Question 1

Hong Kong and Japan have achieved relatively high incomes per capita despite lacking an abundance of natural resources.

Accepted Answer

Hong Kong and Japan are both examples of countries that have managed to achieve high levels of economic development despite their lack of significant natural resources. Instead, both countries have focused on developing strong manufacturing, service, and financial sectors, as well as investing heavily in education and technology. This has allowed them to become major players in the global economy and generate high incomes per capita for their citizens.

Question 2

How will firms react to rising output price levels? What reactions can they expect from their employees and suppliers over time?

Accepted Answer

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Question 3

If the educational attainment of a nation's population increases, the economy's production possibilities curve shifts inward.

Accepted Answer

The statement is false. Increase in educational attainment of a nation's population is likely to increase the productivity of the workforce, leading to an outward shift of the production possibilities curve.

Question 4

Generally there is an inverse relationship between the level of savings and the level of long-term economic growth.

Accepted Answer

The statement is false. There is actually a positive relationship between the level of savings and long-term economic growth, as savings provide the necessary capital for investment in productive projects and infrastructure.

Question 5

Economists generally define economic growth as an increase in real output per capita.

Accepted Answer

Economic growth is commonly defined as an increase in real output (GDP) over a certain time period. Per capita measures are used to adjust for population changes and provide a better understanding of changes in individuals' standard of living. Therefore, economists generally define economic growth as an increase in real output per capita.

Question 6

Discuss the impact of efficiency wages on unemployment and wage inflexibility.

Accepted Answer

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Question 7

Ultimately, productivity growth is the major determinant of a country's standard of living

Accepted Answer

Productivity growth leads to an increase in output per worker or per hour worked, resulting in higher incomes and a higher standard of living for a country's citizens. Therefore, productivity growth is a major determinant of a country's standard of living.

Question 8

It is impossible to have economic growth unless a country or a region has abundant natural resources to sustain the growth.

Accepted Answer

While natural resources can certainly contribute to economic growth, there are many other factors that can also drive growth, including innovation, access to capital, infrastructure development, skilled labor, and favorable trade policies. Countries and regions with limited natural resources can still promote economic growth through investment in these other areas.

Question 9

Why do wage increases along with increases of other input prices impact the short-run aggregate supply but not the long-run aggregate supply, unless they reflect permanent reductions in the supply of those inputs?

Accepted Answer

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Question 10

How precise is the aggregate supply and demand model?

Accepted Answer

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Question 11

Greater and more extensive government regulations of safety standards and environmental controls will have what effect on short-run and long-run aggregate supply?

Accepted Answer

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Question 12

Increases in the quality and quantity of an economy's resources have little effect on its potential output in the long run.

Accepted Answer

Increases in the quality and quantity of an economy's resources can increase its potential output in the long run through factors such as technological advancements and improved infrastructure.

Question 13

Keynes was more focused on reducing short-term fluctuations in the business cycle than determinants of long-term economic growth.

Accepted Answer

Keynes' main focus was on managing demand in the short-term to stabilize the economy during business cycle downturns, rather than on long-term economic growth. He believed that by boosting demand during recessions, governments could reduce high unemployment rates and increase economic output.

Question 14

Discuss some of the reasons behind downward stickiness of wages and prices.

Accepted Answer

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Question 15

Capital formation is a key component of economic growth.

Accepted Answer

Capital formation refers to the process of increasing the stock of productive capital in an economy over time. This capital can be used to produce more goods and services, which can help to increase economic growth and prosperity over the long term. Therefore, capital formation is considered to be a key component of economic growth in most countries.

Question 16

An increase in the quantity of labor inputs always leads to economic growth.

Accepted Answer

Economic growth can come from a variety of factors, including increases in productivity, improvements in technology, and increases in capital inputs, among others. While a larger quantity of labor can contribute to economic growth, it is not always the only or even the primary driver of growth.

Question 17

Higher rates of real economic growth can allow a less-developed, low per capita income country to attain the same standard of living as a more developed, high per capita income country in a few years.

Accepted Answer

While higher rates of real economic growth can significantly improve a less-developed country's economy, attaining the same standard of living as a more developed, high per capita income country typically requires sustained growth over a much longer period, often decades, due to the initial disparities in income, infrastructure, education, and technology.

Question 18

Economists generally define economic growth as an increase in the nominal income of the population.

Accepted Answer

Economists generally define economic growth as an increase in the real Gross Domestic Product (GDP) or real GDP per capita, which reflects an increase in the value of goods and services produced by an economy, adjusted for inflation, rather than just an increase in nominal income.

Question 19

What would happen to the price level, real output, and unemployment in the short run if world oil prices rose sharply?

Accepted Answer

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Question 20

Brazil has a relatively low income per capita because it has relatively few natural resources.

Accepted Answer

Brazil is actually rich in natural resources, including timber, iron ore, gold, oil, and agricultural land. The country's low income per capita can be attributed to factors such as income inequality, high tax rates, and poor infrastructure.

Quiz 13: Aggregate Demand and Aggregate Supply