True/False
Indicate whether the
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
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. | c. | a reduction in
taxes. | b. | a reduction in current consumption. | 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. | c. | human capital/worker. | b. | physical
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, doubling all of the
inputs
a. | more than doubles output due to the catch-up effect. | b. | has absolutely no
impact on output because output is constant. | c. | less than doubles output due to diminishing
returns. | d. | 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. | population growth in the future would be subject to diminishing
returns | 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? Productivity:
a. | growth has been steady over the last 50 years. | b. | has been growing
more slowly every decade since World War II. | c. | grew quickly in the 1950s and 1960s, more
slowly from the early 1970s through 1995, and then quickly again. | d. | grew slowly from the
1950s through the 1970s, and then began to accelerate, probably due to advances in computer
technology. | e. | 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
farmer:
a. | sends his child to agricultural college and the child returns to work on the
farm. | b. | hires another day labourer. | c. | buys another tractor. | d. | discovers that it is
better to plant in the spring rather than in the autumn. |
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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. | there has been an increase in foreign portfolio investment in the
UK. | b. | once the plant starts producing cars UK GDP will rise less than UK
GNP. | c. | once the plant starts producing cars UK GDP and GNP will both fall because some
income from this investment will accrue to foreigners. | d. | 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 2011 is €18,073 and real
GDP/person in 2012 is €18,635, what is the growth rate of real output per person over this
period?
a. | 3.0 per cent | b. | 3.1 per cent | c. | 18.0 per
cent | d. | 18.6 percent | e. | 5.62 per cent |
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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. | c. | Exxon leases a new oil
field. | b. | Nathalie pays her university tuition fees. | 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 invest 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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