Question 1

Most economists believe that freeing up markets can enhance development in poorer countries.

Accepted Answer

Most economists believe in the benefits of free markets, which include increased economic growth, foreign direct investment, and consumer choice. However, there are debates over the extent to which free markets should be implemented and whether regulation is necessary to prevent negative externalities such as inequality and environmental degradation.

Question 2

Technological progress that aids in the productivity of the United States does not help other countries to grow.

Accepted Answer

Technological progress in the United States can lead to improvements in efficiency and output, which can in turn lead to increased demand for goods and services from other countries. Additionally, advancements in technology often involve international collaboration and knowledge sharing, which can benefit other countries as well.

Question 3

If an economy's GDP will double in 25 years, then its growth rate must be about

Accepted Answer

The rule of 70 states that to estimate the number of years it takes for a variable to double, we divide the number 70 by the annual growth rate of that variable. In this case, since the GDP is expected to double in 25 years, we can use the rule of 70 to calculate the annual growth rate: 
70 / Annual growth rate = 25
Annual growth rate = 70 / 25 
Annual growth rate = 2.8%
Therefore, the correct answer is B) 2.8%.

Question 4

The government decides to give tax-exempt status to a new organization whose mission is to award college scholarships to members of the armed forces. In doing so, the government is acting in its role to promote economic growth by

Accepted Answer

By providing tax-exempt status to an organization that awards college scholarships to members of the armed forces, the government is enhancing human capital. This can lead to economic growth by improving people's skills and knowledge, making them more productive and able to contribute more to the economy.

Question 5

The Rule of 70 states that the number of years required for a value to double in size is 70.

Accepted Answer

The Rule of 70 states that the number of years required for a value to double in size is approximately 70 divided by the annual growth rate percentage.

Question 6

Countries with strong legal systems tend to have more economic prosperity than those without.

Accepted Answer

Strong legal systems provide stability and predictability for businesses, encouraging investment and growth. They also protect property rights and enforce contracts, which are essential for a thriving economy. Conversely, weak legal systems can deter investment and hinder economic development.

Question 7

Given the form of a typical production function, which of these would have the greatest impact on the output of a country?

Accepted Answer

A represents total factor productivity (TFP), which measures the efficiency of all inputs in the production process. A significant increase in A would have a greater impact on output than proportional increases in labor (L), capital (K), or natural resources (N) because it enhances the effectiveness of all these inputs.

Question 8

Investments in human capital help to improve productivity.

Accepted Answer

Investing in human capital, such as education and training, can enhance the skills and knowledge of workers, leading to improved productivity in the workforce.

Question 9

The percentage of the world's population that is very poor, as opposed to living in extreme poverty, is about

Accepted Answer

The answer of The percentage of the world's population that...

Question 10

If real gross domestic product increased 0.625% from the first quarter to the second quarter of 2013, the annualized growth rate was 2.5%.

Accepted Answer

To annualize a quarterly growth rate, it is multiplied by four. Therefore, 0.625% x 4 = 2.5%.

Question 11

Increases in _____ often lead to economic growth.

Accepted Answer

Advancements in technology can lead to increased productivity and efficiency, which often drive economic growth.

Question 12

Which statement is NOT true?

Accepted Answer

Economic growth does not necessarily lead to a more equitable distribution of income. In fact, it can sometimes widen the income gap between the rich and poor, especially if the growth is concentrated in certain sectors or industries.

Question 13

Public schools are an example of infrastructure.

Accepted Answer

Public schools are a type of infrastructure as they provide educational resources and facilities for students within a community.

Question 14

Which factor is NOT generally viewed by economists as critical to economic growth?

Accepted Answer

While access to natural resources can certainly be an advantage for economic growth, it is not typically viewed as a critical factor by economists. The other three choices - a strong and fair legal system, a stable monetary system, and economic freedom - are widely recognized as important drivers of economic growth.

Question 15

If your goal was to have the largest amount of money in your bank account as possible in two years, which option would you choose? (Assume that the beginning deposit and all interest earnings remain in the account for the full two years.)

Accepted Answer

Option A has the highest interest rate at 8%, which will lead to a higher overall amount of interest earnings over the two-year period, despite having a lower beginning deposit than option C and D. Option B has a higher beginning deposit, but a lower interest rate, resulting in lower overall interest earnings.

Question 16

Physical capital includes

Accepted Answer

Physical capital refers to manufactured products that are used to produce other goods and services, such as machinery, equipment, and tools. It does not refer to the physical talents of people (human capital) or land and raw resources (natural resources). While creativity is an important aspect of production, it is not a defining characteristic of physical capital.

Question 17

Because it consists of _____ items, a nation's infrastructure is difficult to measure.

Accepted Answer

A nation's infrastructure includes both tangible items like roads, bridges, and buildings, as well as intangible items like communication networks, legal systems, and education systems. Due to this varying mix of tangible and intangible assets, measuring a nation's infrastructure can be challenging.

Question 18

Which strategy is an example of increasing the capital-to-labor ratio?

Accepted Answer

Increasing the number of backhoes given to a construction crew would increase the amount of capital available per worker, thus increasing the capital-to-labor ratio. Replacing the roof on a factory building may improve technology or safety but doesn't necessarily increase the capital-to-labor ratio. Sending workers to training classes may improve their productivity and efficiency but doesn't change the amount of capital available per worker. Increasing the number of workers harvesting crops in a field would decrease the capital-to-labor ratio, as there would be less capital available per worker.

Question 19

Government funding of Los Alamos National Labs is an example of the government acting in its role to promote economic growth by

Accepted Answer

Los Alamos National Labs conduct research and development in various fields such as nuclear weapons and energy, nonproliferation, and national security. The government funding of this organization enhances physical and human capital, which can lead to advancements in technology, innovation, and ultimately economic growth.

Question 20

Growth is the most important contributor to reducing extreme poverty.

Accepted Answer

Economic growth has been shown to be the most effective way of reducing extreme poverty. When a country's economy grows, it creates jobs and opportunities, raises incomes, and improves access to basic necessities such as education, healthcare, and sanitation. This helps lift people out of poverty and leads to long-term sustainable development. However, it's important to note that growth alone may not be sufficient and that policies must be put in place to ensure that growth is inclusive and benefits all people, particularly the most vulnerable.

Quiz 7: Economic Growth