True/False
Indicate whether the
sentence or statement is true or false.
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1.
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The United States should grow faster than Japan
because the United States has a larger economy.
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2.
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Evidence of rising prices for natural resources
demonstrates that non-renewable resources will become so scarce that economic growth will be
limited.
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3.
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The rate of economic growth is probably
underestimated.
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4.
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Human capital refers to human-made capital such as
tools and machinery, as opposed to natural capital such as rivers and timber.
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5.
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If a production function exhibits constant returns
to scale, then doubling all of the inputs doubles output.
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6.
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In very poor countries, paying parents to send
their children to school may increase the education of poor children and decrease the use of child
labour.
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7.
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An increase in capital should cause the growth rate
of a relatively poor country to increase more than that of a rich country.
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8.
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An increase in the rate of saving and investment
permanently increases a country's rate of growth.
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9.
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A country can only increase its level of investment
by increasing its saving.
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10.
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The only factor of production that is not
"produced" is natural resources.
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11.
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Investment in human capital and technology may be
particularly productive because of positive spillover effects.
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12.
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If Germans invest in the UK economy by building a
new Volkswagen factory, in the future UK GDP will rise by more than UK GNP.
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13.
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Most economists believe that inward-oriented
policies that protect infant industries improve the growth rates of developing nations.
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14.
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Economic evidence supports the predictions of
Thomas Malthus regarding the effects of population growth and the food supply on the standard of
living.
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15.
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The opportunity cost of additional growth is that
someone must forgo current consumption.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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16.
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A reasonable measure of the standard of living in a
country is
a. | real GDP per person. | b. | nominal GDP per person. | c. | real
GDP. | d. | the growth rate of nominal GDP per
person. | e. | nominal GDP. |
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17.
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Many East Asian countries are growing very quickly
because
a. | they save and invest an unusually high percentage of
their GDP. | b. | they have always
been wealthy and will continue to be wealthy, which is known as the "snowball
effect." | c. | they are
imperialists and have collected wealth from previous victories in war. | d. | they have enormous natural resources. |
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18.
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When a nation has very little GDP per
person,
a. | it is doomed to being relatively poor
forever. | b. | none of these answers | c. | an increase in capital will likely have little impact on
output. | d. | it has the potential to grow relatively quickly due to
the "catch-up-effect." | e. | it must be a small
nation. |
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19.
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Once a country is wealthy,
a. | it no longer needs any human
capital. | b. | capital becomes more productive due to the
"catch-up effect." | c. | none of these
answers | d. | it may be harder for it to grow quickly because of the
diminishing returns to capital. | e. | it is nearly
impossible for it to become relatively poorer. |
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20.
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The opportunity cost of growth is
a. | a reduction in current
investment. | b. | a reduction in
current consumption. | c. | a reduction in
taxes. | d. | a reduction in current
saving. |
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21.
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For a given level of technology, we should expect
an increase in productivity within a nation when there is an increase in each of the following
except
a. | labour. | b. | physical capital/worker. | c. | human
capital/worker. | d. | natural
resources/worker. |
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22.
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Which of the following statements is
true?
a. | Countries all have the same growth rate and level of
output because any country can obtain the same factors of production. | b. | Countries have great variance in both the level and growth rate of GDP/person;
thus, poor countries can become relatively rich over time. | c. | Countries may have a different level of GDP/person but they all grow at the
same rate. | d. | Countries may have
a different growth rate but they all have the same level of
GDP/person. |
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23.
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If a production function exhibits constant returns
to scale,
a. | doubling all of the inputs more than doubles output due
to the catch-up effect. | b. | doubling all of
the inputs has absolutely no impact on output because output is constant. | c. | doubling all of the inputs less than doubles output due to diminishing
returns. | d. | doubling all of the inputs doubles
output. |
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24.
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Copper is an example of
a. | a renewable natural resource. | b. | human capital. | c. | physical
capital. | d. | technology. | e. | a non-renewable natural resource. |
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25.
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Which of the following statements regarding the
impact of population growth on productivity is true?
a. | There is no evidence, yet, that rapid population growth
stretches natural resources to the point that it limits growth in
productivity. | b. | all of these
answers | c. | Rapid population growth may dilute the capital stock,
lowering productivity. | d. | Rapid population
growth may promote technological progress, increasing
productivity. |
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26.
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Thomas Malthus argued that
a. | none of these answers | b. | an ever increasing population is constrained only by the food supply,
resulting in chronic famines. | c. | technological
progress will continuously generate improvements in productivity and living
standards. | d. | labour is the only
true factor of production. | e. | private charities
and government aid will improve the welfare of the poor. |
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27.
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Which of the following best describes the rate of
growth in productivity in the United States over the last fifty years?
a. | Productivity growth has been steady over the last 50
years. | b. | Productivity has been growing more slowly every decade
since World War II. | c. | Productivity grew
quickly in the 1950s and 1960s, more slowly from the early 1970s through 1995, and then quickly
again. | d. | Productivity grew slowly from the 1950s through the
1970s, and then began to accelerate, probably due to advances in computer
technology. | e. | Productivity has
been growing more quickly every decade since World War II. |
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28.
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Which of the following describes an increase in
technological knowledge?
a. | A farmer sends his child to agricultural college and the
child returns to work on the farm. | b. | A farmer hires
another day labourer. | c. | A farmer buys
another tractor. | d. | A farmer discovers
that it is better to plant in the spring rather than in the
fall. |
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29.
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Our standard of living is most closely related
to
a. | how hard we work. | b. | our supply of capital, because everything of value is produced by
machinery. | c. | our productivity,
because our income is equal to what we produce. | d. | our supply of
natural resources, because they limit production. |
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30.
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Which of the following is an example of foreign
portfolio investment?
a. | Toyota builds a new plant in the north of
England. | b. | EDF of France buys shares in Scottish & Southern
Energy of the UK, and Scottish & Southern Energy uses the proceeds to build a new hydro-electric
power station in Scotland. | c. | Deutsche Bank of
Germany buys some new software from a UK supplier. | d. | JCB builds a new plant near Manchester. | e. | None of these answers. |
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31.
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Which of the following government policies is least
likely to increase growth in Africa?
a. | increase expenditures on public
education | b. | eliminate civil war | c. | All of these answers would increase growth. | d. | reduce restrictions on foreign capital investment | e. | increase restrictions on the importing of American tractors and
electronics |
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32.
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If Toyota builds a new plant in the north of
England,
a. | none of these answers | b. | there has been an increase in foreign portfolio investment in the
UK. | c. | once the plant starts producing cars UK GDP will rise
less than UK GNP. | d. | once the plant
starts producing cars UK GDP and GNP will both fall because some income from this investment will
accrue to foreigners. | e. | once the plant
starts producing cars UK GDP will rise more than UK GNP. |
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33.
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If, in some European country, real GDP/person in
2004 is €18,073 and real GDP/person in 2005 is €18,635, what is the growth rate of real
output per person over this period?
a. | 3.1 percent | b. | 3.0 percent | c. | 18.6
percent | d. | 18.0 percent | e. | 5.62 percent |
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34.
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Which of the following expenditures to enhance
productivity is most likely to emit a positive externality?
a. | Megabank buys a new computer. | b. | Nathalie pays her university tuition fees. | c. | Exxon leases a new oil field. | d. | General Motors buys a new drill press. |
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35.
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To increase growth, governments should do all of
the following except
a. | encourage foreigners to investment in your
country. | b. | encourage saving and
investment. | c. | nationalize major
industries. | d. | encourage research
and development. | e. | promote free
trade. |
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