with a
shortage of labour.
Answer: B
Diff: 0 Type: MC
Skill: Level 3
58)
Based on the production function in the above figure, which of the following is an attainable combination of labour and
real GDP?
i. 300 billion hours of labour and real GDP of $20 trillion
ii. 300 billion hours of labour and real GDP of $8 trillion
iii. 100 billion hours of labour and real GDP of $12 trillion
A) i only
B) ii only
C) iii only
D) ii and iii
E) i and ii
Answer: B
Diff: 0 Type: MC
Skill: Level 3
59) Suppose that the Australian economy initially uses 50 billion hours of labour to produce $5 trillion of real GDP. If 50
billion more hours are employed and Australia's real GDP increases by $4 trillion,
A) Australia has no entrepreneurship.
B) Australia's production function exhibits constant returns to labour.
C) Australia's production function exhibits increasing returns.
D) Australia's production possibility frontier has a positive slope.
E) Australia's production function exhibits diminishing returns.
Answer: E
Diff: 0 Type: MC
Skill: Level 3
60) The real wage rate is the ________ divided by the ________.
A) nominal wage rate; price level
B) quantity of labour supplied; quantity of labour demanded
C) nominal wage rate; inflation rate
D) equilibrium quantity of employment; potential GDP
E) quantity of labour demanded; quantity of labour supplied
Answer: A
Diff: 0 Type: MC
Skill: Level 1
61) The benefit to the firm of hiring another worker is

A) measured as the height of the production function.
B) the extra output produced by the worker.
C) the real wage.
D) the nominal wage.
E) the price level.
Answer: B
Diff: 0 Type: MC
Skill: Level 1
62) The total labour hours that all the firms in the economy plan to hire during a given time period at one particular real
wage rate is the
A) quantity of labour demanded.
B) demand for labour.
C) quantity of labour supplied.
D) quantity of jobs supplied.
E) supply of labour.
Answer: A
Diff: 0 Type: MC
Skill: Level 1
63) If the real wage rate decreases from $25.00 per hour to $22.00 per hour, the
A) supply of labour increases.
B) demand for labour increases.
C) quantity demanded of labour increases.
D) quantity supplied of labour increases.
E) equilibrium quantity of employment must decrease.
Answer: C
Diff: 0 Type: MC
Skill: Level 2
64) For a household, the opportunity cost of not working is the

A) nominal wage rate.
B) demand for labour.
C) real wage rate.
D) cost of living.
E) price level.
Answer: C
Diff: 0 Type: MC
Skill: Level 1
65) As demonstrated by the labour supply schedule, the quantity of labour supplied depends on
A) the nominal wage.
B) the amount of labour that firms want to hire.
C) the value of the dollar.
D) workers' productivity.
E) the real wage.
Answer: E
Diff: 0 Type: MC
Skill: Level 1
66) The supply of labour is defined as the relationship between the real wage rate and the
A) amount of jobs supplied by households.
B) amount of jobs supplied by firms.
C) quantity of labour supplied by firms.
D) equilibrium quantity of employment.
E) quantity of labour supplied by households.
Answer: E
Diff: 0 Type: MC
Skill: Level 1
67) Households increase the quantity of labour supplied when

A) the real wage rate rises because the opportunity cost of not working rises.
B) the real wage rate rises because the opportunity cost of not working falls.
C) income tax rises because an increase in income tax increases the demand for labour.
D) the nominal wage rate falls because the opportunity cost of not working rises.
E) the nominal wage rate rises because the real wage rate must also rise.
Answer: A
Diff: 0 Type: MC
Skill: Level 2
68) When all other influences on work plans remain the same, the
A) lower the real wage rate, the smaller the quantity of labour supplied.
B) lower the real wage rate, the larger the labour force participation rate.
C) lower the real wage rate, the greater the quantity of labour supplied.
D) higher the real wage rate, the greater the quantity of labour demanded.
E) lower the real wage rate, the smaller the quantity of labour demanded.
Answer: A
Diff: 0 Type: MC
Skill: Level 1
69) The labour market is in equilibrium whenever

A) the nominal wage rate is increasing.
B) the real wage rate is increasing.
C) the nominal wage rate is not changing.
D) the nominal wage rate is decreasing.
E) the quantity of labour demanded equals the quantity of labour supplied.
Answer: E
Diff: 0 Type: MC
Skill: Level 1
70) A surplus of labour is eliminated by ________ in the real wage rate and a shortage of labour is eliminated by ________
in the real wage rate.
A) a decrease; an increase
B) a decrease; a decrease
C) an increase; a decrease
D) an increase; an increase
E) None of the above answers is correct because shortages and surpluses are eliminated by changes in the demand for
labour and the supply of labour, not the wage rate.
Answer: A
Diff: 0 Type: MC
Skill: Level 2
71) When the labour market is in equilibrium so that the quantity of labour supplied equals the quantity demanded,
A) the economy is at full employment.
B) there is no unemployment.
C) real GDP might be more than, less than or equal to potential GDP.
D) nominal GDP equals real GDP.
E) there is no inflation.
Answer: A
Diff: 0 Type: MC
Skill: Level 1
72) When the labour market is in equilibrium,

A) the real wage rate falls to equal the nominal wage rate because real GDP is greater than potential GDP.
B) there is full employment but real GDP might be greater than, less than or equal to potential GDP.
C) there is full employment, which means that real GDP equals potential GDP.
D) the real wage rate rises to allow real GDP to equal potential GDP.
E) there is excess labour supplied, which keeps real GDP less than potential GDP.
Answer: C
Diff: 0 Type: MC
Skill: Level 2
73) The full-employment quantity of labour is

A) the number of people in the labour force multiplied by the average hours per worker.
B) the participation rate multiplied by the average hours per worker.
C) the working-age population multiplied by the average hours per worker.
D) the working-age population divided by the participation rate.
E) the number of people in the labour force divided by the participation rate.
Answer: A
Diff: 0 Type: MC
Skill: Level 2
74) Growth in the supply of labour comes from

A) growth in the average hours per worker.
B) growth in the working-age population, which in the long run grows at the same rate as the total population.
C) growth in the participation rate multiplied by the average hours per worker.
D) immigration less the increase in the participation rate.
E) All of the above.
Answer: B
Diff: 0 Type: MC
Skill: Level 2
75) An increase in the supply of labour as a result of population growth causes

A) the real wage rate to increase.
B) the nominal wage to increase.
C) the labour supply curve to shift to the right.
D) the labour supply curve to shift to the left.
E) None of the above.
Answer: C
Diff: 0 Type: MC
Skill: Level 2
76) The effect of an increase in population growth, all else remaining the same, is
i. an increase in the full-employment quantity of labour.
ii. an increase in potential GDP.
iii. a decrease in the equilibrium real wage.
A) i only
B) i and ii
C) i and iii
D) ii and iii
E) i, ii and iii
Answer: E
Diff: 0 Type: MC
Skill: Level 2
77) Labour productivity is defined as

A) hours of work per person.
B) total output multiplied by the total hours of labour.
C) real GDP per person.
D) total real GDP.
E) real GDP per hour of labour.
Answer: E
Diff: 0 Type: MC
Skill: Level 1
78) Labour productivity equals

A) the total production of labour.
B) the quantity of labour hours divided by real GDP.
C) real GDP divided by the amount of human capital.
D) real GDP.
E) real GDP per hour of labour.
Answer: E
Diff: 0 Type: MC
Skill: Level 1
79) Labour productivity is equal to the quantity of

A) real GDP consumed by the total population in one hour.
B) real GDP produced by one hour of labour.
C) workers employed during one hour.
D) workers who are gainfully employed.
E) real GDP.
Answer: B
Diff: 0 Type: MC
Skill: Level 2
80) Real GDP is $700 billion, average hours worked per week is 42 and aggregate hours are 150 billion hours. What is the
economy's labour productivity?
A) $1.80 per hour
B) $16.67 per hour
C) $3.75 per hour
D) $4.67 per hour
E) $4.50 per hour
Answer: D
Diff: 0 Type: MC
Skill: Level 3
81) What is the impact in the labour market when labour productivity increases?
A) The labour supply curve shifts to the right.
B) The labour demand curve shifts to the right.
C) The labour supply curve shifts to the left.
D) The nominal wage decreases.
E) The labour demand curve shifts to the left.
Answer: B
Diff: 0 Type: MC
Skill: Level 2
82) The effect of an increase in labour productivity, assuming no change in the supply of labour, is
i. an increase in the real wage.
ii. an increase in potential GDP.
iii. a decrease in the demand for labour.
A) i only
B) i and ii
C) i and iii
D) ii and iii
E) i, ii and iii
Answer: B
Diff: 0 Type: MC
Skill: Level 2
83) In comparing the United States, Europe and Australia, real GDP per worker is
A) highest in Europe.
B) the same in all three.
C) highest in the United States.
D) highest in Australia.
E) Not relevant as the differences are insignificant.
Answer: C
Diff: 0 Type: MC
Skill: Level 2
84) Sustained increases in the standard of living depend on

A) increases in aggregate hours.
B) increases in the quantity of labour.
C) increases in labour productivity.
D) decreases in labour productivity.
E) increases in the population.
Answer: C
Diff: 0 Type: MC
Skill: Level 1
85) An increase in labour productivity

A) cannot occur without a corresponding increase in employment.
B) decreases the standard of living.
C) generally occurs when physical capital decreases because firms must then hire more workers.
D) increases the standard of living.
E) might be the result of an increase in the quantity of labour.
Answer: D
Diff: 0 Type: MC
Skill: Level 1
86) As labour productivity is higher in the United States than Australia, this means that
A) real wages are higher in Australia.
B) Australian workers will want to work less hours.
C) employers in the United States are willing to pay more for a given quantity of labour than Australian employers are.
D) real wages are higher in Europe but lower in Australia.
E) the production function in the United States is below that of Australia's.
Answer: C
Diff: 0 Type: MC
Skill: Level 2
87) Which of the following is/are required for economic growth?

i. More goods and services produced per hour of work
ii. An increase in the average hours of labour per person
iii. An increase in prices
A) i only
B) i and ii
C) ii and iii
D) ii only
E) i and iii
Answer: B
Diff: 0 Type: MC
Skill: Level 2
88) If real GDP is $1,200 billion, the population is 60 million, and aggregate hours are 80 billion, labour productivity is
A) $150 an hour.
B) $5.00 an hour.
C) $6.67 an hour.
D) $15.00 an hour.
E) $20,000.
Answer: D
Diff: 0 Type: MC
Skill: Level 2
89) At its most basic level, economic growth depends on

A) political freedom.
B) creating the right incentives.
C) government leadership.
D) saving by the government.
E) the government fixing prices to encourage stability.
Answer: B
Diff: 0 Type: MC
Skill: Level 1
A-Head: 8.3 What Makes an Economy Grow?
90) If a country lacks ________, economic growth ________.

A) a proper incentive system; cannot occur
B) a democratic form of government; cannot occur
C) economic freedom; will increase at a faster pace
D) pure capitalism; will be slower compared to other countries
E) a proper incentive system; will occur at a pace suggested by the new growth theory
Answer: A
Diff: 0 Type: MC
Skill: Level 2
91) The presence of an incentive system that encourages growth

A) cannot exist in poor countries.
B) means that the government must be a democracy.
C) creates the right conditions for growth to occur.
D) existed even in hunter-gatherer societies.
E) guarantees that growth will occur.
Answer: C
Diff: 0 Type: MC
Skill: Level 1
92) A key reason why some nations show little or no growth is

A) lack of incentives to undertake actions toward growth.
B) overpopulation that overuses limited resources.
C) too much international trade so that all economic growth spills over to foreigners.
D) patents in rich nations that keep technology only for the rich.
E) too much private property not directed by the government.
Answer: A
Diff: 0 Type: MC
Skill: Level 2
93) An important condition required for economic growth is

A) a libertarian government.
B) a democratic government.
C) economic freedom.
D) a totalitarian government.
E) the incentive to limit international trade so that all economic growth remains within the country.
Answer: C
Diff: 0 Type: MC
Skill: Level 1
94) A basic precondition necessary to achieve economic growth is

A) a well-organised work force.
B) well-functioning factories.
C) a well-functioning legal system.
D) the well-being of society.
E) a strong central government that directs the nation's research and development activities.
Answer: C
Diff: 0 Type: MC
Skill: Level 1
95) Economic freedom requires

A) that the government be a democracy.
B) that there are no regulations and restrictions set on businesses and households by the government.
C) freedom to bribe government officials.
D) the protection of private property by the rule of law.
E) strong labour unions.
Answer: D
Diff: 0 Type: MC
Skill: Level 1
96) Economic freedom provides the

A) incentive system that encourages growth-producing activities.
B) political system that encourages democracy.
C) necessary alternative to free markets.
D) production system that discourages property rights.
E) social system that supports families.
Answer: A
Diff: 0 Type: MC
Skill: Level 1
97) Economic freedom is a precondition for economic growth. Which of the following is/are a characteristic/s of economic
freedom?
i. A democratic form of government.
ii. Property rights must be protected.
iii. The government must support and pay for inventions and innovations.
A) i only
B) ii only
C) ii and iii
D) i and ii
E) i and iii
Answer: B
Diff: 0 Type: MC
Skill: Level 1
98) Property rights

A) include physical, financial and intellectual property.
B) slow economic growth by placing limits on who can use what.
C) don't include financial property.
D) don't include intellectual property.
E) don't include physical property.
Answer: A
Diff: 0 Type: MC
Skill: Level 1
99) Property rights assure people that

A) economic growth will enhance government involvement in the economy.
B) international trade will be limited.
C) the government will provide a minimum standard of living.
D) the government will not confiscate their income or savings.
E) the factors of production and goods are owned jointly by the government and the people.
Answer: D
Diff: 0 Type: MC
Skill: Level 1
100) One possible way of achieving faster economic growth is to

A) protect property rights and free markets.
B) tax savings so that people spend more and firms' profits are higher.
C) assign the government ownership of all capital.
D) regulate the amount of international trade and limit it so that not too much occurs.
E) limit research and development because research and development does not contribute anything to today's production.
Answer: A
Diff: 0 Type: MC
Skill: Level 1
101) If the pre-conditions for growth are in place, the pace of productivity growth is influenced by
i. physical and human capital growth.
ii. echnological advances.
iii. the amount of government incentives for investment.
A) ii only
B) i and ii
C) i, ii and iii
D) ii and iii
E) i only
Answer: B
Diff: 0 Type: MC
Skill: Level 2
102) Which of the following lists gives factors that increase labour productivity?
A) Saving and investment in physical capital, and wage increases
B) Expansion of human capital, population growth, and discovery of new technologies
C) Expansion of human capital, labour force increases, and discovery of new technologies
D) Saving and investment in physical capital, expansion of human capital, and discovery of new technologies
E) Labour force increases and wage increases
Answer: D
Diff: 0 Type: MC
Skill: Level 1
103) Growth in physical capital depends most directly upon the

A) level of human capital.
B) amount of government expenditures.
C) number of firms in the nation.
D) speed of population growth.
E) amount of saving and investment.
Answer: E
Diff: 0 Type: MC
Skill: Level 2
104) One way to achieve faster growth in GDP per person is to increase the
A) growth rate of the population.
B) limits on international trade in order to keep more of total spending on domestically produced goods.
C) number of women working in the home rather than in the workforce.
D) growth rate of human capital.
E) growth rate of the quantity of money.
Answer: D
Diff: 0 Type: MC
Skill: Level 2
105) ________ increases with education, training and job experience.

i. Physical capital
ii. Human capital
iii. Financial capital
A) i only
B) ii only
C) iii only
D) ii and iii
E) i, ii, and iii
Answer: B
Diff: 0 Type: MC
Skill: Level 1
106) A reason for an increase in labour productivity growth is

A) an increase in people's human capital.
B) an increase in the population so that firms hire more workers.
C) growth in the supply of labour.
D) an increase in the quantity of labour.
E) a decrease in the capital stock so that firms must hire more workers.
Answer: A
Diff: 0 Type: MC
Skill: Level 2
107) Human capital refers to the

A) accumulation of money and equipment used by human beings.
B) accumulation of money by human beings.
C) accumulated equipment used by human beings.
D) accumulated financial capital people have acquired.
E) accumulated skill and knowledge of human beings.
Answer: E
Diff: 0 Type: MC
Skill: Level 1
108) Human capital is defined as the

A) accumulated skill and knowledge of human beings.
B) number of factories built for human beings.
C) skills that people are born with.
D) amount of machinery human beings have.
E) accumulated amount of machinery and factories human beings own.
Answer: A
Diff: 0 Type: MC
Skill: Level 1
109) If the level of technology rises, GDP per hour of labour

A) decreases because the level of capital per hour of labour decreases.
B) increases because the level of capital per hour of labour increases.
C) decreases for a given level of capital per hour of labour.
D) increases for any level of capital per hour of labour.
E) does not change because GDP increases only when capital or labour increases.
Answer: D
Diff: 0 Type: MC
Skill: Level 3
110) Labour productivity increases if

i. human capital decreases.
ii. technology advances.
iii. he quality of education decreases.
A) i only
B) ii only
C) iii only
D) i and ii
E) ii and iii
Answer: B
Diff: 0 Type: MC
Skill: Level 2
111) In explaining economic growth, new growth theory stresses the role played by
A) women in the workforce.
B) the government in directing the nation's investments.
C) human choices.
D) population moderation.
E) the participation rate of elderly workers.
Answer: C
Diff: 0 Type: MC
Skill: Level 2
112) According to the new growth theory, which of the following promote economic growth?
i. Discoveries that bring profit.
ii. Choices that expand human capital.
iii. Random events that create technological change.
A) i and iii
B) ii only
C) i, ii and iii
D) i only
E) i and ii
Answer: E
Diff: 0 Type: MC
Skill: Level 2
113) In new growth theory, growth in real GDP per person occurs because
i. human capital grows indefinitely.
ii. technology advances as a result of the choices individuals make.
iii. profit incentives encourage technological change.
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii and iii
Answer: E
Diff: 0 Type: MC
Skill: Level 2
114) New growth theory asserts that

i. human capital grows because of choices.
ii. discoveries result from choices.
iii. competition brings profits.
A) i only
B) ii only
C) iii only
D) i and iii
E) i and ii
Answer: E
Diff: 0 Type: MC
Skill: Level 2
115) According to the new growth theory, real GDP per person grows because
A) the retirement age increases.
B) people make choices in pursuit of profits.
C) the population increases.
D) the government subsidises firms' research and development.
E) the labour force participation rate increases.
Answer: B
Diff: 0 Type: MC
Skill: Level 1
116) The new growth theory asserts that profits are

A) not an essential component in determining whether the economy grows or not.
B) permanent, because physical activities can be replicated.
C) permanent, because they are derived from discoveries.
D) an illusion, since costs are never fully covered.
E) temporary, because the discoveries that lead to profits are eventually used by all.
Answer: E
Diff: 0 Type: MC
Skill: Level 2
117) The new growth theory asserts that

A) the population growth rate will increase when real GDP per person increases.
B) eventually people earn only a subsistence living.
C) a discovery can be used by only one person, the discoverer.
D) technology improves slowly while the population grows rapidly.
E) production processes can be replicated by many different firms in the economy.
Answer: E
Diff: 0 Type: MC
Skill: Level 1
118) A central theme of the new growth theory is that

A) the government is more efficient than private markets.
B) firms don't really experience profit.
C) the economy doesn't experience diminishing returns.
D) humans can work harder than previously thought.
E) firms don't experience diminishing returns.
Answer: C
Diff: 0 Type: MC
Skill: Level 3
119) The new growth theory

A) applies to only very poor, less-developed nations.
B) explains the source of technological advances.
C) asserts that economic growth can be rapid but can only persist for a limited period of time.
D) corrects for poor estimates of population growth.
E) eliminates technological advances from the growth picture.
Answer: B
Diff: 0 Type: MC
Skill: Level 3
120) New growth theory asserts that ________ will lead us to greater productivity and economic growth.
A) new machinery
B) government regulation
C) leisure time
D) nothing
E) unlimited wants
Answer: E
Diff: 0 Type: MC
Skill: Level 1
121) Which of the following statements is likely to be made by someone who believes in the new growth theory?
A) Population growth will limit long-run gains in real GDP per person.
B) Competition will encourage discoveries of new ideas leading to greater economic growth.
C) Economic growth will eventually slow.
D) Choices made by human capital are likely to be inefficient.
E) Although technological changes increase real GDP, these changes are random and unexplainable.
Answer: B
Diff: 0 Type: MC
Skill: Level 2
122) The new growth theory's comparison of the economy to a perpetual motion machine implies that
A) overpopulation will eventually overtake the resources of the planet.
B) the economy will forever create and destroy jobs.
C) labour productivity has no influence on the economy.
D) technological changes just happen.
E) permanent growth is not possible.
Answer: B
Diff: 0 Type: MC
Skill: Level 2
123) New growth theory predicts that

A) economic growth can last indefinitely.
B) government policies can do nothing to foster increased growth.
C) ultimately people earn a subsistence wage.
D) economic growth is only temporary.
E) economic growth is eroded by changes in taxes.
Answer: A
Diff: 0 Type: MC
Skill: Level 1
124) According to new growth theory, growth

A) occurs when real GDP is greater than the subsistence level.
B) ends when competition disappears.
C) cannot be sustained without government help.
D) is unending.
E) depends on the population growth rate.
Answer: D
Diff: 0 Type: MC
Skill: Level 2
125) Activities that encourage faster growth are

A) imposing trade barriers to limit international trade and thereby protect national industries.
B) high levels of consumption and low levels of savings.
C) taxes on savings that serve to encourage more spending and less saving.
D) high levels of saving and investment in human capital.
E) limiting property rights so that everyone can use any invention.
Answer: D
Diff: 0 Type: MC
Skill: Level 1
126) Which of the following statements is FALSE?

A) Faster population growth is the key to growth in real GDP per person.
B) Free international trade helps create economic growth.
C) Saving helps create economic growth.
D) Economic freedom requires property rights.
E) Improvements in the quality of education are important for economic growth.
Answer: A
Diff: 0 Type: MC
Skill: Level 1
127) The following government policies will help achieve faster economic growth EXCEPT
A) increasing saving.
B) discouraging saving and encouraging spending.
C) establishing and protecting property rights.
D) encouraging research and development.
E) improving the quality of education.
Answer: B
Diff: 0 Type: MC
Skill: Level 1
128) If Turkey wants to promote faster economic growth, it will need to

A) restrict international trade to protects its own workers.
B) promote government intervention to help markets determine incentives.
C) promote incentive systems to encourage saving, research and development, increased trade and improved education.
D) restrict property rights so that individuals can better share inventions.
E) restrict economic freedom so the government has better control of markets.
Answer: C
Diff: 0 Type: MC
Skill: Level 2
129) Retirement savings, such as superannuation, help increase economic growth because
A) savings finances investment.
B) the government invests them.
C) they keep interest rates high.
D) they encourage international trade.
E) people have an incentive to work harder and longer hours to save for the future.
Answer: A
Diff: 0 Type: MC
Skill: Level 1

A) protect the economy from international trade.
B) encourage saving.
C) eliminate property rights because they prevent people from using other people's ideas.
D) limit investment because investment adds nothing to production today.
E) tax savings so that people spend more and businesses make more profit.
Answer: B
Diff: 0 Type: MC
Skill: Level 1
131) Hong Kong and Singapore have grown

A) slowly and converged to a similar GDP per capita to that of the United States.
B) rapidly because they virtually eliminated international trade.
C) rapidly and converged to a similar GDP per capita to that of the United States.
D) rapidly despite a lack of property rights.
E) slowly because of low saving rates.
Answer: C
Diff: 0 Type: MC
Skill: Level 1

A) limit schooling in order to have more people in the labour force, producing goods and services.
B) promote tax saving so that people spend more and businesses' profits are larger.
C) abolish the system of patents and copyrights so that everyone can use other people's ideas.
D) encourage research and development.
E) limit international trade to only a few countries so that the nation is not hurt by too much trade.
Answer: D
Diff: 0 Type: MC
Skill: Level 1

A) limit international trade.
B) let the government decide what research and development should be undertaken.
C) encourage international trade.
D) limit research and development and concentrate on the production of goods and services.
E) abolish the system of patents and copyrights so that everyone can use other people's ideas.
Answer: C
Diff: 0 Type: MC
Skill: Level 1
134) Why are some nations rich and others poor?

i. Political stability
ii. Property rights protected by the rule of law
iii. Unlimited government intervention
A) i only
B) ii only
C) i and ii
D) iii only
E) i, ii and iii
Answer: C
Diff: 0 Type: MC
Skill: Level 2
135) If Kenya institutes policies that support economic freedom and growth, it is likely that Kenya will
A) immediately reap the benefits of a double digit increase in economic growth.
B) lose control of the economy and plunge into a long recession.
C) slowly reap the benefits of economic growth as the economy grows over time.
D) immediately reap the benefits of a 4 per cent to 6 per cent increase in economic growth.
E) suffer from too much competition within its economy.
Answer: C
Diff: 0 Type: MC
Skill: Level 2
136) In order to increase economic growth, a government can

A) tax savings in order to encourage more spending.
B) discourage research and development.
C) decrease funding on education.
D) discourage specialisation and trade.
E) establish property rights and a legal system.
Answer: E
Diff: 0 Type: MC
Skill: Level 1
137) Economic growth is enhanced by

A) increasing welfare payments to the poor so they can afford to buy goods.
B) discouraging saving, because increased saving means less spending.
C) free international trade.
D) limiting international trade so that the domestic economy can prosper.
E) ignoring incentive systems.
Answer: C
Diff: 0 Type: MC
Skill: Level 1
138) The presence of government corruption in some countries

A) invalidates the neoclassical growth theory's predictions.
B) supports the classical growth theory's predictions.
C) speeds their economic growth.
D) slows their economic growth.
E) invalidates the new growth theory's predictions.
Answer: D
Diff: 0 Type: MC
Skill: Level 2
1) A
2) B
3) B
4) D
5) D
6) E
7) B
8) D
9) E
10) B
11) D
12) B
13) C
14) A
15) D
16) A
17) C
18) E
19) C
20) E
21) A
22) A
23) B
24) E
25) C
26) A
27) C
28) D
29) B
30) C
31) D
32) E
33) B
34) B
35) E
36) A
37) C
38) C
39) D
40) A
41) C
42) C
43) E
44) B
45) B
46) C
47) B
48) C
49) E
50) D
51) A
52) A
53) D
54) D
55) D
56) D
57) B
58) B
59) E
60) A
61) B
62) A
63) C
64) C
65) E
66) E
67) A
68) A
69) E
70) A
71) A
72) C
73) A
74) B
75) C
76) E
77) E
78) E
79) B
80) D
81) B
82) B
83) C
84) C
85) D
86) C
87) B
88) D
89) B
90) A
91) C
92) A
93) C
94) C
95) D
96) A
97) B
98) A
99) D
100) A
101) B
102) D
103) E
104) D
105) B
106) A
107) E
108) A
109) D
110) B
111) C
112) E
113) E
114) E
115) B
116) E
117) E
118) C
119) B
120) E
121) B
122) B
123) A
124) D
125) D
126) A
127) B
128) C
129) A
130) B
131) C
132) D
133) C
134) C
135) C
136) E
137) C
138) D

Macroeconomics Australia in The Global Environment Australian 1st Edition Parkin Test Bank

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Macroeconomics Australia in The Global Environment Australian 1st Edition Parkin Test Bank

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Macroeconomics Australia in the

Global Environment Australian 1st

3) Which of the following variables is used to determine a country's economic growth?

4) The growth rate of real GDP equals

21) The Rule of 70 can be used to calculate the

39) Potential GDP is the level of

40) The factors of production that produce real GDP are

42) The production function describes the relationship between

44) The production function displays

45) Diminishing returns means that

53) The above figure shows a nation's production function. Point B is

54) The above figure shows a nation's production function. Point C is

61) The benefit to the firm of hiring another worker is

64) For a household, the opportunity cost of not working is the

67) Households increase the quantity of labour supplied when

69) The labour market is in equilibrium whenever

72) When the labour market is in equilibrium,

73) The full-employment quantity of labour is

74) Growth in the supply of labour comes from

75) An increase in the supply of labour as a result of population growth causes

77) Labour productivity is defined as

78) Labour productivity equals

79) Labour productivity is equal to the quantity of

84) Sustained increases in the standard of living depend on

85) An increase in labour productivity

87) Which of the following is/are required for economic growth?

89) At its most basic level, economic growth depends on

90) If a country lacks ________, economic growth ________.

91) The presence of an incentive system that encourages growth

92) A key reason why some nations show little or no growth is

93) An important condition required for economic growth is

94) A basic precondition necessary to achieve economic growth is

95) Economic freedom requires

96) Economic freedom provides the

98) Property rights

99) Property rights assure people that

100) One possible way of achieving faster economic growth is to

103) Growth in physical capital depends most directly upon the

105) ________ increases with education, training and job experience.

106) A reason for an increase in labour productivity growth is

107) Human capital refers to the

108) Human capital is defined as the

109) If the level of technology rises, GDP per hour of labour

110) Labour productivity increases if

114) New growth theory asserts that

116) The new growth theory asserts that profits are

117) The new growth theory asserts that

118) A central theme of the new growth theory is that

119) The new growth theory

123) New growth theory predicts that

124) According to new growth theory, growth

125) Activities that encourage faster growth are

126) Which of the following statements is FALSE?

128) If Turkey wants to promote faster economic growth, it will need to

130) One possible way of achieving faster economic growth is to

131) Hong Kong and Singapore have grown

132) One possible way of achieving faster economic growth is to

133) One possible way of achieving faster economic growth is to

134) Why are some nations rich and others poor?

136) In order to increase economic growth, a government can

137) Economic growth is enhanced by

138) The presence of government corruption in some countries

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90) If a country lacks , economic growth .