Chapter 8 Economic Growth A

Economic growth is best defined as an increase in:

either real GDP or real GDP per capita.

Real GDP per capita is found by:

dividing real GDP by population.

Real GDP per capita:

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

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

growth of real GDP per capita

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:

remain constant.

For a nation’s real GDP per capita to rise during a year:

real GDP must increase more rapidly than population.

Growth is advantageous to a nation because it:

lessens the burden of scarcity.

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

total real output.

Refer to the above table. Between years 1 and 2, real GDP grew by __________ percent in Alta.

5

Refer to the above table. Between years 1 and 2, real GDP per capita grew by approximately __________ percent in Alta.

4

Refer to the above table. Between years 2 and 3:

Alta’s real GDP grew more rapidly than Zorn’s real GDP.

Refer to the above table. Per capita GDP was about:

$303 in year 3 in Zorn.

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

calculate the number of years required for real GDP to double.

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

dividing 70 by the annual growth rate.

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

10 years.

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

14 years

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

conclude that its average annual rate of growth is about 4 percent

Between 1950 and 2009, U.S. real GDP grew at an average annual rate of about:

3.2 percent.

Between 1950 and 2009, U.S. real GDP per capita grew at an average annual rate of about:

2.0 percent.

Real Per Capita GDP in the United States in 2009 was approximately:

$42,300

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

Product quality has improved.

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

Modern economic growth is characterized by sustained and ongoing increases in living standards.

Countries that have experienced modern economic growth have also tended to:

move toward more democratic forms of government.

The Industrial Revolution and modern economic growth resulted in:

the average human lifespan more than doubling.

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

invented and built a more powerful and efficient steam engine

Real per capita GDP:

was much more equal across nations in 1820 than it is today.

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

Africa

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

United States

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

Catching up is possible as "follower countries" tend to grow faster than "leader countries."

As of 1998, living standards in the United States were nearly ______ times higher than those in Africa.

20

Economic growth rates in follower countries:

tend to exceed those in leader countries because followers can cheaply adopt the new technologies that leaders developed at relatively high costs.

Real GDP per capita in the United States (as of 2007) exceeds that of France primarily because:

the United States has a higher percentage of the working-age population in the labor force and because U.S. employees average about 20 percent more hours worked per year.

Based on the annual number of hours worked per capita, labor supply in the United States exceeds that of France by about _______ percent.

40

Strong property rights are important for modern economic growth because:

people are more likely to invest if they don’t fear that others can take their returns on investment without compensation

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

A well-enforced system of patents and copyrights.

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

Unrestricted trade between nations.

A competitive market system:

encourages growth by allowing producers to make profitable investment decisions based on market signals.

Free trade:

encourages growth by promoting the rapid spread of new inventions and innovations

Refer to the above list. As distinct from the demand and efficiency factors of economic growth, the supply factors of economic growth are:

1, 2, 5, and 6 only.

Refer to the above list. As distinct from the supply factors and efficiency factor of economic growth, the demand factor(s) of economic growth is (are):

3 only

Refer to the above list. As distinct from the supply factors and demand factor of economic growth, the efficiency factor(s) of economic growth is (are):

4 only

Which set of items in the above list would shift an economy’s production possibilities curve outward?

1, 2, 5, and 6 only

Which set of items in the above list would move an economy from a point inside its production possibilities curve to a point on its production possibilities curve?

3 and 4 only

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

aggregate expenditures of households, businesses, and government

The achievement of full employment through time will:

increase the realized rate of economic growth

Economic growth can be portrayed as:

an outward shift of the production possibilities curve

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:

production possibilities curve shifted outward

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:

production possibilities curve shifted outward

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:

real GDP declined.

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

shift from AB to CD.

Refer to the above graph. An increase in an economy’s labor productivity would:

shift curve AB to CD.

Refer to the above graph. An increase in the economy’s human capital would:

shift curve AB to CD.

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

move from X on AB to Y on CD.

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

increase in productivity.

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

shift in the production possibilities curve from AB to CD.

An outward shift of a nation’s production possibilities curve:

neither ensures a nation of an increase in real GDP nor of an increase in real GDP per capita.

Labor productivity is measured by:

real output per worker hour.

Labor productivity is defined as:

total output/worker-hours.

Which of the following is correct?

total output = worker-hours labor productivity

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:

is $500.

Suppose total output (real GDP) is $4000 and labor productivity is $8. We can conclude that:

the number of worker-hours must be 500.

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

labor productivity must be $0.5.

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

labor force participation rate.

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

A decrease in the labor force participation rate

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

An increase in the size of the working age population.

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

an increase in the size of the labor force

Which of the following statements is correct?

Between 1953 and 2009, increases in labor productivity account for more of the growth in U.S. real GDP than do increases in the quantity of labor.

Empirical studies suggest that:

technological advances account for about 40 percent of U.S. productivity growth.

Between 2009 and 2020, productivity growth is expected to account for about ________ percent of the growth of real GDP in the United States.

92

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

technological advance

Which of the following statements is correct?

The amount of real capital used per worker has increased historically in the United States.

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

increased the average productivity of labor.

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

increases in the productivity of labor.

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

technological advance

A nation’s infrastructure refers to:

public capital goods such as highways and sanitation systems.

Economies of scale refer to:

the fact that large producers may be able to use more efficient technologies than smaller producers

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

labor productivity to rise.

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

the increase in the stock of real capital exceeds the increase in inputs of labor

Human capital refers to:

the skills and knowledge that enable a worker to be productive.

What percentage of the U.S. adult population has at least a high school education (as of 2009)?

87 percent

What percentage of the U.S. adult population has a college or post-college education (as of 2009)?

29 percent

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

risen from 41 percent in 1960 to 87 percent in 2009.

Globally, on average test scores of eighth-grade math and science students, the U.S. ranks (as of 2007):

9th and 11th, respectively.

If the growth trend of labor productivity is 3 percent per year, the number of years that it will take for the standard of living to double will be about:

23 years

If the secular trend of labor productivity rises from 2 percent per year to 4 percent, the number of years that it will take for the standard of living to double will decline by about:

17 years.

The annual growth of U.S. labor productivity:

was greater between 1995 and 2009 than between 1973 and 1995.

The period in the U.S. economy from 1995 to 2009 is characterized by:

a higher trend rate of productivity growth

Increases in the value of a product to each user, including existing users, as the total number of users rises are called:

network effects

Network effects are:

increases in the value of a product to each user, including existing users, as the total number of users rises.

All of the following are sources of increasing returns and economies of scale except:

the multiplier effect.

The fundamental invention underpinning the recent rise in the average rate of productivity growth is the:

microchip.

All of the following are economic implications of the recent rise in the average rate of productivity growth except:

an end to the business cycle.

Skeptics of the recent rise in the average rate of productivity growth say that:

it is too soon to judge whether the high productivity advances between 1995 and 2009 are long-lasting or transitory.

Economists who believe that the recent rise in the average rate of productivity growth may be long-lasting claim that the above-normal economic growth in the United States between 1995 and 2009 was caused by:

increased entrepreneurial activity, application of information technology, and global competition.

Economists who believe that the recent rise in the average rate of productivity growth will be long lasting say that:

innovations in computers and communications, together with global capitalism, are greatly boosting U.S. productivity and the economy’s potential economic growth rate.

Between 1995 and 2009, the U.S. productivity rate:

grew substantially compared to prior years, leading some economists to predict a long-lasting resurgence of productivity growth.

Which of the following is a true statement?

Economists who support economic growth say that it is the most practical route to the higher standards of living that the vast majority of people desire.

Proponents of economic growth say that pollution:

occurs, not because of growth, but because common resources are treated as free goods.

Critics of economic growth:

argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth.

Proponents of economic growth make all of the following arguments except:

There is a direct relationship between a growing real GDP and rising pollution.

101. (Consider This) The main point of the Consider This box about hypothetical countries Slogo, Sumgo, and Speedo is that over several decades differing:

economic growth rates create large differences in real GDP per capita

Consider This) According to the Consider This box about hypothetical countries Slogo, Sumgo, and Speedo, small differences in __________ make for large differences in _________ over several decades, assuming the same growth of population for each country.

economic growth rates; real GDP per capita

(Consider This) According to the Consider This box on patents and innovation, the cost for U.S. and European drug companies to research, patent, and safety-test a new drug is about:

$1 billion

104. (Consider This) The Consider This box on patents and innovation demonstrates that:

Patent protection for U.S. companies may not be as effective when other countries do not

(Consider This) Over the past several decades, the percentage of women in the paid U.S. workforce has:

increased due to higher wages, expanded job accessibility, changing preferences and attitudes, and other factors.

(Consider This) Rising wages for women in the United States have increased:

the percentage of married women in the workforce.

(Last Word) Over the past twenty-five years, China has averaged annual growth rates of nearly:

9 percent

(Last Word) Growth of real per capita income and China has largely resulted from:

increased use of technology and improved technology.

(Last Word) Which of the following problems has not accompanied China’s rapid economic growth over the past twenty-five years?

Falling per capita income.