Chapter 8 Test

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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 neither 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, it’s 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 the 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

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"

In 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

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 allocating producers to make profitable investment decisions based on market signals

Free trade:

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

Use the list below to answer the following question:

1. Improvements in technology
2. Increases in the supply (stock) of capital goods
3. Purchase 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

Refer to the 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

Use the list below to answer the following question:

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.

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

3 only

Use the list below to answer the following question:

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.

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

4 only

Use the list below to answer the following question:

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 list would shift an economy’s production possibilities curve outward?

1, 2, 5, and 6 only

Use the list below to answer the following question:

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 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 on 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

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 x 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

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 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 2011, 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

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

Human capital refers to:

the skills and knowledge that enable a worker to be productive

Which of the following is a measure of economic growth that is most useful for measuring geopolitical preeminence or military potential?

increases in real GDP

Which of the following is a measure of economic growth that is most useful for comparing living standards?

increases in real GDP per capita

Economic historians identify which invention as a major factor that started the Industrial Revolution in Britain?

steam engine

The invention of the steam engine ushered in the following developments, except:

a sharp reduction in trade as many societies specialized

Which of the following does not correctly characterize modern economic growth?

it has not affected the average lifespan of human beings

In the modern economic growth process, it is typical to find that:

follower countries can grow faster than leader countries

Modern economic growth often results in the following, except:

less time for ordinary people to enjoy leisure activities because the primary focus is on production and work

The main cause for the vast differences in per capita GDP levels seen across the globe today is the:

different starting dates of modern economic growth in different parts of the world

Growth-promoting institutional structures include the following, except:

protection of domestic firms from foreign rivals

Patents and copyrights foster the flow of:

inventions and ideas

Efficient financial institutions foster the flow of:

saving and investment

The reasons why per capita GDP in the U.S. is significantly higher than in some other rich countries like, say, France include the following, except:

differences is the communication technology due to language differences

Supply factors in economic growth include the following, except:

increases in purchases of output

Which of the following is best considered a demand factor in economic growth?

the full employment of resources

Which of the following is a demand factor in economic growth?

an increase in total spending in the economy

Which of the following is the so-called efficiency factor of economic growth?

reaching full production potential

Economic growth can best be portrayed as a:

rightward shift of the production possibilities curve

Suppose that an economy is initially operating at a point on its PPC. If it then experiences an expansion in its production capacity, but its total spending does not rise as fast as its capacity, the economy will end up:

inside its PPC

Real GDP or total output in any year is equal to:

number of worker-hours multiplied by labor productivity

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