Questions for Production and Growth:
1.Which of the following are residents of rich countries likely to have in greater quantities, or better quality, than
residents of poor countries?
a. housing
b. healthcare
c. life expectancy
d. All of the above.
2. Which of the following is a good gauge of economic progress?
a. the level of real GDP per person, but not the growth rate of real GDP per person
b. the level of real GDP per person and the growth rate of real GDP per person
c. the growth rate of real GDP per person, but not the level of real GDP per person
d. neither the level nor the growth rate of real GDP per person
3. Productivity is the amount of goods and services
a. an economy produces. It is not linked to a nation’s economic policies.
b. an economy produces. It is linked to a nation’s economic policies.
c. produced for each hour of a worker’s time. It is not linked to a nation’s economic policies.
d. produced for each hour of a worker’s time. It is linked to a nation’s economic policies.
4. A nation's standard of living is best measured by its
a. real GDP.
b. real GDP per person.
c. nominal GDP.
d. nominal GDP per person.
5. The level of real GDP person
a. differs widely across countries, but the growth rate of real GDP per person is similar
across countries.
b. is very similar across countries, but the growth rate of real GDP per person differs widely
across countries.
c. and the growth rate of real GDP per person are similar across countries.
d. and the growth rate of real GDP per person vary widely across countries.
6. If one wants to know how the material well-being of the average person has changed over time in a
given country, one should look at the
a. level of real GDP.
b. growth rate of nominal GDP.
c. growth rate of real GDP.
d. growth rate of real GDP per person.
7. Countries that grew the fastest over the last 100 or so years had growth rates of real income per
person of about
a. 0.5 percent per year.
b. 1.5 percent per year.
c. 2.0 percent per year.
d. 2.5 percent per year.
8. Last year real GDP per person in the imaginary nation of Olympus was 4,500. The year before it
was 4,250. By about what percentage did Olympian real GDP per person grow during the period?
a. 4.6 percent
b. 5.2 percent
c. 5.9 percent
d. 6.5 percent
9. Last year real GDP in the imaginary nation of Populia was 907.5 billion and the population was 3.3
million. The year before real GDP was 750 billion and the population was 3 million. What was the
growth rate of real GDP per person during the year?
a. 10 percent
b. 14 percent
c. 17 percent
d. 21 percent
10. Last year the imaginary nation of Freedonia had a population of 2,700 and real GDP of 16,200,000.
This year it had a population of 2,500 and real GDP of 14,640,000. What was the growth rate of real
GDP per person between last year and this year?
a. -2.4 percent
b. -0.7 percent
c. 4.4 percent
d. 5.2 percent
11. In 2009, the imaginary nation of Florastan had a population of 8,044 and real GDP of 36,198,000.
In 2010 it had a population of 7,800 and real GDP of 35,880,000. What was the growth rate of real
GDP per person in Florastan between 2009 and 2010?
a. -2.2 percent
b. -0.7 percent
c. 2.2 percent
d. 4.5 percent
12. Which of the following is correct?
a. Although levels of real GDP per person vary substantially from country to country, the
growth rate of real GDP per person is similar across countries.
b. Productivity is not closely linked to government policies.
c. The level of real GDP per person is a good gauge of economic prosperity, and the growth
rate of real GDP per person is a good gauge of economic progress.
d. Productivity may be measured by the growth rate of real GDP per person.
13. Productivity is defined as the quantity of
a. labor required to produce a nation’s GDP.
b. labor required to produce one unit of goods and services.
c. goods and services produced from each unit of labor input.
d. goods and services produced per unit of time.
14. Which of the following is a correct way to measure productivity?
a. Divide the number of hours worked by the quantity of output.
b. Divide the quantity of output by the number of hours worked.
c. Determine how much output is produced in a given time.
d. Determine how much time it takes to produce a unit of output.
15. Which of the following is not correct?
a. Countries that have had higher output growth per person have typically done so without
higher productivity growth.
b. A country's standard of living and its productivity are closely related.
c. Productivity refers to output produced per hour of work.
d. Increases in productivity can be used to increase output or leisure.
16. The key determinant of the standard of living in a country is
a. the amount of goods and services produced from each hour of a worker's time.
b. the total amount of goods and services produced within the country.
c. the total amount of its physical capital.
d. its growth rate of real GDP.
17. For a given year, productivity in a particular country is most closely matched with that country's
a. level of real GDP over that year.
b. level of real GDP divided by hours worked over that year.
c. growth rate of real GDP divided by hours worked over that year.
d. growth rate of real GDP per person over that year.
18. Over the last ten years productivity grew more slowly in Upland than in Lowland and the population
and total hours worked remained the same in both countries. It follows that
a. real GDP per person must be lower in Upland than in Lowland.
b. real GDP per person grew more slowly in Upland than in Lowland.
c. the standard of living must be higher in Upland than in Lowland.
d. All of the above are correct.
19. Given that a country’s real output has increased, in which of the following cases can we be sure that
its productivity also has increased?
a. The total number of hours worked rose.
b. The total number of hours worked stayed the same.
c. The total number of hours worked fell.
d. Both b and c are correct.
20. Phoenix furniture uses 10 workers, each working eight hours, to produce 80 rocking chairs. What is
Phoenix’s productivity?
a. 80 rocking chairs
b. 10 rocking chairs per hour
c. 1 rocking chair per hour
d. 1 hour per rocking chair
21. Which of the following items plays a role in determining productivity?
a. physical capital
b. natural resources
c. technological knowledge
d. All of the above are correct.
22. Industrial machinery is an example of
a. a factor of production that in the past was an output from the production process.
b. technological knowledge.
c. a production function.
d. an item which always has the property called constant returns to scale.
23. Industrial machinery is an example of
a. a factor of production that in the past was an output from the production process.
b. physical capital.
c. something that influences productivity.
d. All of the above are correct.
24. The Karmic Deed Restaurant uses all of the following to produce vegetarian meals. Which of them
is an example of physical capital?
a. the owner's knowledge of how to prepare vegetarian entrees
b. the money in the owner's account at the bank from which she borrowed money
c. the tables and chairs in the restaurant
d. the fresh fruits, vegetables, and grains the restaurant uses to prepare its meals
25. Which of the following would not be considered physical capital?
a. a new factory building
b. a computer used to help Mercury Delivery Service keep track of its orders
c. on-the-job training
d. a desk used in an accountant's office
26. Human capital is the
a. knowledge and skills that workers acquire through education, training, and experience.
b. stock of equipment and structures that is used to produce goods and services.
c. total number of hours worked in an economy.
d. same thing as technological knowledge.
27. Which of the following is considered human capital? Knowledge acquired from
a. early childhood education programs
b. job training
c. on-the-job experience
d. All of the above are correct.
28. Which of the following is human capital?
a. a student loan
b. understanding how to use a company's accounting software
c. training videos for new corporate employees
d. All of the above are correct.
29. Which of the following is considered human capital?
a. the comfortable chair in your dorm room where you read economics texts
b. the amount you get paid each week to work at the library
c. the things you have learned this semester
d. any capital goods that require a human to be present to operate
30. The inputs into production of goods and services that are provided by nature, such as land, rivers,
and mineral deposits are called
a. physical capital.
b. natural resources.
c. human capital.
d. technological knowledge.
31. Natural resources
a. are inputs provided by nature.
b. include land, rivers, and mineral deposits.
c. take two forms: renewable and nonrenewable.
d. All of the above are correct.
32. Which of the following is an example of a nonrenewable resource?
a. coal
b. honey
c. livestock
d. All of the above are correct.
33. Which of the following is an example of a renewable natural resource?
a. fish
b. soybeans
c. wood
d. All of the above are correct.
34. Historically, the market prices of most natural resources (adjusted for inflation) have
a. increased.
b. remained stable.
c. remained stable or decreased.
d. decreased.
35. Which of the following is correct?
a. Once adjustment is made for inflation, the prices of most natural resources have been
about steady or falling.
b. Technological progress has allowed us to substitute renewable resources for some
nonrenewable resources.
c. Technological progress has made once-crucial natural resources less necessary.
d. All of the above are correct.
36. Despite its status as one of the richest countries in the world, Japan
a. has a very low level of productivity.
b. has few natural resources.
c. has very little human capital.
d. engages in a relatively small amount of international trade.
37.An understanding of the best ways to produce goods and services is called
a. human capital.
b. physical capital.
c. technology.
d. productivity.
38.Technological knowledge refers to
a. human capital.
b. available information on how to produce things.
c. resources expended transmitting society's understanding to the labor force.
d. All of the above are technological knowledge.
39.Human capital is
a. the same thing as technological knowledge.
b. the same thing as labor.
c. the tools and equipment operated by humans.
d. knowledge and skills that workers have acquired.
40.Other things the same, which of the following would increase productivity?
a. an increase in either human or physical capital
b. an increase in human capital but not an increase in physical capital
c. an increase in physical capital but not an increase in human capital
d. neither an increase in human capital nor an increase in physical capital
41. In an economy where net exports are zero, if saving rises in some period, then in that period
a. consumption and investment fall.
b. consumption falls and investment rises.
c. consumption rises and investment falls.
d. consumption rises and investment falls.
42. Other things the same, when an economy increases its saving rate
a. consumption and production rise now.
b. consumption rises now and production rises later
c. consumption falls now and production rises later.
d. consumption falls now and production falls later.
43. Accumulating capital
a. requires that society sacrifice consumption goods in the present.
b. allows society to consume more in the present.
c. decreases saving rates.
d. involves no tradeoffs.
44.
“When workers already have a large quantity of capital to use in producing goods and services,
giving them an additional unit of capital increases their productivity only slightly.” This statement
a. represents the traditional view of the production process.
b. is an assertion that capital is subject to diminishing returns.
c. is made under the assumption that the quantities of human capital, natural resources, and
technology are being held constant.
d. All of the above are correct.
45. If there are diminishing returns to capital, then
a. capital produces fewer goods as it ages.
b. old ideas are not as useful as new ones.
c. increases in the capital stock eventually decrease output.
d. increases in the capital stock increase output by ever smaller amounts.
46. Country A and country B are the same except country A currently has a lower level of capital.
Assuming diminishing returns, if both countries increase their capital by 100 units and other factors
that determine output are unchanged, then
a. output in country A increases by more than in country B.
b. output in country A increases by the same amount as in country B.
c. output in country A increases by less than in country B.
d. None of the above is necessarily correct.
47. In the long run, a higher saving rate
a. cannot increase the capital stock.
b. means that people must consume less in the future.
c. increases the level of productivity.
d. None of the above is correct.
48. The catch-up effect refers to the idea that
a. saving will always catch-up with investment spending.
b. it is easier for a country to grow fast and so catch-up if it starts out relatively poor.
c. population eventually catches-up with increased output.
d. if investment spending is low, increased saving will help investment to "catch-up."
49. Which of the following terms is used to refer to the ability of people to exercise authority over the
resources they own?
a. natural rights
b. property rights
c. input control
d. collective control
50.Outward-oriented policies
a. allow countries to take advantage of gains from trade.
b. have generally led to high growth for the countries that pursued them.
c. receive widespread support from economists.
d. All of the above are correct.
51.Suppose a country increases trade restrictions. This country would be pursing an
a. inward policy, which most economists believe has beneficial effects on the economy.
b. inward policy, which most economists believe has adverse effects on the economy.
c. outward policy, which most economists believe has beneficial effects on the economy.
d. outward policy, which most economists believe has adverse effects on the economy.
52.Inventors often obtain patents on new products and processes, thereby turning new ideas into
a. private goods and increasing the incentive to engage in research.
b. private goods but decreasing the incentive to engage in research.
c. public goods and increasing the incentive to engage in research.
d. public goods but decreasing the incentive to engage in research.