Economics 4-3 - Flashcards

question

All of the following qualifies as capital in economics except

answer

bonds and stocks.

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Per capita real gross domestic product (GDP) is higher in the United States than in Mexico. Based on that, we could predict the United States to have a higher rate of ___________ and a lower rate of ___________.

answer

Internet users; infant mortality

question

In the Republic of Yemen, per capita real gross domestic product (GDP) in 2004 was $2,109.27. By 2005, it had increased to $2,203.05. At what rate did Yemen's economy grow in that time?

answer

4.45%

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In 1350, average world income was roughly:

answer

$500.

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A key assumption of the Solow model is:

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diminishing returns to capital only.

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Depreciation is:

answer

the wearing out of capital over time.

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A country lowers trade barriers and institutes monetary and price stability. As a result, the annual growth rate of gross domestic product (GDP) increases from 2% to 4% per year. All else the same, in 35 years, GDP will be __________ as high as if there were no reform.

answer

twice

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Consider the Solow model reflecting technical change. This model assumes that technical change occurs:

answer

exogenously.

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In the economy, the level of capital will remain the same if:

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net investment is zero.

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In 2010, U.S. gross domestic product (GDP) was roughly $14.6 trillion. Given that the U.S. population was roughly 308 million people, per capita GDP in the United States in 2010 was roughly:

answer

$47,403.

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Economic models are:

answer

updated as new real-world data become available.

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Modern growth theory and the Solow growth model are both based on the importance of:

answer

the production function.

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In the Solow growth model, human capital will increase if (choose the best answer):

answer

there are more workers and/or existing workers become better educated and skilled.

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Higher rates of economic growth are negatively correlated with:

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shorter life expectancy.

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In the economy, the level of capital will increase if:

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net investment is positive.

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"Living standards" refer to the well-being of the residents of a country. Generally speaking, higher economic growth leads to higher living standards. But higher living standards today can further contribute to economic growth in the future. Which of the following aspects of higher living standards would contribute most to future economic growth?

answer

improved education for young people

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Growth theory began with _____________, which was introduced in _____________.

answer

The Solow growth model; the 1950s

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A(n) _____________ in the amount of resources will tend to _____________ economic growth.

answer

increase; increase

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In 1800, the average income of U.S. citizens was roughly:

answer

$2,000.

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If the United States _______ business taxes to foster growth, this would be included in an _________ growth model, as opposed to an _________ growth model.

answer

lowered; endogenous; exogenous

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Annual real per capita gross domestic product (GDP) in China was roughly $5,200 in 2000. If it grew by 10% the following year, by 2001 the annual real per capita GDP would be:

answer

$5,720.

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If an economy experiences economic growth, does that mean that everyone in that economy will be better off?

answer

No, it means that the average person is better off.

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Holding other factors constant, Bolivia is likely to experience _________ rates of economic growth than India because it is _________.

answer

lower; landlocked

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Consider a country that suffered through five years of civil war, but now has a stable government that has the support of the majority of the people. In this country, we are likely to observe:

answer

an increase in physical capital and an upward shift of the production function.

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From 2009 to 2010 per capita real gross domestic product (GDP) in the United States grew by 1.8%. At that rate, according to the Rule of 70, in roughly how many years will per capita real GDP double?

answer

39 years

question

A firm has a total of 25 workstations in four different office buildings. This year they build 3 new workstations and get rid of 5 old ones. In this case, investment is equal to _________ and net investment is equal to _________.

answer

3; mc076-1.jpg2

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Lauren owns a bakery. She wants to increase her daily production of baked goods, so she knows she needs to acquire more resources. Which of the following actions would represent an increase in the physical capital resource at her bakery?

answer

moving into a larger space

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Economic growth is defined as:

answer

the percent change of real per capita GDP.

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Annual real per capita gross domestic product (GDP) in India was roughly $2,900 in 2000. If it grew by 8% the following year, by 2001 the annual real per capita GDP would be:

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$3,132.

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According to modern growth theory, the key to economic growth is:

answer

institutions

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Consider the Solow growth model. When the economy has reached the point of ____________ it is said to have achieved _______________.

answer

no new net investment; a steady state

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After the Great Depression, the main focus of macroeconomics was

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the study of business cycles.

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In a population, not all workers have a high school diploma. Suppose the size of the labor force increases but a smaller percentage of the labor force has a high school diploma. It is reasonable to expect that the larger labor force will _________ the human capital input and the smaller percentage of the labor force with a high school diploma will _________ the human capital input.

answer

increase;decrease

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An increase in ________________ would lead to an increase in long-run economic growth.

answer

resources and technology

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Long-run per capita world income growth was basically flat until around what year?

answer

1800

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From 2009 to 2010, nominal gross domestic product (GDP) in the United States grew by 3.8%. Given that prices increased by 1% and the population grew by 1%, we know that per capita real GDP grew by:

answer

1.8%

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An example of physical capital is:

answer

paved roads a factory

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In 1950, Brazil's economy was roughly the same size as Nicaragua's. Today, Brazil's economy is almost five times as large as Nicaragua's. Which of the following best explains this difference?

answer

Brazil supported institutions like property rights, which tend to foster growth, whereas Nicaragua did not.

question

Krista owns a hair salon. She wants to increase the number of clients she serves each month, and she wants to use a technological advance to do so. ______________ would represent a technological advance at her hair salon.

answer

Installing a new hair dryer that can dry hair in half the time, with less damage to the hair

question

Between 2006 and 2010, per capita real gross domestic product (GDP) in China grew at an average rate of 10.62% per year. In contrast, its economy only grew by an average rate of 0.25% from 1961 to 1965. Which of the following factors would have contributed most to this rapid escalation in growth?

answer

the establishment of pro-growth institutions

question

From 2011 to 2012, the country of Fredonia experienced a growth rate of - 1.8%. If the nominal GDP increased by 2% and the population growth was recorded as 0.8%, calculate the annual inflation rate in Fredonia.

answer

3%

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In 2011, per capita real gross domestic product (GDP) in Mexico was roughly $10,100. If Mexico experienced economic growth of 4.8% in 2012, per capita real GDP would increase to:

answer

$10,585.

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From 2011 to 2012, nominal gross domestic product (GDP) in the United States increased by:

answer

4.0%

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From 2011 to 2012, real gross domestic product (GDP) in the United States increased by:

answer

2.2%

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In 2010, real gross domestic product (GDP) in the United States was roughly $14.6 trillion. In 2011, real GDP in the United States was roughly $15.1 trillion. Therefore, between 2010 and 2011, real GDP grew by:

answer

3.4%

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A(n) _____________ in capital goods should ____________ worker productivity.

answer

increase:increase

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In the economy with efficient institutions, technological advancement:

answer

is the result of individuals responding to incentives.

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According to the Solow model, an economy should build:

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more capital as long as the extra benefit is at least as great as the extra cost.

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Data show that:

answer

there is no evidence of a steady state or convergence for the countries of the world.

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An advance in technology allows a firm to produce ___________ output with ___________ resources.

answer

more; the same

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Liberia, a very poor nation in West Africa, is relatively abundant in resources such as mahogany and rubber tree forests, iron-ore deposits, and diamonds. If Liberia is so rich in valuable resources, why is it still so impoverished?

answer

Liberia lacks the institutions necessary to make productive use of those resources.

question

"Living standards" refer to the well-being of the residents of a country. Generally speaking, higher economic growth leads to higher living standards. But higher living standards today can further contribute to economic growth in the future. Which of the following aspects of higher living standards would contribute most to future economic growth?

answer

improved education for young people

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In 2009, per capita real gross domestic product (GDP) in Croatia was $10,059.68. By 2010, it had increased to $10,257.71. At what rate did Croatia's economy grow in that time?

answer

1.97%

question

It is reasonable to expect that as the amount of physical capital is increased, the amount of output produced will:

answer

increase at a diminishing rate.

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An economy is in the steady state if:

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investment equals depreciation.

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"Living standards" refer to the well-being of the residents of a country. Generally speaking, higher economic growth leads to higher living standards. But higher living standards today can further contribute to economic growth in the future. Which of the following aspects of higher living standards would contribute most to future economic growth?

answer

improved education for young people

question

Natural resources include I. physical land. II. diamonds. III. temperate weather patterns.

answer

I, II and III

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In 1998, per capita real gross domestic product (GDP) in Thailand was $4,444.19. By 1999, it had increased to $4,695.22. At what rate did Thailand's economy grow in that time?

answer

5.65%

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Many police officers in Mexico have been found to be working for drug traffickers, providing them with protection and warning them of raids. As a result, crime in Mexico is very high and drug gangs compete for territory, leading to a great loss of life. How would this situation affect Mexico's economic growth?

answer

Economic growth would be harmed because the rule of law no longer applies.

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As additional units of an input are employed, the marginal product of the input is:

answer

eventually decreasing.

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Country A has been growing at a rate of 7% per year, whereas country B has been growing at a rate of 2% per year. The Solow growth model would predict that:

answer

country B is closer to its steady state than country A.

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Lauren owns a bakery. She wants to increase her daily production of baked goods, so she knows she needs to acquire more resources. Which of the following actions would represent an increase in the human capital resource at her bakery?

answer

increasing employee training hiring more employees

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According to the Solow growth model, rich nations are rich because:

answer

they have more capital.

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Japan is a nation of over 6,800 islands, none of which is very large. The largest island, Honshu, is roughly the same size as the state of Montana in the western United States. Does this mean that Japan is destined to have low economic growth and standards of living?

answer

No, Japan is rich in other resources and has advanced levels of technology.

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In 2007, per capita real gross domestic product (GDP) in Brazil was $9,893.92. By 2008, it had increased to $10,525.58. At what rate did Brazil's economy grow in that time?

answer

6.38%

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From 2006 to 2010, per capita real gross domestic product (GDP) in Poland grew an average of 4.71% per year. At that rate, according to the Rule of 70, in roughly how many years will the Polish economy double in size?

answer

14.9 years

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According to the World Bank, the 31 wealthiest countries in the world tended to have much lower rates of ___________ and much higher rates of ___________ when compared to the 40 poorest countries.

answer

infant mortality; adult literacy

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In economics, technology is defined as:

answer

the knowledge available for use in production.

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How does the World Bank classify as rich (R) or poor (P) the following countries: Bangladesh, Israel, North Korea, South Korea?

answer

P, R, P, R

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As they relate to economic growth, institutions are:

answer

significant practices, relationships, or organizations in society.

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If an economy is in the steady state, then:

answer

the marginal product of capital is near zero.

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In 2005, per capita real gross domestic product (GDP) in Angola was $3,328.10. By 2006, it had increased to $4,034.31. At what rate did Angola's economy grow in that time?

answer

21.22%

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A company has three delivery trucks. Each month the trucks require repairs to keep them in good working order. Which of the following is true?

answer

Net investment is equal to zero.

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Consider the case of long-distance telephone service. In country X, there are 20 providers of long-distance telephone service in a highly competitive market environment. On the other hand, in country Y, long-distance telephone service is largely regulated by the government, with the firm Horizon as the sole provider of this service. Under these circumstances, it is expected that

answer

country X will have higher growth potential than country Y.

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From 2009 to 2010, nominal gross domestic product (GDP) in the United States grew by 3.8%. Given that the population grew by 1% and per capita real GDP grew by 1.8%, we know that prices increased by:

answer

1%

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According to the Solow growth model, investment in developing nations should be ___________ investment in more developed nations.

answer

higher than

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As a country approaches the steady state, the returns to capital _________.

answer

decrease

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Access to lifesaving medicine is very limited in parts of Africa; as a result, over 10% of children do not reach the age of five. What effect would this have on economic growth in Africa?

answer

It would slow economic growth because worker health and labor productivity would grow more slowly.

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An increase in the amount of household wealth in an economy would ___________ the average standard of living and would ___________ the spending power experienced by the typical person.

answer

raise; have little effect on

question

In 1950, Brazil's economy was roughly the same size as Nicaragua's. Today, Brazil's economy is almost five times as large as Nicaragua's. Which of the following best explains this difference?

answer

Brazil supported institutions like property rights, which tend to foster growth, whereas Nicaragua did not.

question

From 2011 to 2012, the country of Fredonia experienced a growth rate of - 1.8%. If the nominal GDP increased by 2% and the population growth was recorded as 0.8%, calculate the annual inflation rate in Fredonia.

answer

3%

question

If you attempted to determine if the standard of living of a country has increased by looking only at changes in its nominal gross domestic product (GDP), what would you be missing?

answer

The fact that an increase in nominal GDP does not necessarily mean that standards of living are rising, due to changes in prices and the population

question

For calculating economic growth of a country we need to collect data on which of the following? I. nominal GDP II. real GDP III. prices IV. population

answer

II and IV

question

In 2009, per capita real gross domestic product (GDP) in Croatia was $10,059.68. By 2010, it had increased to $10,257.71. At what rate did Croatia's economy grow in that time?

answer

1.97%

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A firm's human capital would increase with:

answer

on-the-job training.

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Human capital relates to _________ and physical capital relates to _________.

answer

people; buildings

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Modern growth theory views economic growth as:

answer

endogenous.

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Competitive markets contribute significantly to economic growth because:

answer

people who want to participate don't face barriers to entry.

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How will technological advancement impact the steady state level of capital in the Solow growth model?

answer

It will increase the steady state level of capital.

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Determine whether the following statement is consistent with the Solow model, modern growth theory, neither, or both. Funding construction for a damn built on the Mississippi River is dependent upon efficient taxes and the rule of law.

answer

both

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All of the following can lead to economic growth except

answer

an increase in the quantity of money.

question

Average world income began to rapidly rise during the Industrial Revolution because:

answer

the pace of technological innovation outpaced population growth.

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From 2006 to 2010, per capita real gross domestic product (GDP) in Ethiopia grew an average of 7.99% per year. At that rate, according to the Rule of 70, in roughly how many years will the Ethiopian economy double in size?

answer

8.8 years

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According to the Solow growth model, growth will eventually:

answer

stop.

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All of the following can result in economic growth except

answer

a boost in population growth.

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Average income in Western Europe in 1600 was roughly:

answer

$1,400.

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How much would Israel's nominal GDP growth be next year if it experienced real GDP growth next year the same as its average over the past 50 years, with an inflation rate of 3% and population growth of 1%?

answer

6.24%

question

Diminishing marginal product is also known as:

answer

diminishing returns.

question

In a population, the size of the labor force shrinks but a greater percentage of the labor force has a college degree. We can expect the human capital input to:

answer

increase or decrease depending on which change has a larger impact.

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Compared to poorer countries, people in richer countries are ____ likely to have access to physicians and experience ____ infant mortality rates.

answer

more; lower

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From 2009 to 2010, nominal gross domestic product (GDP) in the United States grew by 3.8%. Given that prices increased by 1% and per capita real GDP grew by 1.8%, we know that the population grew by:

answer

1%

question

Countries A and B are exactly similar in terms of resources and technology. Still country A reported a higher growth rate than country B last year. Which of the following can explain this anomaly? I. higher population growth in country B II. favorable climate in country A III. lack of proper institutions in country B

answer

I and III

question

From 2011 to 2012, U.S. real GDP increased by 2.2% and the U.S. population grew by 1%. Therefore, per capita real GDP in the United States increased by:

answer

1.2%

question

According to the textbook, which of the following countries is not considered a "wealthy nation"?

answer

Liberia

question

Nathan owns a coffee shop. He wants to increase the weekly number of coffee drinks he sells, and he wants to use a technological advance to do so. ______________ would represent a technological advance at his coffee shop.

answer

Acquiring a new espresso machine that can prepare coffee drinks faster than his current model

question

Beginning in the late 1970s, economic reform in China allowed farmers, for the first time, to keep a portion of their crops and to sell them to others. Previously, all food was collectively farmed and shared. How did this basic reform improve China's economic growth?

answer

It gave farmers an incentive to be more productive.

question

At the turn of the twenty-first century, most poor nations had:

answer

continued to stagnate.

question

In 1950, residents in Liberia were wealthier than those in Taiwan. Today, per capita gross domestic product (GDP) in Taiwan is more than twenty times that of Liberia. How would private property rights help explain why Taiwan is now so much wealthier than Liberia?

answer

With a well-developed system of property rights, like in Taiwan, people have very strong incentives to improve the value of their assets.

question

Economic growth theory is based on:

answer

the Solow growth model.

question

James has worked for the same company his entire life. His current income is $100,000 per year. When he was originally hired, he made $50,000 per year. The company has given James a consistent raise of 2% every year. How long has James been with the company?

answer

35 years

question

Access to lifesaving medicine is very limited in parts of Africa; as a result, over 10% of children do not reach the age of five. What effect would an increase in medical aid to African children have on overall economic growth for the continent?

answer

Economic growth would increase because the health and productivity of the labor supply would increase.

question

Nominal gross domestic product (GDP) is a poor measure of economic growth because:

answer

it does not consider changes in prices or population growth.

question

As a nation approaches its steady state, the returns to capital _________ and the growth of real gross domestic product (GDP) _________.

answer

decrease; slows down

question

Economic growth theory originated about 60 years ago as a result of contributions by:

answer

Robert Solow.

question

In equation form, the production function for a single firm can be expressed as:

answer

q = f(human capital, physical capital).

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In which area of the world were policies based on the Solow growth model consistently applied, but with very limited success?

answer

Africa

question

Economic growth equals the percent change in nominal gross domestic product (GDP) minus:

answer

the percent change in prices and the rate of population growth.

question

In the economy, the level of capital will decrease if:

answer

net investment is negative.

question

An increase in human capital would tend to:

answer

increase worker productivity.

question

Economic theories about growth:

answer

are used to set economic policies that impact human lives.

question

From 2009 to 2010, per capita real gross domestic product (GDP) in the United States grew by 1.8%. Given that prices increased by 1% and the population grew by 1%, we know that nominal GDP grew by:

answer

3.8%

question

Consider this version of the equation for a production function: Y = A × F (natural resources, human capital, physical capital). In the Solow model, the letter A in this equation represents:

answer

technology, an exogenous change, that multiplies the effectiveness of a nation's resources.

question

According to modern growth theory, a country that wants to foster long-run economic growth and the accumulation of wealth should focus on:

answer

its institutions.

question

Is having abundant resources an absolute guarantee of economic growth and prosperity?

answer

No; other factors like institutions and technological advances are relevant too.

question

In 1950, Nicaragua and Brazil had roughly the same-sized economies. Now, Brazil's economy is almost five times as large as Nicaragua's. This is likely because:

answer

Brazil had better resources and technology.

question

An example of an institution that will decrease the expected payoff of investment is:

answer

high and variable inflation.

question

By how much did real GDP per capita need to increase in South Korea in 2009 to achieve a growth rate consistent with its average over the previous 50 years?

answer

1,668.39

question

New technology makes capital _________ and income will _________.

answer

more productive; increase

question

According to modern growth theory, convergence in the level of wealth across countries depends mainly on:

answer

institutions

question

According to the Solow Growth Model, which of the following is/are the primary source(s) of economic growth?

answer

C - Physical capital

question

North Korea is largely closed to international trade. This can have a _______ impact on economic growth.

answer

negative

question

In what way did Henry Ford's use of the assembly-line method of production represent an advance in technology in automobile manufacturing?

answer

It allowed workers to specialize on specific tasks and become more productive.

question

In 2000, annual real per capita gross domestic product (GDP) in Western Europe was around ___________, whereas in India, it was around ___________.

answer

$31,000; $2,900

question

A firm has 100 computers, and each year 5 of them become obsolete and must be recycled. This firm is in a steady state if investment each year is equal to:

answer

5

question

Average income in Western Europe in 1600 was roughly $1,400 per year, while in Latin America, it was less than half that. Which of the following best explains this difference in average income?

answer

Western Europe had more advanced technology than Latin America.

question

An economy is in a steady state if:

answer

capital and output are not changing.

question

A type of policy that would be advocated by modern growth theory would be to:

answer

reduce trade restrictions.

question

All of the following are examples of institutions except:

answer

incentives.

question

From 2006 to 2010, per capita real gross domestic product (GDP) in India grew an average of 7.11% per year. At that rate, according to the Rule of 70, in roughly how many years will the Indian economy double in size?

answer

9.8 years

question

In the Republic of Yemen, per capita real gross domestic product (GDP) in 2004 was $2,109.27. By 2005, it had increased to $2,203.05. At what rate did Yemen's economy grow in that time?

answer

4.45%

question

In 2012, U.S. gross domestic product (GDP) was roughly:

answer

$15.6 trillion.

question

For each of the following policies, select the type of resource that is the primary focus of the policy. (i) Aid from the IMF for the education for education of technology workers. (ii) A piece of legislation banning drilling for oil in Alaska. (iii) Laws mandating school attendance for children younger than 18. (iv) State tax credits for the construction of new company headquarters within the state.

answer

(i) human capital; (ii) natural resources; (iii) human capital; (iv) physical capital

question

Considering the growth experience for all countries in the world:

answer

there is no evidence of catching up by the poor countries or of the slowing down of growth in the wealthy countries.

question

Modern growth theory views technological innovation as _________, whereas Solow growth theory views technological change as _________.

answer

endogenous; exogenous

question

Krista owns a hair salon. She wants to increase the number of clients she serves each month, so she knows she needs to acquire more resources. Which of the following actions would represent an increase in the physical capital resource at her hair salon?

answer

buying more chairs and hair dryers

question

A restaurant's production function would show the relationship between:

answer

the number of workers hired and the number of meals served.

question

If building new capital is costless and the capital depreciation rate is zero, then an economy will reach a steady state in which the marginal product of capital is

answer

equal to zero.

question

Convergence is the idea that ___________ will equalize across nations as they approach the steady state.

answer

the level of real GDP per capita

question

All of the following except _____________ are barriers to natural growth.

answer

free markets

question

One of the most basic reasons why Taiwan is so much wealthier than Liberia is that Taiwan has:

answer

institutions that promote economic growth.

question

From 2006 to 2010, per capita real gross domestic product (GDP) in China grew an average of 10.62% per year. At that rate, according to the Rule of 70, in roughly how many years will Chinese per capita real GDP double in size, beginning in 2006?

answer

6.6 years

question

Between 2006 and 2010, per capita real gross domestic product (GDP) in India grew at an average rate of 7.11% per year. Which of the following factors would have contributed most to this rapid escalation in growth?

answer

advances in technology

question

Krista owns a hair salon. She wants to increase the number of clients she serves each month, so she knows she needs to acquire more resources. Which of the following actions would represent an increase in the human capital resource at her hair salon?

answer

increasing the amount of training for her stylists hiring more stylists

question

In 1950, residents in Liberia were wealthier than those in Taiwan. Today, per capita gross domestic product (GDP) in Taiwan is more than 20 times that of Liberia. Which of the following best explains why Taiwan is now so much wealthier than Liberia?

answer

Liberia lacks the sort of institutions that promote growth that Taiwan has.

question

According to the Solow growth model, exogenous growth is:

answer

based on luck

question

Country X has a higher growth rate of real investment than country Y. You might expect country X to have:

answer

a higher growth rate of real gross domestic product (GDP).

question

From 2009 to 2010, nominal gross domestic product (GDP) in the United States increased by 3.8%. Does this mean that the U.S. economy actually grew during that time period?

answer

No, because that number ignores changes in prices and population growth.

question

An example of an institution that will increase the expected payoff of investment is:

answer

a more efficient tax structure.

question

Growth that is independent of any factors in the economy is:

answer

exogenous growth.

question

Bob owns and manages an apple orchard. In Bob's business, an example of human capital would be:

answer

the time spent by the workers picking apples.

question

In 2007, per capita real gross domestic product (GDP) in Brazil was $9,893.92. By 2008, it had increased to $10,525.58. At what rate did Brazil's economy grow in that time?

answer

6.38%

question

In what way did Henry Ford's use of the assembly-line method of production represent an advance in technology in automobile manufacturing?

answer

It allowed workers to specialize on specific tasks and become more productive.

question

According to the Solow Growth Model, the marginal product of capital is

answer

positive and decreases as the quantity of capital increases.

question

Average world income began to increase rapidly during:

answer

the Industrial Revolution.

question

In the Solow growth model, human capital measures:

answer

the labor input in terms of the physical number of workers and the knowledge and skills embodied in those workers.

question

If the production function in the Solow growth model is given by q = f(human capital, physical capital), then in this model:

answer

labor is represented by the human capital variable.

question

From 2006 to 2010, per capita real gross domestic product (GDP) in Egypt grew an average of 4.8% per year. At that rate, according to the Rule of 70, in roughly how many years will the Egyptian economy double in size?

answer

15 years

question

According to the Solow growth theory, developing nations will catch up to the developed nations:

answer

because developing nations can borrow technologies from the developed nations and learn from their mistakes.

question

Change in per capita real gross domestic product (GDP) is the best measure of economic growth because:

answer

it adjusts changes in nominal GDP for changes in the price level and population growth.

question

A reason wealthy nations have continued to realize sustained growth is:

answer

there has been continued technological advance.

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