Deck 8: Economic Growth

Question 1

Real GDP per capita

A) cannot grow more rapidly than real GDP.
B) cannot grow more slowly than real GDP.
C) necessarily grows more rapidly than real GDP.
D) can grow either more slowly or more rapidly than real GDP.

Answer 1

can grow either more slowly or more rapidly than real GDP.

Question 2

Between 1950 and 2018, U.S. real GDP per capita grew at an average annual rate of about

A) 5.5 percent.
B) 4.2 percent.
C) 3.2 percent.
D) 2.0 percent.

Answer 2

2.0 percent.

Question 3

If a nation's real GDP is growing by 5 percent per year, its real GDP will double in approximately

A) 22 years.
B) 20 years.
C) 14 years.
D) 8 years.

Answer 3

14 years.

Question 4

If the economy's real GDP doubles in 18 years, we can

A) not say anything about the average annual rate of growth.
B) conclude that its average annual rate of growth is about 5.5 percent.
C) conclude that its average annual rate of growth is about 2.4 percent.
D) conclude that its average annual rate of growth is about 3.9 percent.

Question 5

Given the annual rate of economic growth, the "rule of 70" allows one to

A) determine the accompanying rate of inflation.
B) calculate the size of the GDP gap.
C) calculate the number of years required for real GDP to double.
D) determine the growth rate of per capita GDP.

Question 6

If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, its real GDP per capita will

A) remain constant.
B) fall by 6 percent.
C) rise by 6 percent.
D) fall by 12 percent.

Question 7

$$\begin{array} { | c | c | c | c | c | } \hline \text { Year } & \text { Alta (Real GDP) } & \text { Zorn (Real GDP) } & \text { Alta (Population) } & \text { Zorn (Population) } \\\hline 1 & \$ 2,000 & \$ 150,000 & 200 & 500 \\\hline 2 & 2,100 & 152,000 & 202 & 505 \\\hline 3 & 2,200 & 154,000 & 210 & 508 \\\hline\end{array}$$ Refer to the table. Between years 1 and 2, real GDP grew by __________ percent in Alta.

A) 3
B) 4
C) 5
D) 10

Question 8

$$\begin{array} { | c | c | c | c | c | } \hline \text { Year } & \text { Alta (Real GDP) } & \text { Zorn (Real GDP) } & \text { Alta (Population) } & \text { Zorn (Population) } \\\hline 1 & \$ 2,000 & \$ 150,000 & 200 & 500 \\\hline 2 & 2,100 & 152,000 & 202 & 505 \\\hline 3 & 2,200 & 154,000 & 210 & 508 \\\hline\end{array}$$ Refer to the table. Between years 1 and 2, real GDP per capita grew by approximately __________ percent in Alta.

A) 3
B) 4
C) 5
D) 10

Question 9

$$\begin{array} { | c | c | c | c | c | } \hline \text { Year } & \text { Alta (Real GDP) } & \text { Zorn (Real GDP) } & \text { Alta (Population) } & \text { Zorn (Population) } \\\hline 1 & \$ 2,000 & \$ 150,000 & 200 & 500 \\\hline 2 & 2,100 & 152,000 & 202 & 505 \\\hline 3 & 2,200 & 154,000 & 210 & 508 \\\hline\end{array}$$ Refer to the table. Per capita GDP was about

A) $105 in year 3 in Alta.
B) $303 in year 3 in Zorn.
C) $200 in year 1 in Zorn.
D) $5 in year 2 in Alta.

Question 10

Real GDP per capita is found by

A) adding real GDP and the population.
B) subtracting the population from real GDP.
C) dividing real GDP by the population.
D) dividing the population by real GDP.

Question 11

Which of the following best measures improvements in the standard of living of a nation?

A) growth of nominal GDP
B) growth of real GDP
C) growth of real GDP per capita
D) growth of national income

Question 12

Between 1950 and 2018, U.S. real GDP grew at an average annual rate of about

A) 2.0 percent.
B) 3.1 percent.
C) 5.1 percent.
D) 8.6 percent.

Question 13

Growth is advantageous to a nation because it

A) promotes faster population growth.
B) lessens the burden of scarcity.
C) eliminates the economizing problem.
D) slows the growth of wants.

Question 14

At an annual growth rate of 7 percent, real GDP will double in about

A) $11_{1 / 2} \text { years. }$
B) 10 years.
C) $13_{1 / 2} \text { years. }$
D) 9 years.

Question 15

For comparing changes in potential military strength and political preeminence, the most meaningful measure of economic growth would be changes in

A) total nominal output.
B) total real output.
C) per capita output.
D) per family output.

Question 16

Real per capita GDP in the United States in 2018 was approximately

A) $18,571.
B) $47,845.
C) $56,793.
D) $18.6 trillion.

Question 17

The number of years required for real GDP to double can be found by

A) dividing the annual growth rate by 0.07.
B) multiplying the annual growth rate by 70.
C) dividing 70 by the annual growth rate.
D) adding 14 to annual growth rate.

Question 18

Economic growth is best defined as an increase in

A) either real GDP or real GDP per capita.
B) nominal GDP.
C) total consumption expenditures.
D) wealth in the economy.

Question 19

For a nation's real GDP per capita to rise during a year,

A) consumption spending must increase.
B) real GDP must increase more rapidly than the population.
C) the population must increase more rapidly than real GDP.
D) investment spending must increase.

Question 20

$$\begin{array} { | c | c | c | c | c | } \hline \text { Year } & \text { Alta (Real GDP) } & \text { Zorn (Real GDP) } & \text { Alta (Population) } & \text { Zorn (Population) } \\\hline 1 & \$ 2,000 & \$ 150,000 & 200 & 500 \\\hline 2 & 2,100 & 152,000 & 202 & 505 \\\hline 3 & 2,200 & 154,000 & 210 & 508 \\\hline\end{array}$$ Refer to the table. Between years 2 and 3,

A) Alta's real GDP grew more rapidly than Zorn's real GDP.
B) real GDP fell in Zorn.
C) population growth reduced Alta's real GDP growth to zero.
D) population fell in Alta.

Question 21

Real per capita GDP

A) grows at approximately the same rate for all countries.
B) was much more equal across nations in 1820 than it is today.
C) has been about 20 times higher in the richer nations than the poorer nations for about 2,000 years.
D) grows much faster in "leader countries" than in "follower countries."

Question 22

Countries that have experienced modern economic growth have also tended to

A) adopt feudalistic institutions.
B) restrict women and minorities from holding certain economic and political positions.
C) move toward more democratic forms of government.
D) have less leisure time for sport and artistic activities.

Question 23

1. Improvements in technology. 2. Increases in the supply (stock) of capital goods.
3) Purchases of expanding output.
4) Obtaining the optimal combination of goods, each at least-cost production.
5) Increases in the quantity and quality of natural resources.
6) Increases in the quantity and quality of human resources.
Use the accompanying list to answer the following question. As distinct from the supply factors and
Demand factor of economic growth, the efficiency factor(s) of economic growth is (are)

A) 1 only.
B) 4 only.
C) 1 and 3 only.
D) 3 only.

Question 24

Strong property rights are important for modern economic growth because

A) they allow governments to extract the gains from private citizens' investments.
B) people are more likely to invest if they don't fear that others can take their returns on investment without compensation.
C) they ensure an equitable distribution of income.
D) business cycle fluctuations will be smaller and less likely to disrupt investment patterns.

Question 25

Which of the following economic regions has experienced the least growth in real GDP per capita since 1820?

A) Africa
B) Asia excluding Japan
C) Latin America
D) Western Europe

Question 26

Which of the following institutional structures is most likely to promote growth?

A) a well-enforced system of patents and copyrights
B) a tightly regulated market system
C) a system of tariffs and other trade barriers to protect domestic companies
D) all of these

Question 27

Which of the following statements is most accurate about the prospects for poorer ("follower") countries catching up with richer ("leader") countries?

A) Catching up is unlikely to occur because their growth rates are the same on average.
B) Catching up is unlikely to occur because richer countries tend to grow at a faster rate.
C) Catching up is possible, but only if growth rates in leader countries fall to zero or become negative.
D) Catching up is possible, as "follower countries" tend to grow faster than "leader countries."

Question 28

Free trade

A) discourages growth by increasing competitive pressures on domestic firms.
B) encourages growth by effectively eliminating all patent and copyright barriers to growth.
C) discourages growth compared to situations where the government strongly controls foreign trade.
D) encourages growth by promoting the rapid spread of new inventions and innovations.

Question 29

Under what circumstances do rates of economic growth understate the growth of economic well- being?

A) Economic growth has occurred because of the increased length of the workweek.
B) Product quality has improved.
C) Air quality has declined as real GDP has increased.
D) Population has grown faster than real output.

Question 30

Which of the following economic regions has experienced the most growth in real GDP per capita since 1820?

A) Japan
B) United States
C) Latin America
D) Western Europe

Question 31

A competitive market system

A) encourages growth by allowing producers to make profitable investment decisions based on market signals.
B) encourages growth by ensuring that everyone in society will receive a decent standard of living.
C) discourages growth because firms busy competing have no time to innovate or invest.
D) discourages growth unless government protects domestic firms from foreign competition.

Question 32

1. Improvements in technology. 2. Increases in the supply (stock) of capital goods.
3) Purchases of expanding output.
4) Obtaining the optimal combination of goods, each at least-cost production.
5) Increases in the quantity and quality of natural resources.
6) Increases in the quantity and quality of human resources.
Which set of items in the accompanying list would shift an economy's production possibilities curve
Outward?

A) 2, 5, and 6 only
B) 2, 4, 5, and 6 only
C) 1, 2, 5, and 6 only
D) 1, 3, and 4 only

Question 33

Economic growth rates in follower countries

A) tend to be lower than in leader countries because labor forces in follower countries are too small.
B) tend to exceed those in leader countries because followers can cheaply adopt the new technologies that leaders developed at relatively high costs.
C) will never bring real GDP per capita up to the same levels as in leader countries, even if follower growth rates are greater than those in leader countries.
D) typically average about 2 percent per year.

Question 34

1. Improvements in technology. 2. Increases in the supply (stock) of capital goods.
3) Purchases of expanding output.
4) Obtaining the optimal combination of goods, each at least-cost production.
5) Increases in the quantity and quality of natural resources.
6) Increases in the quantity and quality of human resources.
Use the accompanying list to answer the following question. As distinct from the supply factors and
Efficiency factor of economic growth, the demand factor(s) of economic growth is (are)

A) 1 only.
B) 4 only.
C) 1 and 3 only.
D) 3 only.

Question 35

Which of the following statements is most accurate about modern economic growth?

A) Economic historians mark modern economic growth as beginning around A.D. 1500.
B) Modern economic growth is characterized by sustained and ongoing increases in living standards.
C) Modern economic growth has virtually eliminated business cycle fluctuations.
D) Modern economic growth has been distributed more or less equally across nations.

Question 36

Economic historians date the start of the Industrial Revolution around the year 1776, when James Watt

A) built the first factory for mass production.
B) invented the steam locomotive.
C) successfully lobbied British Parliament for the enactment of patent legislation to protect new inventions.
D) invented and built a more powerful and efficient steam engine.

Question 37

The Industrial Revolution and modern economic growth resulted in

A) the average human lifespan more than doubling.
B) a major population shift from urban to rural areas.
C) increased production by local craftspeople.
D) all of these.

Question 38

Which of the following institutional arrangements is most likely to promote growth?

A) patents and copyrights that expire quickly and are loosely enforced
B) strong government control over resource allocation decisions
C) unrestricted trade between nations
D) all of these

Question 39

1. Improvements in technology. 2. Increases in the supply (stock) of capital goods.
3) Purchases of expanding output.
4) Obtaining the optimal combination of goods, each at least-cost production.
5) Increases in the quantity and quality of natural resources.
6) Increases in the quantity and quality of human resources.
Use the accompanying list to answer the following question. As distinct from the demand and
Efficiency factors of economic growth, the supply factors of economic growth are

A) 2, 5, and 6 only.
B) 2, 4, 5, and 6 only.
C) 1, 2, 5, and 6 only.
D) 1, 3, and 4 only.

Question 40

In 2008, living standards in the United States were nearly ______ times higher than those in Africa.

A) 3
B) 8
C) 10
D) 19

Question 41

1. Improvements in technology. 2. Increases in the supply (stock) of capital goods.
3) Purchases of expanding output.
4) Obtaining the optimal combination of goods, each at least-cost production.
5) Increases in the quantity and quality of natural resources.
6) Increases in the quantity and quality of human resources.
Which set of items in the accompanying list would move an economy from a point inside its
Production possibilities curve to a point on its production possibilities curve?

A) 1, 2, 5, and 6 only
B) 3 and 4 only
C) 3 only
D) 1, 3, and 4 only

Question 42

Refer to the graph. An increase in the economy's human capital would

A) move the economy away from point A and toward point B.
B) shift curve CD to AB.
C) move the economy away from point B and toward point A.
D) shift curve AB to CD.

Question 43

Refer to the graph. An increase in an economy's labor productivity would

A) move the economy away from point A and toward point B.
B) move the economy away from point B and toward point A.
C) shift curve AB to CD.
D) shift curve CD to AB.

Question 44

Which of the following is not a supply factor in economic growth?

A) the stock of capital
B) technological advance
C) the size and quality of the labor force
D) aggregate expenditures of households, businesses, and government

Question 45

Refer to the graph. Growth of production capacity is shown by the

A) shift from AB to CD.
B) shift from CD to AB.
C) movement away from point A and toward point B.
D) movement away from point B and toward point A.

Question 46

Suppose total output (real GDP) is $4,000 and labor productivity is $8. We can conclude that

A) real GDP per capita must be $500.
B) the price-level index must be greater than 100.
C) nominal GDP must be $500.
D) the number of worker-hours must be 500.

Question 47

Suppose total output (real GDP) is $10,000 and worker-hours are 20,000. We can conclude that

A) real GDP per capita must be $200,000.
B) the price-level index must be less than 100.
C) labor productivity must be $0.50.
D) nominal GDP must be between $10,000 and $20,000.

Question 48

Economic growth can be portrayed as

A) an outward shift of the production possibilities curve.
B) an inward shift of the production possibilities curve.
C) a movement from a point on to a point inside a production possibilities curve.
D) a movement from one point to another point on a fixed production possibilities curve.

Question 49

If the number of worker-hours in an economy is 100 and its labor productivity is $5 of output per worker-hour, the economy's real GDP

A) is $20.
B) is $500.
C) is $5,000.
D) cannot be calculated.

Question 50

The achievement of full employment through time will

A) diminish labor productivity.
B) reduce the level of investment as a percentage of GDP.
C) increase the realized rate of economic growth.
D) have no impact on the rate of economic growth.

Question 51

Labor productivity is defined as

A) total output/worker-hours.
B) nominal GDP minus real GDP.
C) the ratio of real capital to worker-hours.
D) the annual increase in nominal GDP per worker.

Question 52

Suppose that an economy's labor productivity and total worker-hours each grew by 3 percent between year 1 and year 2. We could conclude that this economy's

A) real GDP remained constant.
B) capital stock increased by 3 percent.
C) production possibilities curve shifted inward.
D) production possibilities curve shifted outward.

Question 53

The percentage of the working-age population in the labor force (= employed + officially unemployed) is called the

A) labor force participation rate.
B) employment-population ratio.
C) work-activity rate.
D) work-nonwork ratio.

Question 54

Refer to the diagram. Increases in the quantity and quality of human resources and capital are best represented by a

A) shift in the production possibilities curve from AB to CD.
B) move from Y on CD to X on AB.
C) shift in the production possibilities curve from CD to AB.
D) move from X to Z along AB.

Question 55

Refer to the diagram. Realized economic growth is best represented by a

A) move from Z to X along AB.
B) move from X on AB to Y on CD.
C) shift in the production possibilities curve from CD to AB.
D) move from X to Z along AB.

Question 56

Refer to the diagram. The most likely cause of a shift from AB to CD would be a(n)

A) increase in productivity.
B) increase in the price level.
C) decrease in the size of the labor force.
D) increase in government spending.

Question 57

Suppose that an economy's labor productivity fell by 3 percent and its total worker-hours remained constant between year 1 and year 2. We could conclude that this economy's

A) real GDP declined.
B) capital stock increased.
C) production possibilities curve shifted outward.
D) actual production moved from one point to another on a fixed production possibilities curve.

Question 58

Which of the following is correct?

A) Total output = labor productivity/worker-hours.
B) Labor productivity = worker-hours/total output.
C) Total output = worker-hours × labor productivity.
D) Worker-hours = labor productivity × total output.

Question 59

Labor productivity is measured by

A) the ratio of capital to labor.
B) real output per worker-hour.
C) real output per capita.
D) the ratio of worker-hours to real GDP.

Question 60

Suppose that an economy's labor productivity and total worker-hours each grew by 4 percent between year 1 and year 2. We could conclude that this economy's

A) real GDP also increased by 4 percent.
B) real GDP remained constant.
C) production possibilities curve shifted outward.
D) capital stock increased by 4 percent.

Question 61

More than half the growth of real GDP in the United States is caused by

A) a falling price level.
B) the reallocation of labor from manufacturing to agriculture.
C) increases in the productivity of labor.
D) the use of fewer inputs of labor.

Question 62

Which of the following statements is correct?

A) The U.S. population has increased more rapidly than real GDP in recent decades.
B) Improved education and training of labor is the most important source of U.S. productivity growth.
C) The average American factory worker has about 16 years of formal education.
D) The amount of real capital used per worker has increased historically in the United States.

Question 63

Other things equal, which of the following would decrease the rate of economic growth, as measured by changes in real GDP?

A) an increase in the educational attainment of the labor force
B) a permanent decrease in frictional unemployment
C) an increase in the amount of capital per worker
D) a decrease in the labor force participation rate

Question 64

Between 2018 and 2029, productivity growth is expected to account for about ________ percent of the growth of real GDP in the United States.

A) 62
B) 40
C) 92
D) 87

Question 65

Which of the following is the largest contributor to the growth of labor productivity in the United States?

A) technological advance
B) education and training of labor
C) economies of scale
D) improved resource allocation

Question 66

Other things equal, if a full-employment economy reallocated a substantial quantity of its resources to capital goods, we would expect

A) present consumption to rise.
B) future consumption to fall.
C) a lower rate of growth of real GDP.
D) labor productivity to rise.

Question 67

Economies of scale refers to

A) the idea that proprietorships are less bureaucratic and therefore more efficient than corporations.
B) public investments in highways, schools, utilities, and such.
C) the fact that large producers may be able to use more efficient technologies than smaller producers.
D) the reallocation of labor from less-productive to more-productive uses.

Question 68

The historical reallocation of labor from agriculture to manufacturing in the United States has

A) been inflationary.
B) had no effect on the average productivity of labor.
C) increased the average productivity of labor.
D) reduced the average productivity of labor.

Question 69

Which of the following would not be expected to increase labor productivity?

A) technological advance
B) the acquisition of more education and training by the labor force
C) an increase in the size of the labor force
D) the realization of economies of scale

Question 70

Other things equal, which of the following would increase the rate of economic growth, as measured by changes in real GDP?

A) a decline in the average length of the workweek
B) a decrease in the labor force participation rate
C) an increase in the size of the working-age population
D) a decline in the amount of capital per worker

Question 71

What percentage of the U.S. adult population has at least a high school education (as of 2018)?

A) 31 percent
B) 41 percent
C) 90 percent
D) 99 percent

Question 72

Empirical studies suggest that

A) labor productivity has declined throughout U.S. history.
B) technological advances account for about 40 percent of U.S. productivity growth.
C) achieving economies of scale is the most important factor in U.S. economic growth.
D) all U.S. economic growth from between 2001 and 2007 can be attributed to increases in the quantity of labor.

Question 73

Human capital refers to

A) the skills and knowledge that enable a worker to be productive.
B) machinery used by labor in production.
C) the accumulated financial wealth of households.
D) physical capital owned by households rather than businesses.

Question 74

The percentage of U.S. adults with a high school education has

A) remained constant since the 1960s.
B) risen from 8 percent in 1960 to 35 percent in 2018.
C) risen to 100 percent in the 21st century.
D) risen from 44 percent in 1960 to 90 percent in 2018.

Question 75

Which of the following statements is correct?

A) Between 1953 and 2018, all growth in U.S. real GDP can be attributed to increases in labor productivity.
B) Between 1953 and 2018, increases in labor productivity account for more of the growth in U.S. real GDP than do increases in the quantity of labor.
C) Between 1953 and 2018, increases in the quantity of labor account for more of the growth in U.S. real GDP than do increases in labor productivity.
D) Between 1953 and 2018, increases in labor productivity and increases in the quantity of labor contributed equally to the growth in U.S. real GDP.

Question 76

Other things equal, which of the following would increase labor productivity the most?

A) The stock of real capital and inputs of labor increase proportionately.
B) The increase in the stock of real capital exceeds the increase in inputs of labor.
C) The increase in inputs of labor exceeds the increase in the stock of real capital.
D) Inputs of labor increase and the stock of real capital remains constant.

Question 77

Globally, on average test scores of eighth-grade math and science students, the U.S. ranks (as of 2015)

A) 5th and 7th, respectively.
B) 1st and 1st, respectively.
C) 10th and 10th, respectively.
D) 8th and 6th, respectively.

Question 78

A nation's infrastructure refers to

A) its ability to realize economies of scale.
B) its stock of technological knowledge.
C) public capital goods such as highways and sanitation systems.
D) the productivity of its labor force.

Question 79

The largest contributor to increases in the productivity of American labor is

A) the reallocation of labor from agriculture to manufacturing.
B) improvements in labor quality.
C) increases in the quantity of capital.
D) technological advance.

Question 80

What percentage of the U.S. adult population has a college or post-college education (as of 2018)?

A) 8 percent
B) 35 percent
C) 41 percent
D) 88 percent