Ch.9 Productivity And Economic Growth Verified Test Bank - Principles of Macroeconomics -Complete Test Bank by Taylor. DOCX document preview.
Chapter 9
Productivity and Economic Growth
Multiple Choice
1. Prior to 1800, productivity growth averaged
a. | 1 percent per year. |
b. | 0 percent per year. |
c. | .5 percent per year. |
d. | 3 percent per year. |
e. | 2 percent per year. |
OBJ: factual
SEC: 0. Productivity and economic growth
TOP: Economic Growth
MSC: Bloom's: Knowledge
2. Productivity is defined as
a. | output per person. |
b. | output per unit of capital. |
c. | output per unit of technology. |
d. | output per hour of work. |
e. | output per unit of full-time employment. |
OBJ: factual
SEC: 0. Productivity and economic growth
TOP: Productivity
MSC: Bloom's: Knowledge
3. Which of the following is ?
a. | Economic growth began to accelerate during the Industrial Revolution. |
b. | There has always been economic growth. |
c. | Economic growth rates were highest during the Industrial Revolution. |
d. | All of these |
e. | The best measure of economic growth is the growth rate of output. |
OBJ: factual
SEC: 0. Productivity and economic growth
TOP: Productivity Growth
MSC: Bloom's: Analysis | AACSB: Analytic
4. Which of the following is ?
a. | Growth in capital alone explains virtually all of the recent growth in productivity. |
b. | Economic policies cannot influence the growth of productivity in the economy. |
c. | Increases in labor will increase real GDP per hour of work. |
d. | The growth of productivity is determined by the available labor, capital, and technology. |
e. | Increasing the investment share of GDP will increase the growth of capital. |
OBJ: factual
SEC: 0. Productivity and economic growth
TOP: Productivity Growth
MSC: Bloom's: Analysis | AACSB: Analytic
5. Increases in labor, according to the theory of economic growth,
a. | increase productivity but not the growth of real GDP. |
b. | increase neither productivity growth nor the growth of real GDP. |
c. | increase both productivity and the growth of real GDP. |
d. | increase the growth of real GDP but not productivity. |
e. | have an uncertain effect on both productivity and real GDP. |
OBJ: factual
SEC: 0. Productivity and economic growth
TOP: Productivity
MSC: Bloom's: Knowledge
6. Which of the following should be focused on to explain the growth of productivity?
a. | The growth of labor and capital |
b. | The growth of capital and technology |
c. | The growth of labor and technology |
d. | The growth of the labor force |
e. | The natural rate of unemployment |
OBJ: factual
SEC: 0. Productivity and economic growth
TOP: Determinants of Productivity Growth
MSC: Bloom's: Knowledge
/
7. Productivity continues to grow in the twenty-first century, and in particular it is spreading to countries like India and China.
Basic
OBJ: factual
SEC: 0. Productivity and economic growth
TOP: Productivity Growth
MSC: Bloom's: Knowledge
8. The late 1700s and early 1800s represent a period in which productivity grew significantly, and they are thus known by historians as the Industrial Revolution.
Basic
OBJ: conceptual | factual
SEC: 0. Productivity and economic growth
TOP: Industrial Revolution
MSC: Bloom's: Knowledge
9. Productivity is commonly defined as output per hour of work.
Basic
OBJ: conceptual
SEC: 0. Productivity and economic growth
TOP: Productivity
MSC: Bloom's: Knowledge
Multiple Choice
10. The rationale for developing a model in which real GDP depends only on labor is
a. | to prove that productivity growth was higher before the Industrial Revolution. |
b. | to prove that capital and technology play a key role in productivity growth. |
c. | to prove that productivity growth can occur without capital. |
d. | to prove that productivity growth can occur without technology. |
e. | to prove that labor is a key source of productivity growth. |
OBJ: factual
SEC: 1. Labor and Capital without Technology
TOP: Labor-Only Model
MSC: Bloom's: Analysis | AACSB: Analytic
11. A theory without capital or technology
a. | is of limited use because there have always been capital and technology. |
b. | is useful for illustrating production and economic conditions in the time before the Industrial Revolution. |
c. | None of these |
d. | is useful for illustrating the importance of population growth in improving the standard of living. |
e. | is capable of explaining productivity growth. |
OBJ: factual
SEC: 1. Labor and Capital without Technology
TOP: Labor-Only Model
MSC: Bloom's: Knowledge | AACSB: Analytic
12. The flattening out of the production function is due to
a. | the declining opportunity cost of labor. |
b. | the increasing scarcity of labor. |
c. | increasing returns to labor. |
d. | all other factors being held constant. |
e. | the increasing specialization of labor. |
OBJ: factual
SEC: 1. Labor and Capital without Technology
TOP: Diminishing Returns to Labor
MSC: Bloom's: Analysis | AACSB: Analytic
13. Diminishing returns to labor means that
a. | the greater the amount of output, the less labor that is needed. |
b. | as more labor is employed, total output declines. |
c. | as more labor is employed, each additional worker produces less additional output. |
d. | as more labor is employed, total output will increase. |
e. | the greater the amount of output, the less additional labor that is needed. |
OBJ: conceptual
SEC: 1. Labor and Capital without Technology
TOP: Diminishing Returns to Labor
MSC: Bloom's: Analysis | AACSB: Analytic
14. Diminishing returns to labor exists
a. | in any economy. |
b. | only in an economy where most of the output comes from the agricultural sector. |
c. | only in an economy with no technological growth. |
d. | only in a pre-Industrial Revolution economy. |
e. | only in an economy with no capital and technology. |
OBJ: factual
SEC: 1. Labor and Capital without Technology
TOP: Diminishing Returns to Labor
MSC: Bloom's: Analysis | AACSB: Analytic
15. The total amount of capital in the economy increases each year by that year's amount of
a. | gross investment. |
b. | net investment. |
c. | GDP. |
d. | private saving. |
e. | government saving. |
OBJ: conceptual
SEC: 1. Labor and Capital without Technology
TOP: Capital
MSC: Bloom's: Knowledge
16. Which of the following statements is about the production function Y =F(L,K)?
a. | Output increases only when both labor and capital increase. |
b. | An increase in labor causes output to increase but an increase in capital will not cause output to increase unless it is accompanied by an increase in labor. |
c. | An increase in capital causes output to increase but an increase in labor will not cause output to increase unless it is accompanied by an increase in capital. |
d. | An increase in capital causes an increase in capital. |
e. | It is possible for output to increase if capital increases, even if there is no change in the labor input. |
OBJ: conceptual
SEC: 1. Labor and Capital without Technology
TOP: Production Function
MSC: Bloom's: Analysis | AACSB: Analytic
17. When capital is included in the production function,
a. | less output is produced with the same amount of labor. |
b. | more output is produced with the same amount of labor. |
c. | diminishing returns to labor are eliminated. |
d. | the production function exhibits increasing returns to labor. |
e. | the production function exhibits constant returns to labor. |
OBJ: conceptual
SEC: 1. Labor and Capital without Technology
TOP: Including Capital in the Production Function
MSC: Bloom's: Knowledge
18. Consider the production function shown in the figure below. An increase in capital will result in
a. | a downward shift in the production function. |
b. | the slope of the production function becoming flatter. |
c. | a leftward movement along the production function. |
d. | a rightward movement along the production function. |
e. | an upward shift in the production function. |
OBJ: conceptual
SEC: 1. Labor and Capital without Technology
TOP: Effect of Capital on Output
MSC: Bloom's: Analysis | AACSB: Analytic
19. As more capital is added per worker, the production function
a. | shifts down in smaller increments. |
b. | gets flatter. |
c. | shifts up in smaller increments. |
d. | gets steeper. |
e. | shifts up in larger increments. |
OBJ: conceptual
SEC: 1. Labor and Capital without Technology
TOP: Diminishing Returns to Capital
MSC: Bloom's: Analysis | AACSB: Analytic
20. The flattening out of the production function is likely to occur
a. | only in a model without capital or technology. |
b. | in any model where there are fixed factors. |
c. | only in a model without labor. |
d. | only in a model without technology. |
e. | only in a model with labor, capital, and technology. |
OBJ: factual
SEC: 1. Labor and Capital without Technology
TOP: Diminishing Returns to Capital
MSC: Bloom's: Analysis | AACSB: Analytic
21. Which of the following statements is about an economy whose production function includes only capital and labor?
a. | Diminishing returns to capital can occur for the economy as a whole. |
b. | Adding more capital per worker cannot raise real GDP beyond some limit. |
c. | The production function yields a pessimistic conclusion about economic growth. |
d. | To get to the point where the return from an additional unit of capital equals zero requires an extremely large investment share of GDP. |
e. | All of these |
OBJ: factual
SEC: 1. Labor and Capital without Technology
TOP: Diminishing Returns to Capital
MSC: Bloom's: Analysis | AACSB: Analytic
/
22. Increasing the stock of capital enables more output to be produced.
Basic
OBJ: conceptual
SEC: 1. Labor and Capital without Technology
TOP: Capital and Labor Model
MSC: Bloom's: Knowledge
23. Capital is not subject to diminishing returns.
Moderate
OBJ: factual
SEC: 1. Labor and Capital without Technology
TOP: Diminishing Returns to Capital
MSC: Bloom's: Analysis | AACSB: Analytic
24. Diminishing marginal returns can be associated with the popular notion of "too many cooks in a kitchen," in the sense that as we increase the number of people cooking in a reduced space they may bump into each other and therefore not be as productive as they would be in a larger workplace.
Moderate
OBJ: conceptual
SEC: 1. Labor and Capital without Technology
TOP: Diminishing Returns
MSC: Bloom's: Analysis | AACSB: Analytic
25. Diminishing returns explain why labor and capital alone cannot account for the phenomenal growth in productivity during the last 200 years.
Moderate
OBJ: factual
SEC: 1. Labor and Capital without Technology
TOP: Diminishing Returns
MSC: Bloom's: Analysis | AACSB: Analytic
Short Answer
26. How does the theory of economic growth change when capital is added as a factor of production?
OBJ: conceptual
SEC: 1. Labor and Capital without Technology
TOP: Capital and Labor Model
MSC: Bloom's: Analysis | AACSB: Analytic
27. Why is the model with both capital and labor not sufficient to explain growth in productivity?
OBJ: conceptual
SEC: 1. Labor and Capital without Technology
TOP: Capital and Labor Model
MSC: Bloom's: Analysis | AACSB: Analytic
28. Using a graphical representation of the production function, show what is meant by diminishing returns to capital.
OBJ: conceptual
SEC: 1. Labor and Capital without Technology
TOP: Diminishing Returns to Capital
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
29. Technology is
a. | anything that will enable a given amount of capital and labor to produce more output. |
b. | another name for capital. |
c. | another name for productivity. |
d. | any type of invention. |
e. | the application of science to production. |
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Technology
MSC: Bloom's: Knowledge
30. Technology can best be thought of as
a. | any type of capital equipment. |
b. | recipes that show how to combine inputs. |
c. | scientific process. |
d. | what inventors produce. |
e. | physical equipment. |
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Technology
MSC: Bloom's: Analysis | AACSB: Analytic
31. Innovation can best be thought of as
a. | another word for invention. |
b. | what occurs when new capital equipment is used. |
c. | the discovery of a new principle. |
d. | what occurs when new knowledge is applied in production. |
e. | what happens when a new business is started. |
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Innovation
MSC: Bloom's: Knowledge
32. Which part of technological change best refers to how technology affects growth throughout the economy?
a. | The spread of the discovery of new knowledge |
b. | The spread of the application of new knowledge |
c. | The discovery of new knowledge |
d. | The accumulation of scientific knowledge |
e. | The application of new knowledge |
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Diffusion
MSC: Bloom's: Analysis | AACSB: Analytic
33. Equipping cars with a navigational system that uses global positioning systems is best described as an example of
a. | an invention. |
b. | innovation. |
c. | learning by doing. |
d. | diffusion. |
e. | specialization. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Diffusion
MSC: Bloom's: Analysis | AACSB: Analytic
34. The term that best describes what happens when fewer workers are needed to produce the same amount of output with the same amount of capital is
a. | invention. |
b. | creative destruction. |
c. | labor-saving technological change. |
d. | diffusion. |
e. | capital-saving technological change. |
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Labor-Saving Technological Change
MSC: Bloom's: Knowledge
35. Requiring workers to work on weekends and holidays is an example of
a. | labor-saving technological change. |
b. | creative destruction. |
c. | capital-saving technological change. |
d. | an invention. |
e. | diffusion. |
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Capital-Saving Technological Change
MSC: Bloom's: Knowledge | AACSB: Analytic
36. The situation in which workers become more proficient by doing a particular task many times is known by economists as
a. | learning by doing. |
b. | marginal productivity gains. |
c. | repetitive human capital. |
d. | revolving learning. |
e. | None of these |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Learning by Doing
MSC: Bloom's: Knowledge
37. Suppose a worker at a computer company rearranges existing machines and labor and increases production in the process. Using the production function, with output on the vertical axis and labor on the horizontal axis, this would be described as
a. | an upward shift of the curve combined with an upward movement along the curve. |
b. | a movement upward along the curve. |
c. | a movement downward along the curve. |
d. | a downward shift of the curve. |
e. | an upward shift of the curve. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Organization and Specialization
MSC: Bloom's: Analysis | AACSB: Analytic
38. Economists commonly refer to a person's accumulated knowledge and skills as
a. | relevant accumulated productivity. |
b. | human capital. |
c. | the knowledge productivity base. |
d. | internal capital. |
e. | robotic capital. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Human Capital
MSC: Bloom's: Knowledge
39. Which of the following best describes what occurs when time and resources are allocated to educate and train the labor force?
a. | Human capital is produced. |
b. | Increased specialization is enabled. |
c. | Firms will be reorganized. |
d. | There will be more inventions. |
e. | There is learning by doing. |
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Human Capital
MSC: Bloom's: Knowledge
40. Productivity, defined as real GDP per hour worked, increases if
a. | All of these |
b. | new technologies are continuously discovered. |
c. | saving and investment cause an increase in the quantity of capital per worker. |
d. | the average educational level of the work force increases. |
e. | new knowledge is applied in production. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Increase in Productivity
MSC: Bloom's: Analysis | AACSB: Analytic
/
41. All inventions result in innovations.
Basic
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Inventions
MSC: Bloom's: Knowledge
42. Learning by doing represents a situation in which workers become more proficient by doing a particular task repeatedly.
Basic
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Learning by Doing
MSC: Bloom's: Knowledge
43. Innovations apply only to new types of capital.
Moderate
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Innovation
MSC: Bloom's: Knowledge | AACSB: Analytic
44. When wages increase, there are likely to be more labor-saving technological changes.
Moderate
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Labor-Saving Technological Change
MSC: Bloom's: Analysis | AACSB: Analytic
45. The decision to invest in human capital is influenced by considerations similar to those that motivate a firm to invest in physical capital. Therefore, if interest rates rise, fewer people will tend to invest in college education, since this is an investment that commonly involves borrowing money to afford tuition.
Moderate
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Human Capital
MSC: Bloom's: Analysis | AACSB: Analytic
46. The education and training of workers is referred to as learning by doing.
Moderate
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Human Capital
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
47. Which of the following statements is ?
a. | The technology supply responds to market conditions. |
b. | Human capital has no role in research and development. |
c. | Attempts to bring about technological change via research and development are often tried but are usually not successful. |
d. | Technological change occurs at a constant rate. |
e. | Industries that attempt to produce new technologies face very little risk. |
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Research and Development
MSC: Bloom's: Knowledge
/
48. Human capital is an input into technology production.
Moderate
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Human Capital
MSC: Bloom's: Knowledge | AACSB: Analytic
Multiple Choice
49. For an entrepreneur to profit from an innovation,
a. | the innovation, when viewed as a commodity, needs to be highly rivalrous in nature. |
b. | it should be undesirable and unfeasible for excludability to exist. |
c. | the innovation, when viewed as a commodity, needs to be highly nonrivalrous in nature. |
d. | the innovation needs to be both highly nonexcludable and highly nonrivalrous. |
e. | the innovation needs to be excludable. |
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Excludability
MSC: Bloom's: Analysis | AACSB: Analytic
50. Nonrivalry means that
a. | the owner of a good cannot prevent others from using the good. |
b. | the use of a good by one individual does not preclude its use by others at the same time. |
c. | a good cannot be exchanged in a market transaction. |
d. | a good can be exchanged in a market transaction. |
e. | a produced good will not be profitable. |
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Nonrivalry
MSC: Bloom's: Knowledge | AACSB: Analytic
51. The person who figured out that it is best to keep the milk, bread, and eggs at the back of the grocery store and not at the front probably did not profit as much from this idea as the grocery industry as a whole did. This is because
a. | the concept didn't work. |
b. | the concept was highly nonexcludable. |
c. | that person's idea was not an innovation. |
d. | the concept was not a commodity. |
e. | the concept was nonrivalrous. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Non-Excludable Goods
MSC: Bloom's: Analysis | AACSB: Analytic
52. A cell phone is an example of a good that is
a. | rivalrous and excludable. |
b. | nonrivalrous and excludable. |
c. | rivalrous and nonexcludable. |
d. | nonrivalrous and nonexcludable. |
e. | neither rivalrous nor nonrivalrous. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Rival and Excludable Goods
MSC: Bloom's: Analysis | AACSB: Analytic
53. A sporting event is an example of a good that is
a. | rivalrous and excludable. |
b. | nonrivalrous and excludable. |
c. | rivalrous and nonexcludable. |
d. | nonrivalrous and nonexcludable. |
e. | neither rivalrous nor nonrivalrous. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Non-Rival and Excludable Goods
MSC: Bloom's: Analysis | AACSB: Analytic
54. Public radio is an example of a good that is
a. | rivalrous and excludable. |
b. | nonrivalrous and excludable. |
c. | rivalrous and nonexcludable. |
d. | nonrivalrous and nonexcludable. |
e. | neither rivalrous nor nonrivalrous. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Non-Rival and Non-Excludable Goods
MSC: Bloom's: Application | AACSB: Analytic
55. A shady bench on a hot day at a public park is an example of a good that is
a. | rivalrous and excludable. |
b. | nonrivalrous and excludable. |
c. | rivalrous and nonexcludable. |
d. | nonrivalrous and nonexcludable. |
e. | neither rivalrous nor nonrivalrous. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Rival and Non-Excludable Goods
MSC: Bloom's: Analysis | AACSB: Analytic
56. Which of the following is not a characteristic of technology?
a. | It requires trademarks and copyrights in order for those developing it to be compensated. |
b. | It is possible for more than one person to use the good at the same time. |
c. | It is easy to preclude others from using it. |
d. | It is difficult to preclude others from using the good. |
e. | Its supply depends on the cost of producing it. |
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Technology
MSC: Bloom's: Analysis | AACSB: Analytic
57. Intellectual property laws arise as a result of
a. | diffusion. |
b. | learning by doing. |
c. | nonexcludability. |
d. | human capital formation. |
e. | nonrivalry. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Intellectual Property
MSC: Bloom's: Analysis | AACSB: Analytic
58. Equipping lawn mowers with internal combustion engines is an example of
a. | technology spillovers. |
b. | learning by doing. |
c. | specialization. |
d. | the nonrivalrous nature of technology. |
e. | the rivalrous nature of technology. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Spillovers
MSC: Bloom's: Analysis | AACSB: Analytic
59. Which of the following could the government do to increase the incentive for individuals and firms to engage in R&D?
a. | The government could eliminate any private gain arising from the R&D endeavor. |
b. | The government could design incentives that will increase the private gain from an R&D endeavor. |
c. | The government could ensure that there will be social gains from the activity. |
d. | There is no role for government. |
e. | The government should make itself the sole beneficiary of the result's proceeds. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: The Role of Government in R&D
MSC: Bloom's: Knowledge
60. Because technology exhibits nonrivalry and nonexcludability, there will likely be
a. | learning by doing. |
b. | an underproduction of technology. |
c. | specialization. |
d. | an overproduction of technology. |
e. | human capital development. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: The Under-Production of Technology
MSC: Bloom's: Analysis | AACSB: Analytic
61. If the owner of a type of technology is able to successfully preclude others from using the good, this type of technology could be classified as a(n)
a. | nonexcludable good. |
b. | excludable good. |
c. | rival good. |
d. | normal good. |
e. | nontradable good. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Non-Excludable Goods
MSC: Bloom's: Analysis | AACSB: Analytic
/
62. A copyright will enable a good to become more rivalrous in nature.
Moderate
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Intellectual Property Rights
MSC: Bloom's: Analysis | AACSB: Analytic
63. Because investors often cannot be fully compensated for the benefits their ideas provide to others, they may produce too little technology. Thus, there is a potential role for government in providing funds for research and development, both in industry and in universities.
Moderate
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Technological Change
MSC: Bloom's: Analysis | AACSB: Analytic
64. The more excludable an innovation is, the less chance of a spillover.
Moderate
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Non-Excludability
MSC: Bloom's: Analysis | AACSB: Analytic
65. Society usually benefits more from an innovation than the person who develops it.
Basic
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Compensation for Innovation
MSC: Bloom's: Knowledge
Short Answer
66. Explain how each of the following can be thought of as technological change, or if it cannot be thought of as technological change, explain why not.
(A) | The introduction of a night shift |
(B) | An increase in the educational level of the population |
(C) | Specialization within a business |
(D) | A new invention that will make computers faster |
(A) | Night shifts were not possible without electricity and lights. The same labor force can now produce more output by also working at night. |
(B) | More educated people are more productive. The same labor force can now produce more output. |
(C) | If people specialize in what they do best, they are more productive. The same labor force can now produce more output. |
(D) | This is not technological change until the invention is turned into an innovation and is diffused throughout the economy. At that point, the same labor and capital can produce more output. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Technological Change
MSC: Bloom's: Analysis | AACSB: Analytic
67. A teacher develops a new hypermedia program for learning economics. How does this illustrate the concepts of invention, innovation, and diffusion?
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Invention, Innovation, and Diffusion
MSC: Bloom's: Analysis | AACSB: Analytic
68. Why is learning by doing a type of technical progress?
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Learning by Doing
MSC: Bloom's: Analysis | AACSB: Analytic
69. What is the difference between learning by doing and human capital formation?
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Human Capital and Learning by Doing
MSC: Bloom's: Analysis | AACSB: Analytic
70. What makes technology distinct from other commodities?
OBJ: factual
SEC: 2. Technology: The Engine of Growth
TOP: Technology's Special Features
MSC: Bloom's: Analysis | AACSB: Analytic
71. Why are intellectual property laws necessary for technological growth?
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Intellectual Property Laws
MSC: Bloom's: Analysis | AACSB: Analytic
72. Use the analysis presented in the text to explain why Apple Computer does not document how to transfer music from an iPod (portable music player) to iTunes (a program on the computer to store music).
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Technology's Special Features
MSC: Bloom's: Analysis | AACSB: Analytic
73. An engineering company has developed a gadget to help families control the amount of time their children watch TV. What would be an example of a technological spillover in this case? Technological reasons aside, how could this engineering company prevent this kind of technological spillover from occurring?
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Spillovers and Excludability
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
74. According to economist Daron Acemoglu, causes of economic growth include of the following EXCEPT
a. | physical capital. |
b. | human capital |
c. | technology. |
d. | the legal system. |
e. | None of these |
OBJ: factual
SEC: 3. Fundamental Causes of Economic Growth
TOP: Fundamental Causes of Economic Growth
MSC: Bloom's: Knowledge
75. According to economist Daron Acemoglu, physical capital accumulation is
a. | a proximate cause of economic growth. |
b. | a fundamental cause of economic growth |
c. | not related to economic growth. |
d. | an effect instead of a cause of economic growth. |
e. | the only cause of economic growth. |
OBJ: factual
SEC: 3. Fundamental Causes of Economic Growth
TOP: Fundamental Causes of Economic Growth
MSC: Bloom's: Knowledge
76. According to economist Daron Acemoglu, all of the following are fundamental causes of economic growth EXCEPT
a. | technology. |
b. | the legal system. |
c. | property rights. |
d. | geography. |
e. | openness to trade. |
OBJ: factual
SEC: 3. Fundamental Causes of Economic Growth
TOP: Fundamental Causes of Economic Growth
MSC: Bloom's: Knowledge
77. All of the following are found to promote economic growth EXCEPT
a. | high corruption. |
b. | democracy. |
c. | enforcement of property rights. |
d. | protection of patents and copyrights. |
e. | good navigation systems. |
OBJ: factual
SEC: 3. Fundamental Causes of Economic Growth
TOP: Fundamental Causes of Economic Growth
MSC: Bloom's: Knowledge | AACSB: Analytic
78. Institutions include all the following EXCEPT
a. | the legal system. |
b. | the political system. |
c. | the regulatory system. |
d. | copyright protection. |
e. | the design of jail cells. |
OBJ: factual
SEC: 3. Fundamental Causes of Economic Growth
TOP: Fundamental Causes of Economic Growth
MSC: Bloom's: Knowledge
79. Which of the following is an element of a good institution?
a. | High corruption. |
b. | Strong redtape. |
c. | Strong democracy. |
d. | A large government size. |
e. | A closed economy. |
OBJ: factual
SEC: 3. Fundamental Causes of Economic Growth
TOP: Fundamental Causes of Economic Growth
MSC: Bloom's: Analysis | AACSB: Analytic
80. Given the same amount of natural resources, which of the following conditions leads to a higher rate of economic growth?
a. | A command and control economy. |
b. | A corrupt government. |
c. | A country in civil war. |
d. | An economy open to foreign immigration and capital. |
e. | A landlocked country. |
OBJ: conceptual
SEC: 3. Fundamental Causes of Economic Growth
TOP: Fundamental Causes of Economic Growth
MSC: Bloom's: Knowledge | AACSB: Analytic
/
81. According to economist Daron Acemoglu, technology is a fundamental cause of economic growth.
Easy
OBJ: factual
SEC: 3. Fundamental Causes of Economic Growth
TOP: Fundamental Causes of Economic Growth
MSC: Bloom's: Knowledge
82. According to economist Daron Acemoglu, human capital is a proximate cause of economic growth.
Easy
OBJ: factual
SEC: 3. Fundamental Causes of Economic Growth
TOP: Fundamental Causes of Economic Growth
MSC: Bloom's: Knowledge
83. According to economist Daron Acemoglu, well-functioning institutions are a fundamental cause of economic growth.
Easy
OBJ: factual
SEC: 3. Fundamental Causes of Economic Growth
TOP: Fundamental Causes of Economic Growth
MSC: Bloom's: Knowledge
84. According to economist Daron Acemoglu, nature can never be a fundamental cause of economic growth.
Easy
OBJ: factual
SEC: 3. Fundamental Causes of Economic Growth
TOP: Fundamental Causes of Economic Growth
MSC: Bloom's: Knowledge
85. High corruption and a lack of copyright protection help capital accumulation and economic growth.
Easy
OBJ: conceptual
SEC: 3. Fundamental Causes of Economic Growth
TOP: Fundamental Causes of Economic Growth
MSC: Bloom's: Knowledge
Multiple Choice
86. The growth accounting formula was developed by
a. | Adam Smith. |
b. | Thomas Carlyle. |
c. | Robert Malthus. |
d. | Joseph Schumpeter. |
e. | Robert Solow. |
OBJ: factual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Analysis | AACSB: Analytic
87. An equation that enables economists to estimate the relative contributions of capital and technology to productivity growth is known as
a. | the proportions formula. |
b. | the technology growth formula. |
c. | the technology proportion formula. |
d. | the Sarbanes-Oxley formula. |
e. | None of these |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Accounting
MSC: Bloom's: Analysis | AACSB: Analytic
88. The purpose of the growth accounting formula is to
a. | explain why economies stop growing. |
b. | determine the role of government in affecting growth. |
c. | measure the rate at which GDP grows. |
d. | identify the limits to growth. |
e. | determine how much productivity growth is due to changes in the capital stock and how much is due to changes in technology. |
OBJ: factual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Knowledge
/
89. John Nash developed the growth accounting formula and received the Nobel Prize in economics for his significant contribution.
f; Basic
OBJ: factual
SEC: 4. Measuring Technology
TOP: Growth Accounting
MSC: Bloom's: Knowledge
90. The purpose of the growth accounting formula is to quantify the process that has increased the accounting oversight of American companies in the aftermath of the Enron debacle.
f; Moderate
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Accounting
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
91. According to Solow's growth accounting formula, the growth rate of capital per hour of work is multiplied by one-third. This means that
a. | for every 1 percent increase in capital per hour of work, GDP per hour of work will increase by one-third of a percent. |
b. | for every 1 percent increase in capital per hour of work, GDP per hour of work will increase by 3 percent. |
c. | for every 1 percent increase in GDP per hour of work, capital per hour of work will increase by one-third of a percent. |
d. | the value of GDP is one-third the value of the capital stock. |
e. | GDP is three times as large as the capital stock. |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Analysis | AACSB: Analytic
92. Which of the following is a reason why the coefficient corresponding to the growth rate of capital per hour of work is one-third in Solow's growth accounting formula?
a. | Capital income plus depreciation is approximately one-third of aggregate income. |
b. | Capital income plus depreciation is approximately three times the amount of aggregate income. |
c. | The amount of capital in use is approximately one-third of GDP. |
d. | The amount of capital in use is approximately three times the level of GDP. |
e. | Capital is one of the three factors of production. |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Analysis | AACSB: Analytic
93. The coefficient on the growth of capital per hour of work in the growth accounting formula is
a. | exactly one-fourth. |
b. | exactly one-third. |
c. | approximately two-thirds. |
d. | exactly two-thirds. |
e. | approximately one-third. |
OBJ: factual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Knowledge | AACSB: Analytic
94. The productivity function differs from the production function because
a. | all variables are measured in per-worker terms. |
b. | it illustrates the effect of technological change. |
c. | the productivity function is not subject to diminishing returns. |
d. | the productivity function is not influenced by changes in labor. |
e. | the productivity function does not measure output. |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Productivity Function
MSC: Bloom's: Analysis | AACSB: Analytic
95. Which of the following statements best explains why the productivity function might shift up?
a. | The capital stock has increased by a greater percentage than the labor force. |
b. | There has been an increase in productivity. |
c. | There has been an increase in the capital stock. |
d. | There has been a decline in the labor force. |
e. | There has been a technological improvement. |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Technological Improvements
MSC: Bloom's: Analysis | AACSB: Analytic
96. Which of the following best explains the source of increases in productivity?
a. | Increases in capital per hour of work |
b. | Technological change |
c. | Increases in the number of hours worked |
d. | Both technological change and increases in capital per hour of work |
e. | It is not known what causes productivity to increase. |
OBJ: factual
SEC: 4. Measuring Technology
TOP: Increase in Productivity
MSC: Bloom's: Analysis | AACSB: Analytic
97. Suppose that the capital stock grows more slowly than the labor force and there is no technological growth. This would cause
a. | a downward shift of the productivity curve and a downward movement along the productivity curve. |
b. | an upward movement along the productivity curve. |
c. | a downward shift of the productivity curve. |
d. | a downward movement along the productivity curve. |
e. | an upward shift of the productivity curve. |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Productivity Function
MSC: Bloom's: Analysis | AACSB: Analytic
98. Suppose that the capital stock grows at the same rate as the labor force and there is positive technological growth. This would cause
a. | an upward movement along the productivity curve. |
b. | a downward shift of the productivity curve. |
c. | a downward movement along the productivity curve. |
d. | an upward shift of the productivity curve. |
e. | an upward shift of the productivity curve and an upward movement along the productivity curve. |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Productivity Function
MSC: Bloom's: Analysis | AACSB: Analytic
/
99. If the capital stock increases, holding constant labor and technology, output will rise by only a fraction of that amount.
Basic
OBJ: factual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Knowledge
100. If technology grows, output will rise by only a fraction of the increase.
Basic
OBJ: factual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Knowledge
101. The growth accounting formula explains the growth of total output.
Moderate
OBJ: factual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Analysis | AACSB: Analytic
102. The growth rate of productivity is measured by changes in output per hour of work.
Moderate
OBJ: factual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Knowledge | AACSB: Analytic
103. Approximately one-third of aggregate income is used to compensate the owners of capital.
Moderate
OBJ: factual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Knowledge | AACSB: Analytic
Multiple Choice
104. If the growth rate of technology is 2 percent over a given period of time and there has been no change in the amount of capital per hour worked, then, based on Solow's growth accounting formula, the growth rate of real GDP per hour of work will be
a. | 1.67 percent. |
b. | 1 percent. |
c. | 1.67 percent. |
d. | 3 percent. |
e. | 2 percent. |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Rate of Real GDP Per Hour of Work
MSC: Bloom's: Analysis | AACSB: Analytic
105. If the growth rate of capital per hour of work is 3 percent over a given period of time and the growth rate of technology is 2 percent, then, based on Solow's growth accounting formula, the growth rate of real GDP per hour of work will be
a. | 3.67 percent. |
b. | 2.33 percent. |
c. | 1.33 percent. |
d. | 1 percent. |
e. | 3 percent. |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Rate of Real GDP Per Hour of Work
MSC: Bloom's: Analysis | AACSB: Analytic
106. If output per hour grows by 4 percent and capital per hour of work grows by 6 percent, then, based on Solow's growth accounting formula, the growth rate of technology is
a. | 6 percent. |
b. | .67 percent. |
c. | 2 percent |
d. | 0 percent. |
e. | 1 percent. |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Rate of Technology
MSC: Bloom's: Analysis | AACSB: Analytic
107. If capital per hour of work is growing at a rate of 3 percent and the government wants output per hour of work to grow at 4 percent, how high does the growth rate of technology have to be?
a. | 0 percent |
b. | 4 percent |
c. | 3 percent |
d. | 2 percent |
e. | 1 percent |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Analysis | AACSB: Analytic
/
108. Anything that causes the productivity curve to shift is classified as technological change.
Basic
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Productivity Curve
MSC: Bloom's: Knowledge
109. The productivity curve shifted more in the period between 1975 and 1995 than it did in the period between 1955 and 1975.
Basic
OBJ: factual
SEC: 4. Measuring Technology
TOP: Productivity Curve
MSC: Bloom's: Knowledge
Short Answer
110. Explain why the contribution of capital per hour worked to the growth rate of real GDP is multiplied by one-third in the growth accounting formula.
OBJ: factual
SEC: 4. Measuring Technology
TOP: Capital's Contribution to Economic Growth
MSC: Bloom's: Analysis | AACSB: Analytic
111. The growth accounting formula is useful for determining the sources of productivity growth.
(A) | Name the two sources of productivity growth, and write down the growth accounting formula. |
(B) | Explain why labor does not directly enter the formula. |
(C) | Suppose you were given the assignment of determining the sources of productivity growth for the past year. Explain briefly how you would do this in terms of the data you could expect to find. |
(A) | The two sources of productivity growth are capital per worker and technology. The formula is: |
1/3 (growth rate of capital per hour of work) + growth rate of technology. | |
(B) | Labor does not directly enter the formula because productivity and capital are expressed in per-worker terms. Productivity by definition is output per worker. If there is more output produced per worker, then the worker is more productive and is generating more income. Productivity is influenced by capital per worker and not simply capital to account for changes in the number of workers. If for some reason capital grows more slowly than labor, there is less capital available per worker, and you would not expect workers to be able to increase productivity. |
(C) | Productivity is output per worker. The government collects data on the value of output and the number of workers. For capital per worker, you need to know total capital and the number of workers. These numbers are also available. Technology is measured as the residual or what is left over after accounting for capital per worker. For example, if you find productivity grew 4 percent and capital per worker grew 6 percent, the 2 percent difference must be caused by various forms of technological change. |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Analysis | AACSB: Analytic
112. Provide a definition of technology, and explain how it is possible to come up with an estimate of technological growth.
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Knowledge | AACSB: Communication
113. Suppose that in a given year there has been an increase in both technology and the amount of capital per hour worked. Draw the consequence of these changes using a productivity function.
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Increase in Productivity
MSC: Bloom's: Analysis | AACSB: Analytic
114. Suppose that policymakers desire real GDP per hour of work to grow by 3.5 percent a year.
(A) | If this growth is to come solely from increases in the capital stock, by how much should capital per hour of work increase? |
(B) | If policymakers believe that technology will grow at a rate of 2 percent per year, by how much should the capital stock per hour of work increase? |
(A) | According to the growth accounting formula: |
| |
Hence, | |
(B) |
|
|
and 
.
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Accounting
MSC: Bloom's: Analysis | AACSB: Analytic
115. Suppose the productivity function is given by 
.
(A) | Draw a graph that shows the relationship between productivity and capital per hour of work. What assumption are you making about the returns to capital? Please explain. |
(B) | Pick an initial point on your productivity function and label the points |
(C) | Fill in the four blanks in the following table. |
| |
(D) | For growth scenario 1, label the new levels of productivity and capital per hour of work on your graph. Explain briefly. |
(E) | For growth scenario 3, label the new levels of productivity and capital per hour of work on your graph. Please draw a separate graph for this part. Explain briefly. |
(F) | For each of the four scenarios, identify whether labor and capital are growing at the same rate, whether labor is growing faster than capital, or whether capital is growing faster than labor. |
and 
.
(A) | See graph below. The shape of the curve assumes diminishing returns to capital per hour of work. |
| |
(B) | See graph above. Any point will do. |
(C) | Recall the growth accounting formula: |
growth rate of productivity = | |
1/3(growth rate of capital per hour of work) + growth rate of technology. | |
| |
(D) | See graph above. The productivity curve will shift up because there is positive technological growth. Capital per hour of work is higher because the growth rate is positive. Productivity is higher since the growth rate is positive. |
(E) | See graph below. The productivity curve will shift up because there is positive technological growth. Capital per hour of work will be lower because the growth rate is negative. Productivity is the same since the growth rate is 0 percent. |
| |
(F) | This depends on whether the growth of capital per hour of work is positive (capital faster than labor), negative (capital slower than labor), or zero (both the same). |
Scenario 1: capital faster | |
Scenario 2: same | |
Scenario 3: labor faster | |
Scenario 4: labor faster |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Analysis | AACSB: Analytic
116. The coefficient on capital growth is really not known with precision. According to the text, what is the range of possible values for this coefficient? If the coefficient is not known with precision, then why is the growth-accounting formula useful for policymakers?
OBJ: factual
SEC: 4. Measuring Technology
TOP: Coefficient on Capital Growth
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
117. Policies designed to improve education in grades K through 12 will result primarily in
a. | more diffusion. |
b. | better organization. |
c. | more human capital. |
d. | more creative destruction. |
e. | more learning by doing. |
OBJ: conceptual
SEC: 5. Technology Policy
TOP: Policies to Improve Education
MSC: Bloom's: Knowledge
/
118. The U.S. educational system is falling behind other countries, especially in mathematics and science in grades K through 12.
Basic
OBJ: factual
SEC: 5. Technology Policy
TOP: Policies to Encourage Human Capital Investment
MSC: Bloom's: Knowledge
Multiple Choice
119. Which of the following statements concerning the United States' expenditures on research and development (R&D) is ?
a. | The United States spends more on R&D as a share of GDP and less in total compared to other countries. |
b. | The United States spends less on R&D as a share of GDP and less in total compared to other countries. |
c. | The United States spends less on R&D as a share of GDP and more in total compared to other countries. |
d. | The United States spends the same on R&D as a share of GDP and less in total compared to other countries. |
e. | The United States spends more on R&D as a share of GDP and more in total compared to other countries. |
OBJ: factual
SEC: 5. Technology Policy
TOP: Spending on R&D
MSC: Bloom's: Analysis | AACSB: Analytic
120. Since World War II,
a. | most R&D spending has been used to support civilian research. |
b. | most R&D spending has been used to support defense-related research. |
c. | there has been very little R&D spending in the United States. |
d. | the United States has used an industrial-policy approach to target companies that received government money for R&D. |
e. | the government has played a very minor role in the R&D process. |
OBJ: factual
SEC: 5. Technology Policy
TOP: Policies to Encourage R&D
MSC: Bloom's: Analysis | AACSB: Analytic
121. Which of the following government policies would encourage R&D, regardless of industry?
a. | Tightening antitrust laws |
b. | Increasing tax credits for research |
c. | Relaxing copyright protection and patent laws |
d. | Removing tax credits for research |
e. | Tightening interest rates |
OBJ: conceptual
SEC: 5. Technology Policy
TOP: Policies to Encourage R&D
MSC: Bloom's: Analysis | AACSB: Analytic
122. If copyright laws were made tougher and were more strictly enforced, companies would be encouraged to
a. | purchase more plants and equipment. |
b. | hire more labor. |
c. | engage in more R&D activity. |
d. | hire less labor. |
e. | None of these |
OBJ: conceptual
SEC: 5. Technology Policy
TOP: Policies to Encourage Growth
MSC: Bloom's: Knowledge
/
123. Most of the R&D funds in the United States are used to support pure science.
Moderate
OBJ: factual
SEC: 5. Technology Policy
TOP: Spending on R&D
MSC: Bloom's: Analysis | AACSB: Analytic
124. Public agencies are the users of most research funds in the United States.
Moderate
OBJ: factual
SEC: 5. Technology Policy
TOP: Spending on R&D
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
125. Which of the following is the best example of an embodied technological change?
a. | Using a new forecasting technique |
b. | A firm engaging in human capital development |
c. | A retail outlet reorganizing its shelf space |
d. | A company deciding to use robots |
e. | A firm that replaces capital with labor |
OBJ: conceptual
SEC: 5. Technology Policy
TOP: Embodied Technological Change
MSC: Bloom's: Analysis | AACSB: Analytic
126. Which of the following is the best example of a disembodied technological change?
a. | A company that replaces workers with robots |
b. | A local bagel bakery deciding to use the Thompson bagel machine |
c. | Learning by doing |
d. | A mortgage company using a new computer program to determine whether an applicant qualifies for a loan |
e. | A firm that replaces labor with capital |
OBJ: conceptual
SEC: 5. Technology Policy
TOP: Disembodied Technological Change
MSC: Bloom's: Analysis | AACSB: Analytic
/
127. Embodied technological change pertains to human capital investment.
Basic
OBJ: factual
SEC: 5. Technology Policy
TOP: Embodied Technological Change
MSC: Bloom's: Knowledge
128. Disembodied technological change pertains to technological development not associated with new capital equipment.
Basic
OBJ: factual
SEC: 5. Technology Policy
TOP: Disembodied Technological Change
MSC: Bloom's: Knowledge
Multiple Choice
129. The government should intervene to encourage growth if the market
a. | is providing the right incentives, and there is no risk of government failure. |
b. | is not providing the right incentives, and there is little risk of government failure. |
c. | is not providing the right incentives, and there is a risk of government failure. |
d. | is providing the right incentives, and there is risk of government failure. |
e. | is not providing the right incentives regardless of the risk of government failure. |
OBJ: conceptual
SEC: 5. Technology Policy
TOP: Appropriateness of Government Intervention
MSC: Bloom's: Knowledge
130. The government should formulate a technology policy because
a. | private incentives for technology production may outweigh the social benefits of such production. |
b. | research on technology can be kept secret. |
c. | the technology being produced is highly excludable. |
d. | the incentives are too low without government intervention. |
e. | the incentives to produce the technology are too high. |
OBJ: conceptual
SEC: 5. Technology Policy
TOP: Appropriateness of Government Intervention
MSC: Bloom's: Analysis | AACSB: Analytic
/
131. In terms of encouraging technological innovation, the government should intervene to encourage growth if the market is not providing the right incentives and there is little risk of government failure.
Basic
OBJ: conceptual
SEC: 5. Technology Policy
TOP: Government Intervention; Technological Change
MSC: Bloom's: Knowledge
Short Answer
132. Suppose two separate growth-accounting studies between 1980 and 2010 differ on the relative importance of the contributions of capital formation and technological change to growth in productivity. That is, one study argues that technological change has been relatively more important than capital stock growth in contributing to productivity growth, while the second study argues the opposite. How would you reconcile these two studies? (Hint: What did the discussion in the text about the Thompson bagel machine illustrate?)
OBJ: conceptual
SEC: 5. Technology Policy
TOP: Embodied and Disembodied Technological Change
MSC: Bloom's: Analysis | AACSB: Analytic
133. What test should be performed to determine whether the government should engage in policies that affect economic growth?
OBJ: factual
SEC: 5. Technology Policy
TOP: Government Intervention
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
134. According to Edward Lazear, chair of the President's Council of Economic Advisers, productivity growth is most important because
a. | higher productivity growth means that companies can pay higher wages. |
b. | higher productivity growth means that technology will replace most unwanted workers. |
c. | this is the only way to combat the current globalization trend. |
d. | All of the above |
e. | None of the above |
OBJ: conceptual
SEC: 6. End-of-Chapter Material
TOP: Productivity Growth
MSC: Bloom's: Analysis | AACSB: Analytic
135. Which of the following has not been proposed by mainstream economists as a policy measure to encourage productivity growth?
a. | Stimulating technology by subsidizing research |
b. | Keeping taxes on investment low |
c. | Erecting quotas on foreign goods that are technologically advanced |
d. | All of the above have commonly been suggested. |
e. | None of the above have commonly been suggested. |
OBJ: conceptual
SEC: 6. End-of-Chapter Material
TOP: Productivity Growth
MSC: Bloom's: Analysis | AACSB: Analytic
136. According to Paul Krugman, distinguished economics columnist for the New York Times, which of the following is the most important issue facing the economy today?
a. | Slow productivity growth |
b. | Foreign competition |
c. | Lagging technology |
d. | The inappropriate industrial base |
e. | Deteriorating infrastructure |
OBJ: conceptual
SEC: 6. End-of-Chapter Material
TOP: Productivity Growth
MSC: Bloom's: Analysis | AACSB: Analytic
/
137. If economic policymakers want to increase people's income and reduce poverty, they must focus on reducing and maintaining productivity growth.
Basic
OBJ: conceptual
SEC: 6. End-of-Chapter Material
TOP: Productivity Growth
MSC: Bloom's: Knowledge
138. In recent years in the United States both technology and capital have contributed substantially to productivity growth, suggesting that policy should not focus solely on one determinant at the expense of the other.
Moderate
OBJ: conceptual
SEC: 6. End-of-Chapter Material
TOP: Productivity Growth
MSC: Bloom's: Analysis | AACSB: Analytic
139. Renowned economists such as William Baumol, Paul Krugman, and Edward Lazear believe that productivity growth is one of the key issues for determining long-term economic growth.
Basic
OBJ: conceptual
SEC: 6. End-of-Chapter Material
TOP: Productivity Growth
MSC: Bloom's: Knowledge
140. Some economists believe that productivity growth is important, but practically all are in agreement as to how this can be achieved.
Basic
OBJ: conceptual
SEC: 6. End-of-Chapter Material
TOP: Productivity Growth
MSC: Bloom's: Knowledge
Short Answer
Exhibit 21-1
|
| Capital | ||||
| 50 | 100 | 150 | 200 | 250 | |
Labor | 50 | 500 | 615 | 695 | 760 | 810 |
100 | 810 | 1000 | 1130 | 1230 | 1315 | |
150 | 1080 | 1330 | 1500 | 1635 | 1750 | |
200 | 1320 | 1625 | 1835 | 2000 | 2140 | |
250 | 1545 | 1900 | 2145 | 2340 | 2500 | |
141. Answer the questions below:
(A) | Refer to Exhibit 21-1. The table shows how output depends on capital and labor. Using the table, draw the production function Y = F(L), when the capital stock (K) is 50 and when it is 100. What do you observe? Now draw the same curve when the capital stock is 150 and 200. Do you observe any difference in the resulting increase in output? |
(B) | Are there diminishing returns to labor and capital? Explain. |
(A) | On the graph below, when capital is increased the curve will shift up. As capital is successively increased 50 units at a time, the curve will shift up by a smaller amount each time. |
| |
(B) | There are diminishing returns to capital and labor. Fix capital and increase labor to observe that output will increase at a decreasing rate. Fix labor and increase capital to observe that output will increase at a decreasing rate. |
OBJ: conceptual
SEC: 1. Labor and Capital without Technology
TOP: Production Function
MSC: Bloom's: Analysis | AACSB: Analytic
142. Suppose you are given the following information about productivity growth and growth of capital per hour of work for two different time periods. How much of the slowdown in productivity was due to technological change? Is there anything the government could do to reverse this situation?
Productivity growth | Growth of capital per hour worked | |
1970-1995 | 4.5% | 6% |
1996-2015 | 3.3% | 7% |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Technology
MSC: Bloom's: Analysis | AACSB: Analytic
143. Suppose a country's capital stock is $14 trillion, and a fall in government spending causes a $700 billion increase in investment. Use the growth-accounting formula to determine the effect the change in government purchases has on long-run output growth. (Assume that the coefficient on capital in the growth accounting formula is one-third.)
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Analysis | AACSB: Analytic
144. Explain why the discussion about the former Soviet Union illustrates the importance of providing adequate incentives to enable technological change.
OBJ: conceptual
SEC: 6. End-of-Chapter Material
TOP: Demise of the Soviet Union
MSC: Bloom's: Analysis | AACSB: Analytic
145. Answer the questions below:
(A) | Suppose a country has no growth in technology, the capital stock is growing at a rate of 4 percent per year, and the labor force is growing at a rate of 1 percent per year. What is the growth rate of real GDP per hour of work? |
(B) | Suppose a country has a capital stock that is growing at 1 percent, the labor force is growing at 4 percent, and the growth of real GDP per hour of work is 2 percent. What is the growth rate of technology? Which if the growth rate of real GDP? |
(A) | In this problem, it is helpful to use the rule that the growth rate of a ratio of two numbers is equal to the growth rate of the top number minus the growth rate of the bottom number. Therefore, the growth of capital per hour of work = growth capital growth labor. Then, growth of real GDP per hour of work = (1/3)(4 1) = %. On the productivity graph, the curve will not shift, and there will be an upward movement along the curve. |
(B) | Growth rate of technology = 2 (1/3)(1 4) = 3 percent. Growth rate of real GDP = 2 + 4 = 6 percent. On a productivity graph, the curve will shift up, and there will be a downward movement along the new curve. Productivity will be higher. |
OBJ: conceptual
SEC: 4. Measuring Technology
TOP: Growth Accounting Formula
MSC: Bloom's: Application | AACSB: Analytic
146. Identify whether the following measures are labor or capital saving.
(A) | A bookstore installs a system whereby customers can scan their book purchases and pay by credit card. An employee by the door verifies that customers have paid for their books. |
(B) | An accounting agency does some restructuring, which means that half of its work force can work out of their homes. |
(C) | A firm that used to operate two production facilities consolidates the two operations by running the production facility 24 hours a day instead of 12. |
(A) | Labor saving. Fewer employees are required. |
(B) | Capital saving. Only half as much workspace is required. |
(C) | Capital saving and potentially labor saving. Only one facility instead of two. The consolidation may make labor more efficient and may allow for a few jobs to be cut. |
OBJ: conceptual
SEC: 2. Technology: The Engine of Growth
TOP: Technological Change
MSC: Bloom's: Analysis | AACSB: Analytic
147. New data have just been released showing that the growth rate of technology has dropped. Write a short memo that explains what the government can do to improve the situation. What if the data had also showed a drop in capital per hour of work?
OBJ: conceptual
SEC: 5. Technology Policy
TOP: Special Features of the Technology Market
MSC: Bloom's: Analysis | AACSB: Analytic
148. Which of the following types of government spending are likely to help economic growth? Why?
(A) | FBI spending on advertising for new recruits |
(B) | Spending by NASA on research for a new solar panel |
(C) | Funding to improve the interstate highway system |
(D) | Spending by the federal government to send all 4-year-olds to preschool |
(E) | Spending by the federal government on research into alternative fuels to gasoline |
(F) | Subsidies to place more artwork in public places, such as the cows in Chicago |
(A) | This expenditure will not contribute to economic growth because neither capital nor technology is affected. |
(B) | This will contribute to growth because it enhances research and development. |
(C) | This improvement in infrastructure will improve economic growth. |
(D) | This may increase human capital, so would increase growth. |
(E) | This may contribute to research and development that will enhance growth in the future. |
(F) | This will have no effect on growth. |
OBJ: conceptual
SEC: 5. Technology Policy
TOP: Government Intervention
MSC: Bloom's: Analysis | AACSB: Analytic
Chapter 9 Appendix
Driving the Growth Accounting Formula
Multiple Choice
1. The growth rate of a variable is measured by
a. | the amount the variable changes. |
b. | the change in the variable divided by the variable's new level. |
c. | the variable's new level divided by its initial level. |
d. | the change in the variable divided by the variable's initial level. |
e. | the variable's initial level divided by its new level. |
OBJ: factual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: Rate of Growth
MSC: Bloom's: Knowledge
2. The slope times the change along the horizontal axis gives
a. | the change along the vertical axis. |
b. | the percentage change along the horizontal axis divided by the percentage change along the vertical axis. |
c. | the percentage change along the vertical axis. |
d. | the percentage change along the horizontal axis. |
e. | the percentage change along the vertical axis divided by the percentage change along the horizontal axis. |
OBJ: conceptual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: Changes along the Vertical Axis
MSC: Bloom's: Knowledge
3. In the formula 
, the term 
represents
a. | the change in capital per hour. |
b. | the growth rate of the labor force. |
c. | the growth rate of capital per hour. |
d. | the slope of the productivity function. |
e. | the increase in productivity. |
OBJ: conceptual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: Changes in Capital per Hour Worked
MSC: Bloom's: Knowledge
4. In the formula , the term r(K/Y) represents
a. | the slope of the productivity function. |
b. | the share of capital income in aggregate income. |
c. | the investment share of GDP. |
d. | the increase in productivity due to a change in the capital stock. |
e. | the slope of the production function. |
OBJ: conceptual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: Changes in Capital per Hour Worked
MSC: Bloom's: Analysis | AACSB: Analytic
5. In the formula , the term 
represents
a. | the share of capital income in aggregate income. |
b. | the growth rate of output per hour worked that is due to the growth rate of technology. |
c. | the growth rate of output per hour worked that is due to the rate of growth of capital per hour worked. |
d. | the growth rate of capital per hour worked times the share of capital income in aggregate income. |
e. | the growth rate of technology. |
OBJ: conceptual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: Changes in Capital per Hour Worked
MSC: Bloom's: Analysis | AACSB: Analytic
6. In 2017, the capital stock in a particular country was approximately $10 trillion, and national income was $5 trillion. The slope of the productivity curve was
a. | 1.33. |
b. | 0.667. |
c. | 2. |
d. | 0.167. |
e. | 0.33. |
OBJ: conceptual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: Slope of the Productivity Curve
MSC: Bloom's: Analysis | AACSB: Analytic
7. The productivity curve shifts upward as a result of
a. | less technology. |
b. | more technology. |
c. | less capital. |
d. | more capital. |
e. | a higher population. |
OBJ: conceptual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: Shift of the Productivity Curve
MSC: Bloom's: Analysis | AACSB: Analytic
8. An increase in capital per hour of work results in
a. | an upward shift of the productivity curve. |
b. | a downward shift of the productivity curve. |
c. | an upward and right movement along the productivity curve. |
d. | a downward and left movement along the productivity curve. |
e. | a clockwise rotation of the productivity curve. |
OBJ: conceptual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: The Productivity Curve
MSC: Bloom's: Analysis | AACSB: Analytic
9. According to the growth-accounting formula, productivity growth
a. | can be a result of an upward shift and a rightward movement along the productivity curve. |
b. | can only be a result of a shift of the productivity curve. |
c. | can only be a result of a movement along the productivity curve. |
d. | only occurs when an upward shift of the productivity curve is offset by a leftward movement of that curve. |
e. | cannot be described by the productivity curve. |
OBJ: conceptual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: The Productivity Curve
MSC: Bloom's: Analysis | AACSB: Analytic
10. The growth rate of productivity due to an increase in capital income equals
a. | the share of capital income in aggregate income. |
b. | the slope of the productivity function. |
c. | the growth rate of capital per hour worked times the share of capital income in aggregate income. |
d. | the growth rate of capital per hour worked. |
e. | the growth rate of technology. |
OBJ: conceptual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: Changes in Capital Per Hour Worked
MSC: Bloom's: Analysis | AACSB: Analytic
/
11. An increase in technology that increases labor productivity will lead to a rightward movement along the productivity curve.
Moderate
OBJ: factual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: The Productivity Curve
MSC: Bloom's: Knowledge | AACSB: Analytic
12. The effect of an increase in capital per hour of work on productivity is best described as an upward shift of the productivity curve.
Basic
OBJ: factual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: Shift of the Productivity Curve
MSC: Bloom's: Knowledge
Short Answer
13. Suppose in 2016 that real GDP of a particular country is $6 trillion, and the capital stock in real terms is $11 trillion. What is the slope of the productivity function?
OBJ: conceptual
SEC: Productivity and growth
TOP: Appendix: Deriving the Growth Accounting Formula
MSC: Bloom's: Application | AACSB: Analytic
14. Use the graph to answer the following questions.
(A) | Suppose that between two given years, growth in capital per hour of work and growth in technology were both positive. Pick two points on the graph that represent such a scenario. |
(B) | Suppose that between two given years, growth in capital per hour of work was zero, and growth in technology was positive. Pick two points on the graph that represent such a scenario. |
(C) | Suppose that between two given years, growth in capital per hour of work was positive, and growth in technology was negative. Pick two points on the graph that represent such a scenario. What happened to productivity in this particular case? |
(A) | From A to D. |
(B) | A to B or C to D. |
(C) | B to C. Productivity remained unchanged. |
OBJ: conceptual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: Production Function
MSC: Bloom's: Application | AACSB: Analytic
15. Suppose the production function Y = f(K,L) is such that 
. Plot the production function with Y on the vertical axis and L on the horizontal axis for the case where K = 500. Plot the productivity curve with Y/L on the vertical axis and K/L on the horizontal axis.
OBJ: conceptual
SEC: 6. Appendix: Deriving the Growth Accounting Formula
TOP: Production Function
MSC: Bloom's: Application | AACSB: Analytic