Question 1

Use the following to answer questions.
Exhibit: Aggregate Production Function, Labor Market, and LRAS 
-(Exhibit: Aggregate Production Function, Labor Market, and LRAS)  The economy could achieve its potential output at a price level-nominal wage combination of

Accepted Answer

A)   1.5 and $60,000.
B)   1.0 and $50,000.
C)   1.0 and $45,000
D)   0.5 and $30,000.

Question 2

The skills, training, and education possessed by workers contribute to economic growth

Accepted Answer

A)   by increasing saving.
B)   by increasing the quality of labor.
C)   by increasing the quantity of labor.
D)   by increasing real wages.

Question 3

Which of the following equations is correct?

Accepted Answer

A)   % growth rate of output per capita  % growth rate of output + % growth rate of population
B)   % growth rate of output per capita  % growth rate of output -% growth rate of population
C)   % growth rate of output per capita  % growth rate of output * % growth rate of population
D)   % growth rate of output per capita  % growth rate of output ÷ % growth rate of population

Question 4

Use the rule of 72 to determine how long it takes for real GDP to double if real GDP grows at 3% per year.

Accepted Answer

A)   12 years
B)   24 years
C)   36 years
D)   72 years

Question 5

Using a three-panel diagram of the labor market, the aggregate production function, and long-run aggregate supply, show and explain the effect of an increase in capital stock on wages, employment, and potential output.

Accepted Answer

To illustrate the effect of an increase ...

Question 6

Holding all else constant, a country's standard of living will decline if its

Accepted Answer

A)   nominal GDP grows at a faster rate than real GDP.
B)   nominal GDP grows at a slower rate than real GDP.
C)   the rate of population growth exceeds the rate of growth of real GDP.
D)   the rate of population growth is less than the rate of growth of real GDP.

Question 7

Economic growth is an exponential process. What does this mean?

Accepted Answer

A)   It means that the returns to huge capital investments made today will diminish at an increasing rate over time.
B)   It means that small differences in sustained growth rates have significant effects on a nation's real income over long periods of time.
C)   It means that countries must allocate increasing amounts of resources to capital goods to see constant increases in the growth rate of potential output.
D)   It means that if a country allocates a fixed amount of resources to capital goods, its potential output will increase at an increasing rate over long periods of time.

Question 8

Which of the following is a cost of economic growth?

Accepted Answer

A)   the sacrifice of current consumption
B)   inflation in consumption goods
C)   the sacrifice of future consumption
D)   excessive depletion of a nation's human capital

Question 9

The rule of 72 states that grows at some exponential rate of z percent

Accepted Answer

A)   will double in value in approximately 72 years.
B)   will double in value in approximately 72 ÷ z years.
C)   will double in value in approximately 72 * z years.
D)   will double in value in approximately 72z years.

Question 10

Use the following to answer questions .
Exhibit: Aggregate Production Function 
-(Exhibit: Aggregate Production Function)  The production function displays

Accepted Answer

A)   increasing marginal returns to labor.
B)   constant marginal returns to labor.
C)   increasing marginal returns to labor initially followed by diminishing marginal returns.
D)   diminishing marginal returns to labor.

Question 11

If a nation's real GDP grows at approximately 3.4% per year and its population doubles in 120 years, calculate the approximate rate of change in per capita real GDP.

Accepted Answer

A)   0.6% per year.
B)   2.8% per year.
C)   3.4% per year.
D)   4% per year.

Question 12

All else constant, if a nation's potential output doubles in 36 years, its average annual growth rate is

Accepted Answer

A)   approximately 1% .
B)   approximately 2%.
C)   approximately 3%.
D)   approximately 4%.

Question 13

Which of the following events will shift the long-run aggregate supply curve?

Accepted Answer

A)   a decrease in participation by women in the labor force
B)   an increase in the economy's general price level
C)   a liberal immigration policy that welcomes foreign workers
D)   a decrease in the average work week from 40 hours to 36 hours

Question 14

The determinants of economic growth include all of the following except

Accepted Answer

A)   technological improvement.
B)   improvements in the quality of factors of production.
C)   a stable price level.
D)   increases in the quantity of factors of production.

Question 15

Economic growth can generally be achieved through a(n)

Accepted Answer

A)   decrease in economic freedom.
B)   decline in the rate of growth in the working-age population.
C)   increase in the proportion of GDP used for saving.
D)   increase in the depreciation of capital goods.

Question 16

Economic growth is the process through which the economy's potential output is increased.

Accepted Answer

A) True 
 B)False

Question 17

If population increases at an average rate of 1% per year and output increases at an average rate of 5% per year, then per capita real GDP will double in

Accepted Answer

A)   14.4 years.
B)   18 years.
C)   24 years.
D)   36 years.

Question 18

Use the following to answer questions .
Exhibit: Production Possibilities Curves 1 
-(Exhibit: Production Possibilities Curves 1)  A cyclical increase in real GDP is represented by a movement

Accepted Answer

A)   from D to C.
B)   from D to E.
C)   from F to A.
D)   from A to B.

Question 19

Suppose a country's real GDP increases. At the same time, its population also increases. What happens to its standard of living?

Accepted Answer

A)   Its standard of living remains the same.
B)   Its standard of living depends on the price level.
C)   Its standard of living could rise if population growth exceeds output growth.
D)   Its standard of living could rise if population growth is smaller than output growth.

Question 20

In the U.S., between 1990 and 2007, capital stock and the level of technology increased dramatically. During the same period, employment and real wages rose. What do these set of events suggest?

Accepted Answer

A)   The demand for labor increased by more than the increase in supply of labor over this period.
B)   The demand for labor increased by less than the increase in supply of labor over this period.
C)   The demand for labor decreased while the supply of labor increased over this period.
D)   The demand for labor and the supply of labor decreased over this period.

Exam 8: Economic Growth

The determinants of economic growth include all of the following except

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The skills, training, and education possessed by workers contribute to economic growth

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All else constant, if a nation's potential output doubles in 36 years, its average annual growth rate is

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Suppose a country's real GDP increases. At the same time, its population also increases. What happens to its standard of living?

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Holding all else constant, a country's standard of living will decline if its

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Which of the following equations is correct?

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Economic growth is the process through which the economy's potential output is increased.

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Which of the following is a cost of economic growth?

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Economic growth is an exponential process. What does this mean?

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If a nation's real GDP grows at approximately 3.4% per year and its population doubles in 120 years, calculate the approximate rate of change in per capita real GDP.

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Use the following to answer questions . Exhibit: Production Possibilities Curves 1 -(Exhibit: Production Possibilities Curves 1) A cyclical increase in real GDP is represented by a movement

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Use the rule of 72 to determine how long it takes for real GDP to double if real GDP grows at 3% per year.

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In the U.S., between 1990 and 2007, capital stock and the level of technology increased dramatically. During the same period, employment and real wages rose. What do these set of events suggest?

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Using a three-panel diagram of the labor market, the aggregate production function, and long-run aggregate supply, show and explain the effect of an increase in capital stock on wages, employment, and potential output.

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Use the following to answer questions . Exhibit: Aggregate Production Function -(Exhibit: Aggregate Production Function) The production function displays

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Use the following to answer questions. Exhibit: Aggregate Production Function, Labor Market, and LRAS -(Exhibit: Aggregate Production Function, Labor Market, and LRAS) The economy could achieve its potential output at a price level-nominal wage combination of

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If population increases at an average rate of 1% per year and output increases at an average rate of 5% per year, then per capita real GDP will double in

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The rule of 72 states that grows at some exponential rate of z percent

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Economic growth can generally be achieved through a(n)

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Which of the following events will shift the long-run aggregate supply curve?

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To illustrate the effect of an increase ...
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