ECO Exam 2 CH12

The downside of pursuing a policy that increases saving and investment is _____ nonexistent. that current consumption of goods and services decreases. that there is an increase in the number of banks. that there is growth in the stock market.

The traditional view of the production process is that capital is subject to diminishing returns. So that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries. True False

From 1890 to 2010, countries with lower levels of real GDP per person than the United States all had growth rates that are lower than that of the United States. True False

In 2014, real GDP in an imaginary economy was $1 billion and the population was 2 million. In 2015, real GDP is $1.2 billion and the population is the same 2 million. What was the growth rate of real GDP per person during the year? -0.20% 0.20% -20% 20%

If workers increase the amount of training they obtain, we expect worker productivity to _____ decrease by a factor of 2. not change. increase. decrease.

In the late 1800's, Japan was the richest country in the world. True False

In the long run, the higher saving rate leads to a higher level of productivity and income but not to higher growth in these variables. True False

Consider the case of Crusoe's economy. Suppose Robinson Crusoe spends two hours to find ten turtle eggs. What is his productivity? 2 hours. 10 turtle eggs. 0.1 hour per turtle egg. 5 turtle eggs per hour.

In the United States, real GDP per person was $4,044 in 1870 and $47,210 in 2010. The growth rate was 1.77% per year. Which of the following is true? 77% per year is an average rate of growth for real GDP per person, actual growth each year was much higher. 1.77% per year is an average rate of growth for real GDP per person, actual growth each year was much lower. Each year, for 140 years, real GDP per person increased by 1.77%. 1.77% per year is an average rate of growth for real GDP per person over many years.

Given that it takes only 35 years for an initial value to double if there is a 2 percent growth rate, we can conclude that _____ growth rates are not compounding. growth rates are compounding. Real GDP per person does not change over time. a country with a lower initial real GDP per person can never pass a country with a higher initial real GDP per person.

Consider three countries with diminishing returns to capital. Country A has real GDP per person of $12,000; Country B has real GDP per person of $20,000; Country C has real GDP per person of $25,000. Suppose that the saving rate increases by the same rate in all three countries. For the next few years, Country A will grow faster than Countries B and C. For the next few years, Country C will grow faster than Countries A and B. In the long run, all three countries will grow at the same rate. In the long run, all three countries will have the same level of real GDP.

It is possible to increase economic growth with population growth because _____ with more people, there are more scientists and inventors to contribute to technological advances. it dilutes the capital stock. it stretches natural resources. there are more consumers.

If workers increase the amount of training they obtain, we expect worker productivity to _____ decrease by a factor of 2. not change. increase. decrease.

In Canada, real GDP per person was $2,397 in 1870 and $38,370 in 2010. The growth rate was 2.00% per year. Which of the following is true? The growth rate of 2.00% per year ignores short-run fluctuations around the long-run trend and represents an average rate of growth for real GDP per person over the period. Each year, for 140 years, real GDP per person increased by 2.00%. 2.00% per year is an average rate of growth for real GDP per person, actual growth in each year was much lower. The growth rate of 2.00% per year accounts for short-run fluctuations around the long-run trend.

A public policy that increases investment from abroad should _____ decrease future labor productivity. increase future labor productivity because the natural resources per worker increase. increase future labor productivity because it increases the current capital stock. have no effect on future labor productivity.

The fact that in the United States, real GDP per person was $4,044 in 1870 and $47,210 in 2010 implies that every year the United States had the growth rate of 1.77% per year. True False

The opening of a new American-owned factory in Algeria would tend to increase Algeria's GDP more than it increases Algeria's GNP because some of the income from the factory accrues to people who do not live in Algeria. True False

Suppose an economy experiences an increase in its saving rate. The higher saving rate leads to a higher growth rate of productivity in the long-run. True False

The fact that in Canada, real GDP per person was $2,397 in 1870 and $38,370 in 2010 implies that every year, the growth rate was 2.00% per year. True False

In 2013, real GDP in an imaginary economy was $1 billion and the population was 1 million. In 2014, real GDP was $1.2 billion and the population increased to 1.1 million. What was the growth rate of real GDP per person during the year? -10% -9% 10% 9%

Suppose that productivity grew faster in Country A than in Country B, while the population and total hours worked remained the same in both countries. The standard of living must be the same in both countries. Real GDP per person must be lower in Country A than in Country B. The standard of living must be higher in Country B than in Country A. Real GDP per person grew faster in Country A than in Country B.

In 1890, Brazil's real GDP per person was only $62 more than China's. From 1890 to 2010, Brazil experienced 2.65 percent economic growth while China had 2.15 percent. At the end of 2010, Brazil's real GDP per person was $3,460 more than China's. This shows _____ small differences in growth rates can result in large dollar differences over time. compounding economic growth does not change numerical values. a country with a lower initial real GDP per person will always be lower. Real GDP per person does not change over time.

The United Kingdom is an advanced economy, and over the past century its rate of economic growth has been higher than that of the United States. True False

Bertha uses all of the following resources to prepare delicious breakfast meals at her café. Which of them is an example of human capital? Furniture and kitchen equipment. Advertising. Funds invested in the establishment. Bertha's unique recipes.

Consider two economies with diminishing returns to capital. The economies are identical except one has a higher capital per worker than the other. Suppose that the saving rates in both countries increase. Over the next few years, the growth rate of technological knowledge will be lower in the country that started with less capital per worker. Over the next few years, the growth rate of real GDP per worker will be higher in the country that started with more capital per worker. Over the next few years, the growth rate of human capital will be higher in the country that started with less capital per worker. Over the next few years, the growth rate of real GDP per worker will be higher in the country that started with less capital per worker

Japan's status as a rich nation is attributable to international trade, but not to Japan's domestic quantities of natural resources. True False

Which of the following describes natural resources? The hospital building and the doctors' knowledge of medicine. The chefs' cooking skills and the kitchen equipment. The pumps and the cash register at a gas station. The inputs into production of goods and services that are provided by nature, such as land, rivers, and mineral deposits.

Which of the following can increase both productivity and income? An increase in human capital. A decrease in the savings rate. An increase in population. An increase in the savings rate.

Which of the following is an example of a nonrenewable resource? The knowledge possessed by scientists. Wood. Livestock. Oil.

In 2013, real GDP in an imaginary economy was $1 billion and the population was 1 million. In 2014, real GDP was $1.2 billion and the population increased to 1.1 million. What was the growth rate of real GDP per person during the year? 10% 9% -10% -9%

Which of the following describes natural resources? The electricity delivery system. Wind energy. A wind turbine. A variety of small, grid-connected devices referred to as distributed energy resources.

Which of the following defines productivity? The quantity of labor required to produce one unit of goods and services. The quantity of goods and services produced from each unit of labor input. The quantity of goods and services produced per unit of time The quantity of labor required to produce a nation's GDP.

In 2013, real GDP in an imaginary economy was $1.2 billion and the population was 1 million. In 2014, real GDP fell to $1 billion, whereas the population increased to 1.1 million. What was the growth rate of real GDP per person during the year? -20.00% -24.24% 24.00% -16.70%

Which of the following is an example of foreign portfolio investment? Ford Motor Company builds a car factory in Mexico. In the 1800s, Europeans purchased stock in American companies that used the funds to build railroads and factories. A European firm opens an interior design firm in San Francisco, CA. A European firm opens a new toy factory in China.

For a developed nation, a downside of public policy that increases health and nutrition is that _____ it decreases natural resources. it decreases physical capital. it decreases labor productivity. there is little payoff from the increase.

Bertha uses all of the following resources to prepare delicious breakfast meals at her café. Which of them is an example of physical capital? Funds invested in the establishment. Furniture and appliances. Bertha's unique recipes. Chefs and waiters.

Last year, real GDP in an imaginary economy was $125 billion and the population was 5 million. This year, real GDP is $132 billion and the population was 5.2 million. What was the growth rate of real GDP per person during the year? 1.0% 1.54% 2.0% 0.15%

Last year, a computer company made 600 laptops with 1200 hours of labor. This year, it made 900 laptops with 1200 hours of labor. What can you say about company's productivity? Productivity remained the same. Productivity increased by 50%. Productivity increased by 0.25 laptops. Productivity decreased by 50%.

Suppose an economy experiences an increase in its saving rate. The higher saving rate leads to a higher growth rate of productivity in the short- run. True False

In Mexico, real GDP per person was $1,169 in 1900 and $14,350 in 2010. The growth rate was 2.31% per year. Which of the following is true? 2.31% per year is an average rate of growth for real GDP per person, actual growth in each year was much lower. In some years the growth rate was higher than 2.31% per year, in other years, it was lower. 2.31% per year is an average rate of growth for real GDP per person, actual growth in each year was much higher. Each year, for 110 years, real GDP per person increased by 2.31%.

The short-run effects of an increase in the saving rate include a higher growth rate of productivity and a lower growth rate of income. True False

In a closed economy, if saving rises in some period, then in that period consumption falls and investment rises. True False

Which of the following accurately describes the difference between foreign direct investment and foreign portfolio investment? When foreigners directly invest in a country, they do so to stimulate the country's economy, all their profit will stay and be re-invested in the country, whereas foreign portfolio investment assumes that investors will move additional income back to their home country in the form of profit. Foreign direct investment assumes an investment that is owned and operated by a foreign entity, whereas foreign portfolio investment assumes investment into a domestically owned and operated business. Foreign direct investors have a right to a portion of the profit that the corporation earns, whereas portfolio investors own profits earned by the business they invested in. Foreign portfolio investment assumes an investment that is owned and operated by a foreign entity, whereas foreign direct investment assumes investment into a domestically owned and operated business.

Which of the following countries is a middle-income country, which over the past century had a higher rate of economic growth than the United States? Canada Mexico Argentina Japan

Which of the following is an accurate explanation of why the average American today is "richer" than the richest American 100 years ago? A century ago, people had fewer years of schooling. Tremendous technological advances. A century ago, international trade had not yet begun to flourish. Inaccurate measurements of personal fortunes.

An economy which consumes only what it produces has the standard of living that is tied to productivity. True False

Consider the case of Crusoe's economy. Suppose Robinson Crusoe spends two hours to catch four fish. What is his productivity? 4 fish. 2 fish per hour. 2 hour. 0.5 hour per fish.

Protecting property rights _____ leads to greater economic growth. decreases economic growth. only helps homeowners. has nothing to do with business transactions.

Which of the following statements is consistent with the fact that capital in an economy is subject to diminishing returns? When workers have a relatively large quantity of capital, giving them an additional unit of capital increases their productivity by a large amount. When workers have a relatively small quantity of capital, giving them an additional unit of capital increases their productivity by a relatively large amount. When workers have a relatively small quantity of capital, giving them an additional unit of capital will not increase their productivity. When workers already have a large quantity of capital, giving them an additional unit of capital will not increase productivity.

Consider the case of Crusoe's economy. Suppose Robinson Crusoe spends two hours to find ten turtle eggs, whereas his friend Friday finds 10 turtle eggs in one hour. Which of the following is true about productivity in this economy? Robinson and Friday are equally productive. Friday is more productive than Robinson. Robinson and Friday are equally unproductive. Robinson is more productive than Friday.

A domestic downside to a policy that increases education is that _______ there are already enough people with college degrees. people must forgo current wages to invest in education. it decreases natural resources. human capital has no link to labor productivity.

A factory employs 100 workers, each working 8 hours, to produce 3200 gadgets. What is productivity at the factory? 800 gadgets per hour. 4 gadgets per worker hour. 3200 gadgets. 320 gadgets per worker.

Increasing health and nutrition in less developed nations will most likely _____ decrease natural resources. decrease physical capital. increase labor productivity. decrease labor productivity.

Japan is an advanced economy, and over the past century its rate of economic growth has been higher than that of the United States. True False

Countries that have had higher output growth per person have typically done so without higher productivity growth. True False

If a country's saving rate declined, then other things the same, in the long run, the country would have lower productivity and lower real GDP per person. True False

Which of the following is measured by the growth rate of real GDP per person? Foreign direct investment. Changes in the level of well-being in a country. Human capital. Growth rate of nominal GDP.

The traditional view of the production process is that capital is subject to constant returns. True False

The historic data show that the world's richest countries have no guarantee they will stay the richest. True False

Suppose over the past decade, Country A had a higher population growth and productivity growth than Country B. Real GDP in both countries grew at the same rate. Real GDP in Country A grew faster than in Country B. Real GDP per person must be lower in Country B. Real GDP in Country A grew slower than in Country B.

Suppose a European firm opens a new toy factory in China. This is an example of brain-drain. foreign direct investment. indirect foreign investment. foreign portfolio investment.

Promoting political stability _____ can lead to greater economic growth. decreases economic growth. only helps homeowners. has nothing to do with business transactions.

One of the Ten Principles of Economics is that a country's standard of living depends on its ability to produce goods and services. True False

Consider two economies with diminishing returns to capital. The economies are identical except one has a higher capital per worker than the other. Suppose that the saving rates in both countries increase. Over the next few years, the growth rate of human capital will be higher in the country that started with less capital per worker. Over the next few years, the growth rate of real GDP per worker will be higher in the country that started with less capital per worker. Over the next few years, the growth rate of technological knowledge will be lower in the country that started with less capital per worker. Over the next few years, the growth rate of real GDP per worker will be higher in the country that started with more capital per worker.

Suppose that productivity grew more slowly in Country A than in Country B, while the population and total hours worked remained the same in both countries. The standard of living must be higher in Country A than in Country B. Real GDP per person grew more slowly in Country A than in Country B. The standard of living must be the same in both countries. Real GDP per person must be lower in Country A than in Country B.

The historic data show that the world's poorest countries are doomed to remain in poverty. True False

Which of the following most accurately describes the factors affecting productivity? Natural resources, physical capital, and human capital. Natural resources, technology, physical capital, and human capital. Physical capital, human capital, and technology. Natural resources, technology, and human capital.

Last year real GDP in an imaginary economy was $10 billion and the population was 2 million. This year, real GDP is $9 billion and the population is the same 2 million. What was the growth rate of real GDP per person during the year? 0.9% -10.0% -9.0% 11.0%

Real GDP per person more accurately measures a nation's standard of living than nominal GDP per person. True False

An orchard employs 10 workers, each working eight hours, to produce 160 boxes of apples. What is orchard's productivity? 20 boxes per hour. 2 boxes per worker hour. 160 boxes. 16 boxes per worker.

In Germany, real GDP per person was $2,204 in 1870 and $38,410 in 2010. The growth rate was 2.06% per year. Which of the following is true? The growth rate of 2.06% per year accounts for short-run fluctuations around the long-run trend. The growth rate of 2.06% per year ignores short-run fluctuations around the long-run trend and represents an average rate of growth for real GDP per person over the period. 2.06% per year is an average rate of growth for real GDP per person, actual growth in each year was much lower. Each year, for 140 years, real GDP per person increased by 2.06%.

The traditional view of the production process is that capital is subject to diminishing returns. So that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries.

A public policy that increases saving and investment increases future labor productivity because the policy ____ increases the capital stock. causes an increase in the stock market. causes an increase in the number of banks. increases natural resources per worker.

If workers increase the amount of education they obtain, we would expect worker productivity to _____ decrease by a factor of 2. not change. decrease. increase.

Last year, a chocolate factory made 60,000 bars employing 100 workers, each of whom worked 8 hours per day. This year, the factory produced 70,000 toys, employing 80 workers, each of whom worked 10 hours per day. What can you say about factory's productivity? Productivity remained the same. Productivity increased by 16.7%. Productivity increased by increased by 14.3%. Productivity decreased by 16.7%.

Bertha uses all of the following resources to prepare delicious breakfast meals at her café. Which of them is an example of technological knowledge? Funds invested in the establishment. Efficient commercial foodservice equipment that allows an increased number of servings per hour. Kitchen help. Bertha's cooking skills.

Industrial machinery is an example of Natural resource. Physical capital Financial capital. Human capital

When China experiences investment from abroad, Chinese workers have to protect the domestically developed technology from being copied by richer countries. Chinese workers gain access to the state-of-the-art technologies developed and used in richer countries. It requires more government restrictions on foreign ownership of domestic capital. The wages of Chinese workers fall.

Over the last century, which of the following countries had the highest growth rate of real GDP per person? The United Kingdom Japan Mexico China

Other things the same, when an economy increases its saving rate, consumption increases now and production rises later. True False

In 1890, Brazil's real GDP per person was only $62 more than China's. From 1890 to 2010, Brazil experienced 2.65 percent economic growth while China had 2.15 percent. At the end of 2010, Brazil's real GDP per person was $3,460 more than China's. This shows _____ small differences in growth rates can result in large dollar differences over time. compounding economic growth does not change numerical values. a country with a lower initial real GDP per person will always be lower. Real GDP per person does not change over time.

In 2014, real GDP in an imaginary economy was $1 billion and the population was 2 million. In 2015, real GDP is $1.2 billion and the population is the same 2 million. What was the growth rate of real GDP per person during the year? 0.20% 20% -0.20% -20%

Last year real GDP per person in an imaginary economy was $4,500. This year, it is $4,900. What was the rate of economic growth over the year? 8.2% 8.9% 9.2% 1.1%

A furniture factory uses 10 workers, each working eight hours, to produce 240 computer desks. What is productivity at the factory? 30 desks per hour. 3 desks per worker hour. 240 computer desks. 24 desks per worker.

Last year, a toy factory made 60,000 toys employing 80 workers, each of whom worked 8 hours per day. This year, the factory produced 76,500 toys, employing 85 workers, each of whom worked 10 hours per day. What can you say about factory's productivity? Productivity remained the same. Productivity decreased by 4%. Productivity increased by increased by 8.33%. Productivity increased by 4%.

Suppose that productivity grew faster in Country A than in Country B, while the population and total hours worked remained the same in both countries. The standard of living must be higher in Country B than in Country A. Real GDP per person grew faster in Country A than in Country B. The standard of living must be the same in both countries. Real GDP per person must be lower in Country A than in Country B.

Suppose that the U.S. undertakes a policy to increase its saving rate. This policy will cause a decrease in the growth of real GDP per person for several decades. True False

In Japan, real GDP per person was $1,517 in 1890 and $34,810 in 2010. The growth rate was 2.65% per year. Which of the following is true? 2.65% per year is an average rate of growth for real GDP per person, actual growth each year was much lower. The growth rate of 2.65% per year ignores short-run fluctuations around the long-run trend. 2.65% per year is an average rate of growth for real GDP per person, actual growth each year was much higher. Each year, for 120 years, real GDP per person increased by 2.65%.

Suppose a European company buys stock of a Chinese toy corporation. This is an example of Brain-drain. foreign portfolio investment. indirect foreign investment. foreign direct investment.

If workers increase the amount of education that they obtain, they increase their _____ natural resources. human capital. physical capital. technology.

A potential downside to a policy that increases investment from abroad is that it _____ decreases human capital. decreases physical capital. decreases natural resources. does not have the same effect on all measures of economic prosperity.

Public policies pursuing free trade _____ can lead to greater economic growth. only help domestic producers. only help domestic consumers. have nothing to do with business transactions.

A public policy that increases investment from abroad should _____ decrease future labor productivity. increase future labor productivity because the natural resources per worker increase. increase future labor productivity because it increases the current capital stock. have no effect on future labor productivity.

When China experiences investment from abroad, productivity rises, however the wages of Chinese workers fall. True False

The U. S. government has promoted research and development by _____ sponsoring research and enforcing patent laws. only sponsoring research. only enforcing patent laws. passing a balanced budget amendment.

Which of the following is an example of foreign direct investment? American saving is being used to finance Mexican investment. An American entrepreneur opens and operates a candy factory in Finland. A New York based interior design firm opens a store in San Francisco, CA. In the 1800s, Europeans purchased stock in American companies that used the funds to build railroads and factories.

When China experiences investment from abroad, China's productivity rises, however the wages of Chinese workers fall. China's productivity and the wages of Chinese workers increase. China's productivity declines, however and the wages of Chinese workers rise. China's productivity and the wages of Chinese workers decrease.

What is measured by the level of real GDP divided by hours worked over that year? Nominal GDP per person. Productivity for a given year. Growth rate of real GDP. Real GDP per person.

A public policy that increases education increases labor productivity because it _______ increases human capital. increases physical capital. increases natural resources. decreases human capital.

The growth that arises from capital accumulation requires that society sacrifice consumption goods and services now in order to enjoy more consumption in the future. True False

The public policy of promoting research and development increases economic growth by _____ leading to technological advances. increasing natural resources. decreasing natural resources. only creating private goods.

faster than relatively poor countries due to the fall-behind effect. slower than relatively poor countries due to the catch-up effect. faster than relatively poor countries due to the constant-returns-to-scale effect. faster than relatively poor countries due to the catch-up effect.