Test Bank Answers Economic Growth Chapter.15 11th Edition

Chapter 15 Test Bank KEY

1. Over the last decade, the world has experienced

A. decreased living standards in some of the poorest countries.

B. increased living standards in all countries.

C. growth in output for all countries.

D. improvements in technology but little change in output.

2. The alternative combinations of goods and services that could be produced with all available resources and technology is the

A. GDP per capita.

B. real GDP.

C. aggregate supply curve.

D. production possibilities.

3. The production possibilities curve represents the

A. actual GDP that is being produced.

B. potential output that could be produced.

C. potential GDP per capita that could be attained.

D. actual population growth that is occurring.

4. Short-run economic growth comes from

A. expanding the production possibilities curve.

B. a rightward shift of aggregate supply.

C. increased or more efficient use of existing resources.

D. a population decrease which increases output per person.

5. Which of the following is if an economy is producing inside its production possibilities curve?

A. There are not enough resources available to reach the curve.

B. More output can be produced with existing resources.

C. The available technology is limiting the level of production.

D. The economy is producing the maximum potential output.

6. A major goal of short-run macroeconomic policy is to move to a point on the _____ curve.

A. investment demand

B. production function

C. production possibilities

D. aggregate supply

7. By using all available resources and technology, the economy will

A. shift aggregate supply to the right.

B. shift the production possibilities curve to the right.

C. experience long-run economic growth.

D. produce at a point on the production possibilities curve.

8. Short-run economic growth focuses on

A. using all the available resources and technology.

B. increasing the amount of available resources.

C. improving the level of technology.

D. holding the population level constant while growing GDP.

9. If an economy moves from a point inside the production possibilities curve to a point on the curve

A. there is increased use of the productive capacity.

B. the level of unemployment has increased.

C. the available resources must have increased.

D. the level of technology must have increased.

10. Long-run macroeconomic policy focuses on shifting the

A. aggregate supply curve to the left.

B. production possibilities curve outward.

C. aggregate demand curve to the left.

D. money supply curve to the right.

11. Long-run economic growth policies focus on

A. shifting the aggregate demand curve to the left.

B. moving the economy along the production possibilities curve.

C. shifting the production possibilities curve outward.

D. moving the economy onto the production possibilities curve.

12. When an economy experiences long-run growth, there will be

A. an increase in potential GDP.

B. an increase in the use of existing productive capacity.

C. a shift in aggregate supply to the left.

D. a commitment to expansionary fiscal policy.

13. A major goal of long-run economic policy is to

A. increase food production.

B. reduce transfer programs.

C. increase potential GDP.

D. increase population.

14. Long-run economic growth is consistent with

A. expanding the aggregate demand curve.

B. expanding the production possibilities curve.

C. an increase in government spending.

D. an increase in GDP per capita.

15. To produce a combination of goods and services beyond the current production possibilities curve, an economy must

A. use more of the available resources and technology.

B. raise the prices of goods and services so that firms will produce more.

C. find more resources or develop new technology.

D. experience population growth.

16. An increase in our production possibilities is known as

A. inflation.

B. crowding out.

C. GDP per capita.

D. economic growth.

17. Fiscal and monetary policies are used to shift the

A. aggregate demand curve.

B. aggregate supply curve.

C. production possibilities curve.

D. real GDP curve.

18. A sustained increase in total output is possible only if the aggregate _____ curve shifts to the _____.

A. supply; left

B. supply; right

C. demand; left

D. demand; right

19. Which of the following is definitely if the production possibilities curve shifts outward?

A. Aggregate supply has increased.

B. Population has increased.

C. GDP per capita has increased.

D. Inflation has increased.

20. Which of the following is definitely when nominal GDP increases?

A. The standard of living improves.

B. The amount of output increases.

C. The value of output increases.

D. The production possibilities curve shifts outward.

21. Which of the following measures the actual quantity of goods and services produced in the United States?

A. nominal GDP

B. GDP per worker

C. real GDP per capita

D. real GDP

22. Real GDP measures the

A. market value of goods and services produced.

B. standard of living.

C. actual quantity of goods and services produced.

D. level of productivity.

23. Which of the following is the best measure of the actual quantity of goods and services produced by an economy?

A. nominal GDP

B. real GDP

C. real GDP per capita

D. GDP per worker

24. Real GDP is the most effective measure for determining the

A. income level per household.

B. change in the price level.

C. standard of living across countries.

D. growth rate of the economy over time.

25. Which of the following is the best measure of the growth rate of the economy?

A. the percentage change in real GDP

B. investment as a percentage of real GDP

C. real GDP per capita

D. real GDP per worker

26. The growth rate refers to the change in _______ from one period to another.

A. standard of living

B. population

C. nominal GDP

D. real GDP

27. The change in real output between two time periods divided by total output in the base period is the formula for

A. level of productivity.

B. growth rate.

C. production possibilities.

D. net investment.

28. If real GDP was $17,500 billion in 2016 and $17,800 billion in 2017, the economic growth rate was approximately ___ percent.

A. 0.8

B. 1.7

C. 3.2

D. 4.6

29. If real GDP was $17,200 billion in 2015 and $17,500 billion in 2016, the economic growth rate was approximately ___ percent.

A. 0.8

B. 1.7

C. 3.2

D. 4.6

30. If real GDP was $16,600 billion in 2014 and $17,200 billion in 2015, the economic growth rate was approximately ___ percent.

A. 3.6

B. 2.7

C. 2.2

D. 1.9

31. Economic growth is a(n) _______ process.

A. constant

B. exponential

C. arithmetic

D. linear

32. Which of the following statements about long-run economic growth is ?

A. Growth is compounded from one year to the next.

B. Growth is always occurring for rich countries.

C. Growth this year does not impact growth next year.

D. Poor countries are incapable of growth.

33. Small differences in annual growth rates accumulate into

A. small differences in GDP.

B. large differences in GDP.

C. a leftward shift of the aggregate demand curve.

D. an increase in population.

34. GDP per capita is

A. total GDP multiplied by total population.

B. total GDP divided by total population.

C. total output divided by total labor force.

D. the percentage change in real GDP from one period to another.

35. GDP per capita measures the

A. impact of the marginal tax rate on AS.

B. Rule of 72.

C. standard of living.

D. productivity of the work force.

36. GDP per capita is the most widely used measurement for

A. determining the distribution of output within a country.

B. determining the growth rate of the economy over time.

C. finding the impact of population on GDP.

D. comparing living standards between countries.

37. The most commonly used measurement for comparing the standard of living between two countries is

A. the ratio of current GDP to GDP in the base period.

B. GDP per capita.

C. investment as a percentage of GDP.

D. GDP per worker.

38. Which of the following is the best measure of living standards for an economy?

A. GDP per worker

B. nominal GDP

C. GDP per capita

D. population growth

39. In addition to generating more output, economic growth can also contribute to

A. improved health for workers.

B. increased unemployment for workers.

C. decreased productivity.

D. a more equitable distribution of output.

40. Growth in GDP per capita is only possible if growth in _______ exceeds growth in _______.

A. employment; output

B. output; prices

C. prices; employment

D. output; population

41. Growth in GDP per capita can only occur if the growth in

A. output is greater than the growth in population.

B. employment is greater than the growth in prices.

C. population is greater than the growth in unemployment.

D. prices is greater than the growth in output.

42. Which of the following explains why GDP per capita is likely to decline in less developed countries?

A. Unemployment growth is greater than population growth.

B. Population growth is greater than inflation.

C. GDP growth is greater than capital investment growth.

D. Population growth is greater than GDP growth.

43. If GDP was $18.62 trillion in 2016 and the population was 323.4 million, then GDP per capita was approximately

A. $27,397.

B. $36,500.

C. $57,575.

D. $71,000.

44. If GDP was $19.39 trillion in 2017 and the population was 325.7 million, then GDP per capita was approximately

A. $33,333.

B. $47,042.

C. $59,533.

D. $68,500.

45. If GDP was $18.12 trillion in 2015 and the population was 321 million, then GDP per capita was approximately

A. $48,070.

B. $56,449.

C. $59,286.

D. $64,520.

46. If GDP was $17.43 trillion in 2014 and the population was 318.6 million, then GDP per capita was approximately

A. $43,575.

B. $48,390.

C. $54,708.

D. $57,798.

47. If GDP per capita grows at a constant rate of 6 percent per year, using the "Rule of 72" it will take approximately _____ for GDP per capita to double.

A. 6 years

B. 10 years

C. 12 years

D. 12 months

48. If GDP per capita grows at a constant rate of 9 percent per year, using the "Rule of 72" it will take approximately ___ years for GDP per capita to double.

A. 8 months

B. 8 years

C. 9 years

D. 9 months

49. If real GDP grows at a constant rate of 2 percent per year, using the "Rule of 72" it will take approximately ___ years for real GDP to double.

A. 2 months

B. 2 years

C. 36 months

D. 36 years

50. If real GDP per capita grows at a constant rate of 4 percent per year, using the "Rule of 72" it will take approximately ___ years for real GDP to double.

A. 4 months

B. 4 years

C. 18 years

D. 18 months

51. Using the Rule of 72 approximately how long will it take for productivity to double with a constant productivity growth rate of 1.5 percent per year?

A. 48 months

B. 48 years

C. 72 years

D. 108 years

52. All persons over age 16 who are either working for pay or actively seeking paid employment defines

A. labor force.

B. employment rate.

C. GDP per capita.

D. productivity rate.

53. The proportion of the adult population that is employed is the

A. unemployment rate.

B. employment rate.

C. GDP per capita.

D. productivity rate.

54. Output per labor hour is used to measure

A. production possibilities.

B. nominal GDP.

C. employment rate.

D. productivity.

55. Which of the following is used to measure labor productivity?

A. labor input divided by total output

B. output per labor hour

C. hourly wage rate divided by output per labor hour

D. dollar value of inputs per unit of output

56. In recent decades, a primary source of long-run growth in U.S. output has been

A. increased capacity utilization.

B. a reduction in structural unemployment.

C. increased output per worker.

D. rapid growth of the money supply.

57. Continual increases in GDP per capita are most likely to come from

A. increases in output per worker.

B. increases in the employment rate.

C. decreases in population growth.

D. increases in inflation.

58. If the total output for an economy is equal to $750 billion and the total number of labor hours is 20 billion, then labor productivity is equal to

A. $15.00 per hour.

B. $20.00 per hour.

C. $37.50 per hour.

D. $75.00 per hour.

59. If the total output for an economy is equal to $840 billion and the total number of labor hours is 24 billion, then labor productivity is equal to

A. $201.60 per hour.

B. $35.00 per hour.

C. $24.00 per hour.

D. $18.00 per hour.

60. Which of the following does NOT contribute to an increase in productivity?

A. research and development

B. income transfers

C. capital investment

D. improvements in the quality of labor

61. Which of the following is NOT a source of productivity gain?

A. an increase in population

B. an increase in the ratio of capital to labor

C. development of better capital equipment and products

D. better use of resources in the production process

62. Which of the following is NOT likely to contribute to gains in productivity?

A. greater expenditures on training and education

B. improved management

C. greater expenditures on research and development

D. increased unemployment benefits

63. Sources of productivity growth include all of the following except

A. an increase in the ratio of capital to labor.

B. an increase in the price level.

C. better use of available resources in the production process.

D. an increase in labor skills.

64. Improved labor skills contribute to growth of the economy by

A. increasing productivity.

B. raising savings rates.

C. raising investment rates.

D. replacing capital.

65. Productivity is definitely enhanced by

A. higher taxes.

B. more government regulation.

C. education and training activities.

D. limits on immigration.

66. Additional capital contributes to economic growth by

A. replacing labor and increasing unemployment.

B. enhancing labor productivity.

C. replacing manufacturing industries with service industries.

D. giving savers more money to put into investment.

67. Which of the following will reduce labor productivity?

A. an increase in the ratio of labor to capital

B. a higher savings rate

C. an increase in literacy

D. an increase in capital stock

68. More technically-advanced capital makes its contribution to productivity by

A. replacing labor and increasing unemployment.

B. enhancing labor productivity.

C. increasing profits for producers.

D. increasing nominal GDP.

69. In order to maximize the potential of workers, managers should

A. watch workers closely so they don't become lazy.

B. offer incentives to workers.

C. require a certain level of productivity from each worker.

D. limit coffee breaks and shorten lunch hours.

70. Increases in productivity in the United States since 1929 are mostly due to

A. increases in the quantity of labor.

B. increases in the number of U.S. firms.

C. research and development.

D. the high salaries paid to workers.

71. Which of the following is credited with making the greatest contribution to economic growth over time for the United States?

A. improved management techniques

B. investment in capital

C. research and development

D. increased education

72. Which of the following has historically made the greatest contribution to U.S. economic growth?

A. research and development

B. improved management training

C. increased worker productivity

D. better education and training for workers

73. Which of the following policies does NOT shift the aggregate supply curve to the right?

A. education and training programs

B. government budget deficits

C. tax incentives to increase exploration for natural resources

D. increased immigration

74. Which of the following policies does NOT shift the aggregate supply curve to the right?

A. deregulation

B. tax cuts

C. job training programs

D. minimum-wage laws

75. Government policies that shift aggregate supply to the right include

A. immigration preferences based on potential productivity.

B. increased transfer payments to the unemployed.

C. elimination of training programs for the structurally unemployed.

D. reduction in job search assistance.

76. Which of the following can reduce the level of long-run economic growth?

A. a decrease in deficit spending by the government

B. an increase in government safety regulations

C. an increase in the savings rate

D. government enforced property rights

77. Dollars spent on education and training

A. increase short-run growth but not long-run growth.

B. increase both short-run and long-run growth.

C. increase long-run growth but not short-run growth.

D. affect the level of productivity but do not affect growth.

78. Government policies that support education and job training cause

A. a decrease in GDP per capita, since dollars are not being spent on output.

B. an increase in the size of the labor force.

C. an increase in productivity.

D. an increase in the ratio of capital to labor.

79. Which of the following government policies will shift aggregate supply to the right?

A. setting immigration preferences based on potential productivity

B. increasing transfer payments to the unemployed

C. eliminating government-funded training programs for the structurally unemployed

D. eliminating job-search assistance

80. Ceteris paribus, when new immigrants enter a country

A. production possibilities decrease.

B. aggregate supply shifts to the left.

C. the size of the labor force increases.

D. crowding in occurs.

81. Which of the following is most likely to increase aggregate supply?

A. an increase in safety regulations

B. a decrease in the capital gains tax

C. an increase in the minimum wage

D. an increase in government borrowing

82. A decrease in the tax rate on capital gains can

A. reduce the level of investment.

B. result in economic growth.

C. reduce the level of saving.

D. cause crowding out.

83. Increased saving

A. allows for increased investment.

B. causes a decrease in economic growth.

C. jeopardizes economic freedom.

D. causes crowding out.

84. Government policies to encourage saving are meant to

A. increase economic growth.

B. decrease aggregate supply.

C. increase the level of consumption.

D. increase the price level.

85. A reduction in private-sector borrowing and spending caused by increased government borrowing is known as

A. crowding up.

B. crowding in.

C. over-crowding.

D. crowding out.

86. Which of the following can reduce the level of economic growth?

A. crowding out

B. technological improvements

C. higher ratios of capital to labor

D. crowding in

87. Crowding out occurs when the government

A. increases taxes, thus causing a decrease in consumption.

B. borrows money, thus making it more difficult for the private sector to borrow.

C. prints money, which displaces currency.

D. encourages saving, which makes more dollars available for borrowing.

88. Crowding out is most likely to occur when the federal government

A. runs a surplus and pays off part of the debt.

B. balances the budget.

C. runs a deficit and raises taxes to generate more revenue.

D. runs a deficit and borrows money to finance its spending.

89. Which of the following reduces the level of economic growth?

A. technological improvements

B. higher ratio of capital to labor

C. crowding out

D. research and development

90. Which of the following statements is regarding crowding out?

A. Saving is diverted from business investment to government spending.

B. Businesses that pay less than minimum wage are forced to close.

C. Consumption is encouraged because property rights are protected.

D. Immigrants without the required skills are forced out of the labor market.

91. Supply-side economists believe that

A. government regulation is necessary to ensure the correct mix of output.

B. a decrease in regulation will shift the aggregate supply curve to the right.

C. a decrease in regulation will allow producers to abuse consumers.

D. government regulation encourages long-run economic growth.

92. Which of the following will cause the aggregate supply curve to shift to the left?

A. a lower tax rate

B. deregulation of production processes

C. a higher minimum wage

D. more job and skills training

93. According to supply-side economists, which of the following encourages economic growth?

A. minimum wage laws

B. food and drug health standards

C. transportation regulations

D. economic freedom

94. Which of the following does NOT contribute to economic freedom?

A. government regulation of production processes

B. government enforced property rights

C. government enforced legal rights

D. government established political rights

95.

Refer to the Production Possibilities 1 figure. A short-run increase in capacity utilization can be demonstrated by a movement from point

A. A to point C.

B. B to point C.

C. D to point E.

D. D to point B.

96.

Refer to the Production Possibilities 1 figure. Long-run economic growth can be demonstrated by a move from point

A.E to point A.

B. A to point B.

C. B to point C.

D. C to point E.

97.

Refer to the Production Possibilities 1 figure. A rightward shift of aggregate supply is consistent with a move from point

A.E to point A.

B. B to point C.

C. B to point D.

D. D to point E.

98.

Refer to the Production Possibilities 1 figure. Expansionary monetary and fiscal policies, designed to achieve short-run economic growth, would move the economy from point

A. D to point E.

B. A to point B or point C.

C. B to point C or point D.

D. C to point B.

99.

Refer to the Production Possibilities 2 figure. Short-run economic growth can be illustrated by a movement from point

A. C to point D.

B. D to point B.

C. A to point B.

D. D to point A

100.

Refer to the Production Possibilities 2 figure. Long-run economic growth can be illustrated by

A. A movement from point B to point D.

B. An outward shift of the production possibilities curve.

C. An inward shift of the production possibilities curve.

D. A movement from point A to point B.

101.

Refer to the Production Possibilities 2 figure. Expansionary monetary and fiscal policies are designed to move the economy in the short-run from point

A. A to point B.

B. C to point B.

C. C to point D.

D. D to point B.

102.

Refer to the Production Possibilities 2 figure. Policies that encourage the growth of net investment and labor productivity are designed to move the economy from point

A. C to point B.

B. C to point A.

C. B to either point D or point C.

D. D to point C.

103. Which of the following changes is likely as a result of economic growth?

A. a shorter life span

B. less leisure time

C. the ability to consume more goods

D. a decrease in productivity

104. Living standards are often measured using

A. GDP per capita.

B. the growth rate of GDP.

C. nominal GDP.

D. the employment rate.

105. One News Wire article, titled "Americans Save Little", explains where the United States ranks in terms of savings rates. Savings rates in the United States are lower than each of the following except

A. Sweden.

B. Switzerland.

C. South Korea.

D. Japan.

106. The United States has often employed policy that favors immigration from those with certain job skills and education. This type of immigration policy focuses on

A. investment incentives.

B. labor productivity.

C. capital gains taxes.

D. research and development.

107. The United States has often employed policy that favors immigration from those with certain job skills and education. This type of immigration policy should cause a(n)

A. short-run changes in capacity use.

B. movement along the production possibilities curve.

C. expansion of the production possibilities curve.

D. increase in unemployment as more workers immigrate.

108. When an economy moves from a point inside its production possibilities curve to a point on its production possibilities curve, it is using all of its productive capacity.

All resources are being used to the fullest capacity if the economy moves to a point on its production possibilities curve, since all points on the curve are points of maximum productive efficiency.