Chapter 08
Economic
Growth
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-1
A supply factor in economic growth would be:
A. A fall in the efficient use of resources
B. A rise in the rate of resource depletion
C. An increase in the quantity of labor
D. An increase in consumption spending
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-2
Which is not a supply factor in economic
growth?
A. An efficient allocation of resources
B. Natural resources
C. The quantity and quality of labor
D. Technological knowledge
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-3
Which is a demand factor in economic growth?
A. More human and natural resources
B. Technological progress and innovation
C. An increase in the economy's stock of
capital goods
D. An increase in total spending in the
economy
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-4
Assume a nation's current production
possibilities are represented by the
curve AB in the above diagram.
Positive economic growth would
best be indicated by a:
A. Shift in the curve from AB to CD
B. Shift in the curve from AB to EF
C. Movement from point 1 to point 2
D. Movement from point 3 to point 4
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-5
Refer to the above diagram. If the
production possibilities curve
for an economy is at AB but the
economy is operating at point 4,
the reasons are most likely to be
because of:
A. Supply and environmental
factors
B. Demand and efficiency
factors
C. Labor inputs and labor
productivity
D. Technological progress
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-6
Refer to the above diagram. If there is
a movement away from the full
employment of resources in an
economy with production
possibilities curve AB, this can be
shown by:
A shift of the curve from AB to CD
B. A movement from point 3 to
point 1
C. A movement from point 2 to
point 4
D. Point 5 in the diagram
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-7
Refer to the above diagram.
Negative economic
growth can be shown by a
shift of:
A. EF to AB
B. EF to CD
C. AB to CD
D. CD to AB
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-8
Refer to the above diagram. A shift in
the production possibilities curve
from AB to CD is most likely due
to:
A. The use of the economy's
resources in an efficient way
B. An increase in the spending of
business and consumers
C. An increase in government
purchase of the economy's output
D. An increase in the quantity and
quality of labor resources
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-9
Real GDP or total output in any year is equal
to:
A. Labor inputs divided by resource outputs
B. Labor productivity multiplied by real
output
C. Worker-hours multiplied by labor
productivity
D. Worker-hours divided by labor
productivity
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-10
If total output in an economy is $600,000 and
the total work-hours in the economy are
40,000, labor productivity is:
A. $7
B. $9
C. $13
D. $15
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-11
Which will NOT increase the average
productivity of labor?
A. An increase in the stock of real capital
B. Improvements in the education and health
of the labor force
C. Technological progress as reflected in
more efficient capital goods
D. An increase in the size of the labor force
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-12
The basic determinants of labor inputs (total hours
of work) include:
A. Economies of scale and technological
advance
B. Education and training, and allocative
efficiency
C. The size of the labor force and average hours
of work
D. The quantity and quality of capital and human
resources
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-13
Negative economic growth can be shown as a:
A. Rightward shift of the production possibilities
curve
B. Leftward shift of the production possibilities
curve
C. Movement from a point on the production
possibilities curve to one outside of it
D. Movement from one point on the production
possibilities curve to another point on the curve
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-14
Assume that an economy has 1500 workers,
each working 2000 hours per year. If the
average real output per worker-hour is $20,
then total output or real GDP will be:
A. $3 million
B. $30 million
C. $45 million
D. $60 million
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-15
The table below shows the quantity of labor (measured in hours)
and the productivity of labor (measured in real GDP per hour) in a
hypothetical economy in three different years.
•
Year
Quantity of Labor
Productivity of
Labor
1
2.000
200
2
2.000
210
3
2.200
210
Refer to the above table. Between Year 2 and Year 3, the productivity of
labor:
A. Increased by 5 percent and the quantity of labor increased by 10
percent
B. Increased by 2 percent and the quantity of labor increased by 10
percent
C. Remained the same, but the quantity of labor increased by 5 percent
D. Remained the same, but the quantity of labor increased by 10 percent
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-16
The table below shows the quantity of labor (measured in hours)
and the productivity of labor (measured in real GDP per hour) in a
hypothetical economy in three different years.
Year
Quantity of Labor
Productivity of
Labor
1
2.000
200
2
2.000
210
3
2.200
210
Refer to the above table. Between Year 1 and Year 2, real GDP
increased by:
A. 1.5 percent
B. 2.5 percent
C. 5.0 percent
D. 6.0 percent
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-17
The table below shows the quantity of labor (measured in hours)
and the productivity of labor (measured in real GDP per hour) in a
hypothetical economy in three different years.
Year
Quantity of Labor
Productivity of
Labor
1
2.000
200
2
2.000
210
3
2.200
210
Refer to the above table. In Year 2, the economy's real GDP was:
A. $400,000
B. $420,000
C. $462,000
D. $500,000
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-18
The table below shows the quantity of labor (measured in hours)
and the productivity of labor (measured in real GDP per hour) in a
hypothetical economy in three different years.
Year
Quantity of Labor
Productivity of
Labor
1
2.000
200
2
2.000
210
3
2.200
210
Refer to the above table. Between Year 1 and Year 2, the productivity
of labor increased by:
A. 1.0 percent
B. 3.0 percent
C. 5.0 percent
D. 7.0 percent
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-19
The table below shows the quantity of labor (measured in hours)
and the productivity of labor (measured in real GDP per hour) in a
hypothetical economy in three different years.
Year
Quantity of Labor
Productivity of
Labor
1
2.000
200
2
2.000
210
3
2.200
210
Refer to the above table. What explains the increase in real GDP from
Year 1 to Year 3? An increase in:
A. Labor productivity between Year 2 and Year 3
B. The quantity of labor between Year 1 and Year 2
C. Labor productivity between Year 1 and Year 2 and an increase in
the quantity of labor between Year 2 and Year 3
D. Labor productivity between Year 2 and Year 3 and an increase in
the quantity of labor between Year 1 and Year 2
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-20
The table below shows the quantity of labor (measured in hours)
and the productivity of labor (measured in real GDP per hour) in a
hypothetical economy in three different years.
Year
Quantity of Labor
Productivity of
Labor
1
2.000
200
2
2.000
210
3
2.200
210
Refer to the above table. Between Year 2 and Year 3, real GDP
increased by:
A. 2 percent due to 2 percent increase in labor productivity
B. 5 percent due to 5 percent increase in labor productivity
C. 10 percent due to 5 percent increase in the quantity of labor
D. 10 percent due to 10 percent increase in the quantity of labor
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-21
What economic concept would be most closely
associated with a situation where an
aluminum plant uses extensive
computerization on the production line to
reduce per-unit costs of production?
A. Infrastructure
B. Human capital
C. Network effects
D. Economies of scale
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-22
One of the distinguishing features of the New
Economy is:
A. Decreasing returns to scale in
manufacturing
B. The need for less specialized inputs in
manufacturing
C. Technological progress from the
investment in the space program
D. Technological progress from the microchip
and information technology
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-23
If there is an increase in labor productivity:
A. The production possibilities curve would shift
outward and the long-run aggregate supply curve
would shift rightward
B. The production possibilities curve would shift
inward and the long-run aggregate supply curve
would shift leftward
C. The production possibilities curve would shift
outward and the long-run aggregate supply curve
would shift leftward
D. The production possibilities curve would shift
inward and the long-run aggregate supply curve
would shift rightward
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-24
The knowledge and skills that make a
productive worker are referred to by
economists as:
A. Human capital
B. Increasing returns
C. Resource allocation
D. Simultaneous consumption
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-25
If the annual growth in a nation's productivity is
2.5 percent rather than 1.5 percent, then the
nation's standard of living will double in
about:
A. 20 years
B. 28 years
C. 46 years
D. 56 years
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-26
A source of increasing returns to scale in the
New Economy is:
A. Less specialized inputs
B. Less investment in technology
C. Simultaneous consumption
D. The labor-force participation rate
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-27
Increasing returns would be a situation where a firm
increases its workforce and other inputs by:
A. 10 percent and its output increases by 5
percent
B. 5 percent and its output increase by 10 percent
C. 8 percent and its output increases by 8 percent
D. 12 percent and its output increases by 10
percent
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-28
Increases in the value of the product to each
user, including existing users, as the total
number of users rises is called:
A. Network effects
B. Simultaneous consumption
C. Learning by doing
D. The spreading of development costs
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-29
A major argument for economic growth is that
it:
A. Creates an equal distribution of income
B. Protects common property resources
C. Leads to a higher standard of living
D. Reduces the amount of taxation
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-30
One of the macroeconomic implications of the
New Economy is that it can achieve:
A. A higher rate of frictional unemployment
B. A lower natural rate of unemployment
C. A lower rate of simultaneous consumption
D. A higher rate of inflation
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-31
A skeptic of the New Economy would argue that
it is:
A. A short-run trend
B. A network effect
C. The result of learning by doing
D. Designed to lower the natural rate of
unemployment
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-32
Does the New Economy mean the business cycle is
dead?
A. Yes, the faster rate of productivity growth will
eliminate recession
B. Yes, the changes in technology have a compound,
positive effect on the economy
C. No, the trend line for economic growth is just
steeper, but there can still be economic downturns
D. No, the fact there are many start-up firms means
that there will be more bankruptcies that will hurt the
economy
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-33
The movement of workers from lower
productivity jobs to higher productivity jobs
would be an example of a(n):
A. Technological advance
B. Network effects
C. Simultaneous consumption
D. Improved resource allocation
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-34
"Show me a pastoral society with an untouched
environment, an abundance of leisure, and
nonsecular values, and I will show you an
underdeveloped, poverty-ridden country."
This statement is most likely to be made by
a(n):
A. Advocate of learning by doing
B. Advocate of network effects
C. Proponent of economic growth
D. Critic of economic growth
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-35
An example of public investment in
infrastructure would be:
A. A construction company
B. An oil and gas pipeline
C. A manufacturing plant
D. A waste water treatment system
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-36
One of the main arguments against further
growth for industrialized nations focuses on
the problem of:
A. Technological knowledge
B. Environmental quality
C. Feedback mechanisms
D. Infrastructure
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-37
One of the basic economic defenses of economic
growth rests on the conclusion that:
A. Growth makes workers less obsolete and more
secure in employment
B. Growth reduces the cost to society of "common
property" resources
C. Growth makes the gap between unlimited wants
and scarce resources less acute
D. A growth-oriented society confers a "work and look
to the future" attitude on the members of society
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-38
If a nation's real GDP is growing 4 percent a
year on average, the real GDP in the nation
will double in about:
A. 10.5 years
B. 17.5 years
C. 24.2 years
D. 29.2 years
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-39
An antigrowth view would be that there may be
a significant tradeoff between productivity
and:
A. Education
B. Employment
C. Economies of scale
D. The quality of life
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-40
Nation A has a sustained growth rate of 5 percent.
Nation B has a sustained growth rate of 2 percent.
Over 70-years, real GDP will double in:
A. 7 years in Nation A and 21 years in Nation B
B. 14 years in Nation A and 21 years in Nation B
C. 14 years in Nation A and 35 years in Nation B
D. 21 years in Nation A and 35 years in Nation B
Answer:
Principles of Macroeconomics - Chapter 07Copyright © 2006 Pearson Addison-Wesley. All rights reserved.
9-41