Q&A Hero

Q: Economic growth is defined as A) a decrease in the rate of inflation. B) an increase in employment. C) a sustained expansion of production possibilities. D) an increase in the wage rate. E) an increase in the nation's population.

Q: Why are the governments of developed countries concerned about the quality of education in their countries? What effect does education play in determining the country's economic growth rate and its standard of living? Why does it have this effect?

Q: A country's leadership believes that the neoclassical growth theory is correct. The country already has the necessary preconditions for growth, so suggest policy changes the government might enact to help speed economic growth.

Q: What policies can a government undertake to achieve faster economic growth?

Q: Why is economic growth so slow or non-existent in many third world countries? What policies would you propose to improve the situation?

Q: What is economic freedom and why is it important for economic growth?

Q: What do the classical growth theory and the new growth theory predict for global growth amongst different nations? Comment on the accuracy of the predictions.

Q: Of the two economic growth theories, which is the most optimistic about the chances of real GDP per person growing indefinitely? Which is the most pessimistic? What accounts for the differences?

Q: In the classical theory of growth, what is the final outcome of an increase in growth and labor productivity?

Q: What is the law of diminishing returns? Give an example of what the law of diminishing returns implies.

Q: What does a productivity curve reflect? What leads to movements along a productivity curve and what leads to shifts in a productivity curve?

Q: Explain the productivity curve and how the components interact.

Q: What are the sources of human capital?

Q: List and explain the three factors that can increase labor productivity.

Q: Define labor productivity. Discuss the relationship between labor productivity, human capital growth, and technology change.

Q: Labor productivity is $20 per hour and aggregate hours are 400 billion hours. a. What does real GDP equal? b. Because of technological advances, labor productivity doubles to $40 per hour. Furthermore, assume that aggregate hours decrease to 300 billion hours. What does real GDP equal?

Q: Labor productivity is $30 per hour and aggregate hours are 165 billion hours. What does real GDP equal?

Q: Real GDP equals $12 trillion and aggregate hours equals 300 billion hours. What does labor productivity equal?

Q: What is the effect on real GDP per person if labor productivity increases? What is the effect on the nation's standard of living?

Q: Real GDP can increase either because the quantity of labor increases or because labor productivity increases. What is the effect on the standard of living if real GDP increases because a. the quantity of labor increases? b. labor productivity increases?

Q: Suppose real GDP grows at 7 percent per year and the population grows at 2 percent per year. How many years will it take for real GDP and real GDP per person to double?

Q: During 2005, real GDP in Ireland grew 9.8 percent. If Ireland maintains this level of growth in the future, real GDP will double in approximately how many years?

Q: Suppose that real GDP grows at 3 percent per year. What is the growth rate of real GDP per person if the population grows at: a. 2 percent? What happens to the standard of living? b. 3 percent? What happens to the standard of living? c. 4 percent? What happens to the standard of living?

Q: If a nation's population grows at 2 percent and its real GDP grows at 4 percent, what is the growth rate of real GDP per person?

Q: U.S. real GDP per person grew rapidly in the early 1960s. The table above has U.S. real GDP and population for 1961 and 1962.a. What was U.S. real GDP per person in 1961?b. What was U.S. real GDP per person in 1962?c. Between 1961 and 1962, how rapidly did U.S. real GDP per person grow?

Q: A nation's population was 250 million last year and is 255 million this year. If its real GDP was $8.5 trillion last year and is $8.8 trillion this year, what is its growth rate of real GDP per person?

Q: What is the Rule of 70?

Q: How do we calculate growth in a nation's standard of living?

Q: Why is growth in GDP different from growth in a nation's standard of living? Is it possible for a nation's GDP to grow while its standard of living falls?

Q: Which of the following policies encourages economic growth?A) increased taxes on income and business profitsB) reduction of government support of higher educationC) high tariffs and strict import quotas on foreign-made productsD) creation of tax free savings accountsE) limiting the years people spend in education so that they can start productive work

Q: The presence of government corruption in some countries A) slows their economic growth. B) speeds their economic growth. C) invalidates the new growth theory's predictions. D) supports the classical growth theory's predictions. E) invalidates the neoclassical growth theory's predictions.

Q: Workers in the United States are ________ workers in China because ________. A) more productive than; workers in the United States have more capital per worker. B) more productive than; there are more college-educated workers in the United States. C) less productive than; there are fewer workers in the United States. D) less productive than; the labor force participation rate is lower in the United States. E) equally as productive as; China's real GDP per person equals the U.S. real GDP per person.

Q: The idea of continuous economic growth as a "perpetual motion machine" best reflects the prediction of which growth theory? A) the classical growth theory B) the traditional growth theory C) the Keynesian growth theory D) the new growth theory E) no growth theory

Q: Economic growth in Cuba has been slow. What can best explain the slow growth? A) lack of economic resources B) lack of incentive mechanisms and economic freedom C) labor productivity is low. D) a non-democratic form of government E) too much competition within the economy

Q: Economic growth is enhanced byA) free international trade.B) limiting international trade so that the domestic economy can prosper.C) discouraging saving, because increased saving means less spending.D) ignoring incentive systems.E) increasing welfare payments to the poor so they can afford to buy goods.

Q: The fastest growing nations today are those with A) barriers that significantly limit international trade. B) the fastest growing exports and imports. C) government intervention in markets to ensure high prices. D) few funds spent on research and development. E) the least saving.

Q: A government policy that taxes saving in order to discourage saving and encourage spending will A) slow economic growth. B) speed economic growth. C) create a greater incentive for people to specialize. D) strengthen people's property rights. E) increase the growth rate of capital.

Q: Saving A) slows growth because it decreases consumption. B) finances investment which brings capital accumulation. C) has no impact on economic growth. D) is very low in most East Asian nations. E) is important for a country to gain the benefits of international trade.

Q: In order to increase economic growth, a government can A) discourage research and development. B) decrease funding on education. C) discourage specialization and trade. D) establish property rights and a legal system. E) tax saving in order to encourage more spending.

Q: Which of the following statements is FALSE? A) Saving helps create economic growth. B) Improvements in quality of education are important for economic growth. C) Free international trade helps create economic growth. D) Faster population growth is the key to growth in real GDP per person. E) Economic freedom requires property rights.

Q: Activities that encourage faster growth are A) high levels of saving and investment in human capital. B) high levels of consumption and low levels of savings. C) taxes on saving that serve to encourage more spending and less saving. D) imposing trade barriers to limit international trade and thereby protect national industries. E) limiting property rights so that everyone can use any invention.

Q: Property rights protect A) only the rights to physical property. B) only the rights to financial property. C) all rights except rights to intellectual property. D) rights to physical property, financial property, and intellectual property. E) the government's right to impose taxes.

Q: Economic freedom means that A) firms are regulated by the government. B) some goods and services are free. C) people are able to make personal choices and their property is protected. D) the rule of law does not apply. E) the nation's government is a democracy.

Q: Which of the following characteristics is a precondition for economic growth? i. economic freedom ii. free markets iii. active government policy to discourage saving A) i only B) ii only C) iii only D) Both i and ii E) Both ii and iii

Q: Which of the following is NOT a necessary precondition for economic growth? A) economic freedom B) democracy C) property rights D) free markets E) ALL of the above are necessary preconditions.

Q: If Kenya institutes policies that support economic freedom and growth, it is likely that Kenya will A) immediately reap the benefits of double digit increase in economic growth. B) immediately reap the benefits of a 4 percent to 6 percent increase in economic growth. C) slowly reap the benefits of economic growth as the economy grows over time. D) lose control of the economy and plunge into a long recession. E) suffer from too much competition within its economy.

Q: Brian is running for state senator and if elected, pledges to improve economic growth. His plan for economic growth includes increasing spending on public education and providing tax incentives to encourage improved private education. His plan is likely to A) slow economic growth because it includes a provision for private education. B) have no effect on economic growth because property rights are not changed. C) speed economic growth as the quality of resources improve. D) fail because the provision for private education limits government involvement in education. E) have no effect on economic growth because government spending cannot affect the economic growth rate.

Q: Governments should promote education because education contributes to the nation's A) employment. B) free markets. C) economic growth potential. D) international trade. E) protection of property rights.

Q: China's growth rate has ________ that of most other countries, ________. A) topped; but its real GDP per person is still lower than other industrialized countries B) lagged behind; and its real GDP is close to other Asian economies C) lagged behind; but its real GDP per person is higher than other Asian economies D) topped: but its real GDP per person declined in 2008-09 E) equalled; and its real GDP per person declined in 2008-09

Q: The fastest growing nations today A) are not saving but instead are investing. B) have erected many trade barriers to protect domestic firms. C) have the fastest growing exports and imports. D) have non-democratic political systems. E) have the government directing all their research and development.

Q: Encouraging international trade will A) slow economic growth when a country is forced to specialize and trade with other countries. B) slow economic growth as many workers lose their jobs to foreign workers. C) speed economic growth as workers diversify their knowledge and limit trade. D) speed economic growth as workers specialize and trade with others. E) speed economic growth because international trade limits the harm done by property rights.

Q: One possible way of achieving faster economic growth is to A) limit international trade. B) encourage international trade. C) limit research and development and concentrate on production of goods and services. D) abolish the system of patents and copyrights so that everyone can use people's ideas. E) let the government decide what research and development should be undertaken.

Q: One possible way of achieving faster economic growth is to A) abolish the system of patents and copyrights so that everyone can use people's ideas. B) limit international trade to only a few countries so that the nation is not hurt by too much trade. C) encourage research and development. D) limit schooling in order to have more people in the labor force, producing goods and services. E) promote tax saving so that people spend more and businesses' profits are larger.

Q: Many economists argue that an incentive to save is A) high income tax rates. B) a tax on consumption rather than on income. C) a tax on income rather than a tax on consumption. D) greater government regulation of the banking and securities industries. E) strengthening the property rights that savers have to the physical capital they purchase.

Q: One of the possible roles governments can play in sponsoring growth is to A) provide tax incentives to encourage saving. B) own more of the nation's resources in order to put them to use. C) close the nation to trade in order to protect its domestic producers. D) make decisions for its citizens as to the most suitable job. E) limit the use of property rights in order to decrease the harm they create.

Q: East Asian economies have grown A) rapidly because of high saving rates. B) rapidly despite a lack of property rights. C) slowly because of a lack of property rights. D) slowly because of low saving rates. E) rapidly because they virtually eliminated international trade.

Q: One possible way of achieving faster economic growth is to A) encourage saving. B) protect the economy from international trade. C) limit investment because investment adds nothing to production today. D) eliminate property rights because they prevent people from using other people's ideas. E) tax saving so that people spend more and businesses make more profit.

Q: Retirement savings accounts, such as IRAs, help increase economic growth because A) people have an incentive to work harder and longer hours to save for the future. B) they keep the interest rates high. C) savings finances investment. D) government invests them. E) they encourage international trade.

Q: If Turkey wants to promote faster economic growth, it will need to A) promote incentive systems to encourage saving, research and development, increased trade and improved education. B) restrict economic freedom so the government has better control of markets. C) restrict international trade to protects its own workers. D) promote government intervention to help markets determine incentives. E) restrict property rights so that individuals can better share inventions.

Q: The following government policies will help achieve faster economic growth EXCEPT A) discouraging saving and encouraging spending. B) encouraging research and development. C) establishing and protecting property rights. D) improving the quality of education. E) increasing saving.

Q: One way to achieve faster growth in GDP per person is to increase the A) number of women working in the home rather than in the workforce. B) growth rate of the quantity of money. C) growth rate of human capital. D) growth rate of the population. E) limits on international trade in order to keep more of total spending on domestically produced goods.

Q: Which of the following are important for countries to promote with property rights and incentives if economic growth is to occur? i. specialization ii. saving and investment iii. increases in human capital iv. discovery of new technology A) i, ii, iii and iv. B) ii and iii. C) iii and iv. D) ii and iv. E) i, ii and iv only.

Q: One possible way of achieving faster economic growth is to A) regulate the amount of international trade and limit it so that not too much occurs. B) limit research and development because research and development does not contribute anything to today's production. C) assign the government ownership of all capital. D) protect property rights and free markets. E) tax saving so that people spend more and firms' profits are higher.

Q: Jose and Julia were discussing the necessary components to achieve economic growth. Jose stated that the economy must include free markets, specialization and trade, and an ethical judicial system. Julia reminded Jose that another key component is A) freedom of speech. B) freedom of religion. C) a guaranteed high rate of return on savings. D) property rights. E) democracy.

Q: Property rights assure people that A) the government will not confiscate their income or savings. B) the government will provide a minimum standard of living. C) the factors of production and goods are owned jointly by the government and the people. D) economic growth will enhance government involvement in the economy. E) international trade will be limited.

Q: Property rights A) don't include intellectual property. B) don't include financial property. C) don't include physical property. D) include physical, financial, and intellectual property. E) slow the economic growth by placing limits on who can use what.

Q: A reason why many of the third world countries are not achieving an increase in their standard of living is that they A) don't have enough natural resources. B) don't have strong military power to force people to work harder. C) don't have social institutions with a strong rule of law and economic freedom. D) strongly encouraged international trade. E) don't have a strong central government.

Q: A key reason why some countries are growing very slowly is A) they lack a democratic government. B) they lack economic freedom. C) their inflation rate is too high. D) they are too poor, so there is no saving. E) there is too much competition within their economies.

Q: Economic growth is slow or absent in some economies because those lack A) political freedom. B) economic freedom. C) democracy. D) cultural freedom. E) a strong government.

Q: Economic freedom is present, at least in part, when A) there are no property rights to limit people's freedom. B) there is no private property. C) people are able to make personal choices. D) there is no government. E) money is free.

Q: Economic freedom is a precondition for economic growth. Which of the following is a characteristic of economic freedom? i. A democratic form of government ii. Property rights must be protected. iii. The government must support and pay for inventions and innovations. A) i only B) ii only C) Both i and ii D) Both ii and iii E) Both i and iii

Q: A condition necessary for a country to achieve economic growth is A) high tax rates so the government can purchase a lot of capital equipment. B) strict environmental regulations. C) economic freedom. D) government control of the banking system. E) democracy.

Q: Hong Kong is an example of an economy that A) does not experience economic growth because it is not a democracy. B) experiences economic growth in spite of the fact that is lacks democratic freedom. C) grows more slowly than other Asian countries because property rights are not valued. D) needs to promote investment so that economic growth can occur. E) lacks economic freedom and therefore experiences the slowest economic growth of all developed economies.

Q: For economic freedom to exist, A) copyright laws must be abolished and markets supervised by the government. B) democracy must exist. C) property rights must be protected and markets must be free. D) human capital must be given away free. E) money must be free.

Q: Countries that enjoy economic growth A) have property rights and markets which provide incentives for discovering new technologies. B) have economies that allow the government to make decisions in everyone's best interests. C) restrict international trade so that domestic industries can grow. D) place high taxes on saving and investment. E) place controls on property rights so that firms are protected from competition.

Q: Economic freedom provides the A) political system that encourages democracy. B) social system that supports families. C) production system that discourages property rights. D) incentive system that encourages growth-producing activities. E) necessary alternative to free markets.

Q: Economic freedom requires A) that there are no regulations and restrictions set on businesses and households by the government. B) the rule of law and the ability to enforce the laws. C) strong labor unions. D) freedom to bribe government officials. E) that the government be a democracy.

Q: Economic freedom A) is not important for nations to grow. B) must come from a democratic government. C) is founded, in part, on the rule of law. D) is created when the nation imposes many regulations on businesses. E) is harmed by having too many property rights.

Q: A basic precondition necessary to achieve economic growth is A) well-functioning factories. B) well-being of society. C) a well-functioning legal system. D) a well-organized work force. E) a strong central government that directs the nation's research and development activities.

Q: An important condition required for economic growth is A) a democratic government. B) a totalitarian government. C) a libertarian government. D) economic freedom. E) the incentive to limit international trade so that all economic growth remains within the country.