Parkin&Bade, Macroeconomics, 2nd edition

Chapter 8: Economic Growth

Multiple choice: Choose the one alternative that best completes the statement or answers the question.

1) Economic growth is defined as

A) a sustained expansion of production possibilities.

B) a decrease in the rate of inflation.

C) an increase in employment.

D) an increase in the wage rate.

E) an increase in the nation's population.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

2) Which of the following variables is used to determine a country's economic growth?

i. Real GDP

ii. Wages

iii. Inflation

A) i and iii

B) i only

C) i, ii and iii

D) ii and iii

E) i and ii only

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

3) If real GDP was $13.1 trillion in 2017 and $13.3 trillion in 2018, what is the growth rate?

A) 2.1 per cent

B) 15.0 per cent

C) -1.5 per cent

D) 1.5 per cent

E) $0.2 trillion

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

4) If real GDP in year 1 is $72 million and real GDP in year 2 is $87 million, then the growth rate of real GDP is

A) 15 per cent.

B) 20.8 per cent.

C) 17 per cent.

D) 83 per cent.

E) $15 million.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

5) Using the data in the table above, the growth rate of real GDP for 2010 is equal to

A) 4.76 per cent.

B) 9.09 per cent.

C) 5.00 per cent.

D) 7.00 per cent.

E) 10.0 per cent.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

6) Using the data in the table above, real GDP per person in 2009 is

A) $70 trillion.

B) $75,000.

C) $71,429.

D) 7 per cent.

E) $70,000.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

7) Using the data in the table above, the growth rate of real GDP has

A) slowed from year to year.

B) increased from year to year.

C) increased more rapidly from year to year.

D) remained constant from year to year.

E) probably changed, but more information is needed about the price level to determine by how much it has changed.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

8) If real GDP grows at a faster rate than population, then the standard of living, as measured by real GDP per person,

A) worsens.

B) cannot be measured.

C) improves.

D) remains the same.

E) either improves, worsens or stays the same, depending on the size of the population and the actual level of real GDP.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

9) The population in the current year is 31.5 million and the real GDP is $814 million. The previous year's statistics were a population of 31 million and a real GDP of $800 million. The change in the standard of living, measured by growth in real GDP per person, is

A) 0.13 per cent.

B) 0 per cent.

C) 7.75 per cent.

D) 1.6 per cent.

E) 6 per cent.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

10) Real GDP in the country of Oz is growing at 5 per cent and its population is growing at 2 per cent. In the country of Lilliput, real GDP is growing at 4 per cent and its population is growing at 0.5 per cent. Thus,

A) real GDP per person in Lilliput is growing at a faster rate than in Oz.

B) real GDP per person in Lilliput is growing at a rate that is not comparable to that in Oz.

C) real GDP per person in Lilliput is growing at the same rate as in Oz.

D) real GDP per person in Oz is growing at a faster rate than in Lilliput.

E) We need more information to determine if real GDP per person in Lilliput is growing faster or slower than real GDP per person in Oz.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

11) If a country experiences a real GDP growth rate of 1 per cent and population growth of 2 per cent, then the growth rate of real GDP per person is

A) 2 per cent.

B) 0 per cent.

C) 3 per cent.

D) 1 per cent.

E) -1 per cent.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

12) The Rule of 70 states that the level of a variable will double in

A) the number of years equal to the variable's annual growth rate minus 70.

B) the number of years equal to the variable's annual rate of growth divided by 70.

C) 70 years.

D) the number of years equal to 70 multiplied by the variable's annual growth rate expressed as a decimal.

E) the number of years equal to 70 divided by the variable's annual growth rate.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

13) Approximately how long will it take Ethiopia to double its real GDP per person of $100 if its growth rate of real GDP per person is 0.9 per cent?

A) 77.7 years

B) 109 years

C) 70 years

D) 63 years

E) 100 years

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

14) According to the Rule of 70, if a country grows at 2.0 per cent per year instead of 1.5 per cent per year, how years less will it take to double its level of real GDP?

A) It will take 35 less years.

B) It will take 58.3 less years.

C) It will take 17.9 less years.

D) It will take 20 less years.

E) It will take 11.6 less years.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

15) A nation's annual growth rate of real GDP per person is 2 per cent. Its standard of living will

A) double in 35 years.

B) fall because of its population growth.

C) double in 10 years.

D) not change because its population is growing.

E) double in 50 years.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

16) If it took 20 years for real GDP to double, what was the growth rate of real GDP?

A) 4.5 per cent

B) 5 per cent

C) 4 per cent

D) 3.5 per cent

E) 3.0 per cent

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

17) For the world, what period of time experienced the fastest growth rate of real GDP per person?

A) Around 500 B.C.

B) Between 1500 A.D. and 1850 A.D.

C) After about 1850 A.D.

D) Between 1000 A.D. and 1500 A.D.

E) Around 400 A.D.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

18) Real GDP per person averaged $150 a year (in 2009 dollars) from 1,000,000 BC until 1620. Then in ________ real GDP began to increase without limit and by 1850 had risen to twice its 1650 level because ________.

A) 1650; the Pilgrims arrived in the Americas

B) 1776; the United States was founded

C) 1650; of the Industrial Revolution

D) 1750; Columbus arrived in the Americas

E) 1750; of the Industrial Revolution

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

19) Economic growth is a sustained expansion of production possibilities measured as the increase in ________ over a given period.

A) real GDP per person

B) real GDP

C) capital per person

D) population

E) the standard of living

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

20) The table above gives information about the economy of Japan. The economic growth rate in 1997 was ________ per cent.

A) 4

B) 8.0

C) 0.008

D) 0.08

E) 0.8

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

21) Suppose that Australia has fully employed all of its resources. This situation means that Australia

A) is operating above potential GDP.

B) is growing at a faster rate than the United States.

C) is operating at its potential GDP.

D) is experiencing zero unemployment.

E) None of the above.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

22) The factors of production that produce real GDP are

A) labour, human capital, physical capital, land and entrepreneurship.

B) labour, physical capital and entrepreneurship.

C) labour, human productivity, physical capital and entrepreneurship.

D) money, labour and capital productivity.

E) labour, human capital and entrepreneurship.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

23) The production function describes the relationship between

A) the real wage and the quantity of labour supplied.

B) potential GDP and the real wage rate.

C) real GDP and the quantity of labour employed.

D) real and potential GDP.

E) real and nominal GDP.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

24) The production function displays

A) increasing returns.

B) diminishing returns.

C) normal returns.

D) real returns.

E) average returns.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

25) The idea of "diminishing returns" means that real GDP ________ as the quantity of labour increases.

A) does not change

B) decreases at a faster rate

C) increases at a slower rate

D) increases at a faster rate

E) decreases at a slower rate

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

26) As additional units of labour hours are employed, holding all other factors constant, along the production function,

A) nominal GDP decreases at an increasing rate.

B) real GDP increase at a constant rate.

C) real GDP increases at a decreasing rate.

D) real GDP increases at an increasing rate.

E) real GDP initially decreases and then starts to increase.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

27) The production function shows that, as employment increases, real GDP

A) decreases at a decreasing rate.

B) increases until it reaches potential GDP and then it starts to decrease.

C) increases at a constant rate.

D) increases at a decreasing rate.

E) increases at an increasing rate.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

28) The above figure shows a nation's production function. Point A is

A) unattainable given the state of the economy.

B) attainable if the nation uses resources efficiently.

C) the maximum amount of real GDP the nation can produce.

D) the labour market equilibrium quantity of employment and real GDP.

E) attainable if the economy is inefficient.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

29) The above figure shows a nation's production function. Point B is

A) unattainable.

B) attainable if the nation uses resources inefficiently.

C) the maximum amount of real GDP the nation can ever produce.

D) attainable if the nation uses resources efficiently.

E) Both answers C and D are correct.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

30) The above figure shows a nation's production function. Point C is ________ and ________ because ________.

A) unattainable; efficient; the nation would be using resources efficiently if it could attain this level of production

B) attainable; efficient; the nation is using resources efficiently

C) unattainable; inefficient; the nation is using resources inefficiently

D) attainable; inefficient; the nation is using resources inefficiently

E) unattainable; inefficient; the nation is using resources efficiently but it could be more efficient

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

31) The figure above that most accurately shows a production function is

A) Figure A.

B) Figure B.

C) Figure C.

D) Figure D.

E) Both Figure A and Figure B; Figure A for an economy with an excess of labour and Figure B for an economy with a shortage of labour.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

32) Based on the production function in the above figure, which of the following is an attainable combination of labour and real GDP?

i. 300 billion hours of labour and real GDP of $20 trillion

ii. 300 billion hours of labour and real GDP of $8 trillion

iii. 100 billion hours of labour and real GDP of $12 trillion

A) i only

B) ii only

C) iii only

D) ii and iii

E) i and ii

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

33) The total labour hours that all the firms in the economy plan to hire during a given time period at one particular real wage rate is the

A) quantity of labour demanded.

B) demand for labour.

C) quantity of labour supplied.

D) quantity of jobs supplied.

E) supply of labour.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

34) For a household, the opportunity cost of not working is the

A) nominal wage rate.

B) demand for labour.

C) real wage rate.

D) cost of living.

E) price level.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

35) The supply of labour is defined as the relationship between the real wage rate and the

A) amount of jobs supplied by households.

B) amount of jobs supplied by firms.

C) quantity of labour supplied by firms.

D) equilibrium quantity of employment.

E) quantity of labour supplied by households.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

36) When all other influences on work plans remain the same, the

A) lower the real wage rate, the smaller the quantity of labour supplied.

B) lower the real wage rate, the larger the labour force participation rate.

C) lower the real wage rate, the greater the quantity of labour supplied.

D) higher the real wage rate, the greater the quantity of labour demanded.

E) lower the real wage rate, the smaller the quantity of labour demanded.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

37) A surplus of labour is eliminated by ________ in the real wage rate and a shortage of labour is eliminated by ________ in the real wage rate.

A) a decrease; an increase

B) a decrease; a decrease

C) an increase; a decrease

D) an increase; an increase

E) None of the above answers is correct because shortages and surpluses are eliminated by changes in the demand for labour and the supply of labour, not the wage rate.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

38) When the labour market is in equilibrium,

A) the real wage rate falls to equal the nominal wage rate because real GDP is greater than potential GDP.

B) there is full employment but real GDP might be greater than, less than or equal to potential GDP.

C) there is full employment, which means that real GDP equals potential GDP.

D) the real wage rate rises to allow real GDP to equal potential GDP.

E) there is excess labour supplied, which keeps real GDP less than potential GDP.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

39) Growth in the supply of labour comes from

A) growth in the average hours per worker.

B) growth in the working-age population, which in the long run grows at the same rate as the total population.

C) growth in the participation rate multiplied by the average hours per worker.

D) immigration less the increase in the participation rate.

E) All of the above.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

40) The effect of an increase in population growth, all else remaining the same, is

i. an increase in the full-employment quantity of labour.

ii. an increase in potential GDP.

iii. a decrease in the equilibrium real wage.

A) i only

B) i and ii

C) i and iii

D) ii and iii

E) i, ii and iii

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

41) Labour productivity equals

A) the total production of labour.

B) the quantity of labour hours divided by real GDP.

C) real GDP divided by the amount of human capital.

D) real GDP.

E) real GDP per hour of labour.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

42) Real GDP is $700 billion, average hours worked per week is 42 and aggregate hours are 150 billion hours. What is the economy's labour productivity?

A) $1.80 per hour

B) $16.67 per hour

C) $3.75 per hour

D) $4.67 per hour

E) $4.50 per hour

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

43) The effect of an increase in labour productivity, assuming no change in the supply of labour, is

i. an increase in the real wage.

ii. an increase in potential GDP.

iii. a decrease in the demand for labour.

A) i only

B) i and ii

C) i and iii

D) ii and iii

E) i, ii and iii

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

44) Sustained increases in the standard of living depend on

A) increases in aggregate hours.

B) increases in the quantity of labour.

C) increases in labour productivity.

D) decreases in labour productivity.

E) increases in the population.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

45) As labour productivity is higher in the United States than Australia, this means that

A) real wages are higher in Australia.

B) Australian workers will want to work less hours.

C) employers in the United States are willing to pay more for a given quantity of labour than Australian employers are.

D) real wages are higher in Europe but lower in Australia.

E) the production function in the United States is below that of Australia's.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

46) If real GDP is $1,200 billion, the population is 60 million, and aggregate hours are 80 billion, labour productivity is

A) $150 an hour.

B) $5.00 an hour.

C) $6.67 an hour.

D) $15.00 an hour.

E) $20,000.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

47) If a country lacks ________, economic growth ________.

A) a proper incentive system; cannot occur

B) a democratic form of government; cannot occur

C) economic freedom; will increase at a faster pace

D) pure capitalism; will be slower compared to other countries

E) a proper incentive system; will occur at a pace suggested by the new growth theory

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

48) A key reason why some nations show little or no growth is

A) lack of incentives to undertake actions toward growth.

B) overpopulation that overuses limited resources.

C) too much international trade so that all economic growth spills over to foreigners.

D) patents in rich nations that keep technology only for the rich.

E) too much private property not directed by the government.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

49) A basic precondition necessary to achieve economic growth is

A) a well-organised work force.

B) well-functioning factories.

C) a well-functioning legal system.

D) the well-being of society.

E) a strong central government that directs the nation's research and development activities.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

50) Economic freedom provides the

A) incentive system that encourages growth-producing activities.

B) political system that encourages democracy.

C) necessary alternative to free markets.

D) production system that discourages property rights.

E) social system that supports families.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

51) Property rights

A) include physical, financial and intellectual property.

B) slow economic growth by placing limits on who can use what.

C) don't include financial property.

D) don't include intellectual property.

E) don't include physical property.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

52) One possible way of achieving faster economic growth is to

A) protect property rights and free markets.

B) tax savings so that people spend more and firms' profits are higher.

C) assign the government ownership of all capital.

D) regulate the amount of international trade and limit it so that not too much occurs.

E) limit research and development because research and development does not contribute anything to today's production.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

53) Which of the following lists gives factors that increase labour productivity?

A) Saving and investment in physical capital, and wage increases

B) Expansion of human capital, population growth, and discovery of new technologies

C) Expansion of human capital, labour force increases, and discovery of new technologies

D) Saving and investment in physical capital, expansion of human capital, and discovery of new technologies

E) Labour force increases and wage increases

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

54) One way to achieve faster growth in GDP per person is to increase the

A) growth rate of the population.

B) limits on international trade in order to keep more of total spending on domestically produced goods.

C) number of women working in the home rather than in the workforce.

D) growth rate of human capital.

E) growth rate of the quantity of money.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

55) A reason for an increase in labour productivity growth is

A) an increase in people's human capital.

B) an increase in the population so that firms hire more workers.

C) growth in the supply of labour.

D) an increase in the quantity of labour.

E) a decrease in the capital stock so that firms must hire more workers.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

56) Human capital is defined as the

A) accumulated skill and knowledge of human beings.

B) number of factories built for human beings.

C) skills that people are born with.

D) amount of machinery human beings have.

E) accumulated amount of machinery and factories human beings own.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

57) Labour productivity increases if

i. human capital decreases.

ii. technology advances.

iii. he quality of education decreases.

A) i only

B) ii only

C) iii only

D) i and ii

E) ii and iii

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

58) According to the new growth theory, which of the following promote economic growth?

i. Discoveries that bring profit.

ii. Choices that expand human capital.

iii. Random events that create technological change.

A) i and iii

B) ii only

C) i, ii and iii

D) i only

E) i and ii

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

59) New growth theory asserts that

i. human capital grows because of choices.

ii. discoveries result from choices.

iii. competition brings profits.

A) i only

B) ii only

C) iii only

D) i and iii

E) i and ii

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

60) The new growth theory asserts that profits are

A) not an essential component in determining whether the economy grows or not.

B) permanent, because physical activities can be replicated.

C) permanent, because they are derived from discoveries.

D) an illusion, since costs are never fully covered.

E) temporary, because the discoveries that lead to profits are eventually used by all.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

61) A central theme of the new growth theory is that

A) the government is more efficient than private markets.

B) firms don't really experience profit.

C) the economy doesn't experience diminishing returns.

D) humans can work harder than previously thought.

E) firms don't experience diminishing returns.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

62) New growth theory asserts that ________ will lead us to greater productivity and economic growth.

A) new machinery

B) government regulation

C) leisure time

D) nothing

E) unlimited wants

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

63) The new growth theory's comparison of the economy to a perpetual motion machine implies that

A) overpopulation will eventually overtake the resources of the planet.

B) the economy will forever create and destroy jobs.

C) labour productivity has no influence on the economy.

D) technological changes just happen.

E) permanent growth is not possible.

Diff: 0 Type: MC

Skill: Level 2

A-Head: 8.3 What Makes an Economy Grow?

AACSB: Reflective thinking

64) According to new growth theory, growth

A) occurs when real GDP is greater than the subsistence level.

B) ends when competition disappears.

C) cannot be sustained without government help.

D) is unending.

E) depends on the population growth rate.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

65) Which of the following statements is FALSE?

A) Faster population growth is the key to growth in real GDP per person.

B) Free international trade helps create economic growth.

C) Saving helps create economic growth.

D) Economic freedom requires property rights.

E) Improvements in the quality of education are important for economic growth.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

66) If Turkey wants to promote faster economic growth, it will need to

A) restrict international trade to protects its own workers.

B) promote government intervention to help markets determine incentives.

C) promote incentive systems to encourage saving, research and development, increased trade and improved education.

D) restrict property rights so that individuals can better share inventions.

E) restrict economic freedom so the government has better control of markets.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

67) One possible way of achieving faster economic growth is to

A) protect the economy from international trade.

B) encourage saving.

C) eliminate property rights because they prevent people from using other people's ideas.

D) limit investment because investment adds nothing to production today.

E) tax savings so that people spend more and businesses make more profit.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

68) One possible way of achieving faster economic growth is to

A) limit schooling in order to have more people in the labour force, producing goods and services.

B) promote tax saving so that people spend more and businesses' profits are larger.

C) abolish the system of patents and copyrights so that everyone can use other people's ideas.

D) encourage research and development.

E) limit international trade to only a few countries so that the nation is not hurt by too much trade.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

69) Why are some nations rich and others poor?

i. Political stability

ii. Property rights protected by the rule of law

iii. Unlimited government intervention

A) i only

B) ii only

C) i and ii

D) iii only

E) i, ii and iii

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

70) In order to increase economic growth, a government can

A) tax savings in order to encourage more spending.

B) discourage research and development.

C) decrease funding on education.

D) discourage specialisation and trade.

E) establish property rights and a legal system.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking

71) The presence of government corruption in some countries

A) invalidates the neoclassical growth theory's predictions.

B) supports the classical growth theory's predictions.

C) speeds their economic growth.

D) slows their economic growth.

E) invalidates the new growth theory's predictions.

Difficulty: Basic

A-Head: 5.2 Measuring Australian GDP

AACSB: Analytical thinking