Q&A Hero

Q: A key reason why some nations show little or no growth is A) overpopulation that overuses limited resources. B) lack of incentives to undertake actions toward growth. C) too much private property not directed by the government. D) patents in rich nations that keep technology only for the rich. E) too much international trade so that all economic growth spills over to foreigners.

Q: All of the following are preconditions for economic growth EXCEPT i. property rights. ii. democracy. iii. free markets. A) i only B) ii only C) iii only D) Both i and ii E) i, ii, and iii

Q: The presence of an incentive system that encourages growth A) guarantees that growth will occur. B) creates the right conditions for growth to occur. C) cannot exist in poor countries. D) existed even in hunter-gatherer societies. E) means that the government must be a democracy.

Q: If a country lacks ________, economic growth ________. A) a democratic form of government; cannot occur B) a proper incentive system; cannot occur C) pure capitalism; will be slower compared to other countries D) a proper incentive system; will occur at a pace suggested by the new growth theory E) economic freedom; will increase at a faster pace

Q: At its most basic level, economic growth depends on A) creating the right incentives. B) saving by the government. C) government leadership. D) government's fixing prices to encourage stability. E) political freedom.

Q: According to the new growth theory, ________ is the factor that motivates technological change. A) random chance B) profit C) diminishing returns D) the replication of activities E) decisions about how much human capital to acquire

Q: The theory that suggests that our unlimited wants will lead to perpetual economic growth is the A) classical growth theory. B) sustained growth theory. C) old growth theory. D) new growth theory. E) Malthusian growth theory.

Q: According to new growth theory, growth A) occurs when real GDP greater than the subsistence level. B) is unending. C) ends when competition disappears. D) depends on the population growth rate. E) cannot be sustained without government help.

Q: The new growth theory states that A) technological advances are the result of random chance. B) technological advances are the result of discoveries and choices. C) technological advances are the responsibility of the government. D) the subsistence level income leads to technological advances. E) it is impossible to replicate production activities.

Q: New growth theory predicts that A) economic growth is only temporary. B) economic growth can last indefinitely. C) economic growth is eroded by changes in taxes. D) government policies can do nothing to foster increased growth. E) ultimately people earn a subsistence wage.

Q: According to classical growth theory, when real GDP per person ________, the population grows. A) is less than the subsistence real income B) exceeds the subsistence real income C) exceeds capital per hour of labor D) is less than capital per hour of labor E) is constant

Q: If real GDP per person is above the subsistence level then, according to classical growth theory, A) the population will increase. B) the population will decrease. C) the standard of living will continue to improve. D) labor productivity will increase. E) more technological advances occur.

Q: Classical growth theory predicts that increases in A) real GDP per person are permanent and sustainable. B) real GDP per person are temporary and not sustainable. C) resources permanently increase labor productivity. D) resources permanently increase real GDP per person. E) competition increase economic growth.

Q: Which of the following theories predicts that there can be no sustained rise in real GDP per person above the subsistence level? i. Classical growth theory ii. New growth theory A) i only B) ii only C) Neither i nor ii D) Both i and ii E) None of the above because whether the rise in real GDP per person is sustained or not depends on what created the rise.

Q: The new growth theory's comparison of the economy to a perpetual motion machine implies that A) permanent growth is not possible. B) the economy will forever create and destroy jobs. C) overpopulation will eventually overtake the resources of the planet. D) technology changes just happen. E) labor productivity has no influence on the economy.

Q: Which of the following statements is likely to be made by someone who believes in the new growth theory? A) Population growth will limit long-run gains in real GDP per person. B) Competition will encourage discoveries of new ideas leading to greater economic growth. C) Although technological changes increase real GDP, these changes are random and unexplainable. D) Choices made by human capital are likely to be inefficient. E) Economic growth will eventually slow.

Q: New growth theory asserts that ________ will lead us to greater productivity and economic growth. A) new machinery B) government regulation C) unlimited wants D) leisure time E) nothing

Q: The new growth theory A) corrects for poor estimates of population growth. B) eliminates technological advances from the growth picture. C) applies to only very poor, less-developed nations. D) explains the source of technological advances. E) asserts that economic growth can be rapid but can only persist for a limited period of time.

Q: A central theme of the new growth theory is that A) firms don't really experience profit. B) humans can work harder than previously thought. C) the economy doesn't experience diminishing returns. D) firms don't experience diminishing returns. E) the government is more efficient than private markets.

Q: The new growth theory asserts that A) the population growth rate will increase when real GDP per person increases. B) a discovery can be used by only one person, the discoverer. C) technology improves slowly while population grows rapidly. D) production processes can be replicated at many different firms in the economy. E) eventually people earn only a subsistence living.

Q: The new growth theory asserts that profits are A) permanent, because they are derived from discoveries. B) temporary, because the discoveries that lead to profits are eventually used by all. C) an illusion, since costs are never fully covered. D) permanent, because physical activities can be replicated. E) not an essential component determining whether the economy grows or not.

Q: According to the new growth theory, real GDP per person grows because A) the population increases. B) the labor force participation rate increases. C) people make choices in pursuit of profits. D) the retirement age increases. E) the government subsidizes firms' research and development.

Q: 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) both i and iii E) both i and ii

Q: In new growth theory, growth in real GDP per person occurs because i. human capital grows indefinitely. ii. technology advances as a result of choices individuals make. iii. profit incentives encourage technological change. A) i only B) ii only C) iii only D) both i and iii E) i, ii, and iii

Q: 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 technology change A) i and iii B) i and ii C) i, ii and iii D) ii only E) i only

Q: In explaining economic growth, new growth theory stresses the role played by A) human choices. B) population moderation. C) women in the workforce. D) the participation rate of elderly workers. E) the government in directing the nation's investments.

Q: The new growth theory was developed by ________ and proposes that ________. A) Paul Romer; the desire for profits drives increases in real GDP per person B) Robert Solow; increases in technology growth are responsible for economic growth C) Thomas Malthus; increases in population drive wages to their subsistence level D) Adam Smith; markets will determine the appropriate economic growth rate E) Ben Bernanke; changes in the money supply drive economic growth

Q: Classical growth theory predicts A) a slowdown in population growth over time. B) real GDP per person will remain at the subsistence level over time. C) sustained increases in economic growth in the long run. D) the population growth rate slows as real GDP per person rises. E) sustained increases in the standard of living in the long run.

Q: In classical growth theory, if real GDP per person is above the subsistence level, A) the economy will keep growing without limit. B) population grows and lowers real GDP per person to its subsistence level. C) technological growth occurs and keeps real GDP per person above its subsistence level. D) the pursuit of profit will cause economic growth to accelerate. E) None of the above is correct because the classical growth theory asserts that real GDP per person can never exceed the subsistence level.

Q: The classical growth theory asserts that A) economic growth will continue indefinitely. B) economic growth and population growth complement each other. C) population growth increases a nation's economic growth. D) population growth will lead to people earning only a subsistence level of income. E) population growth leads to more growth in technology.

Q: Classical growth theory predicts that economic growth A) will continue at the classical rate of 3 percent forever. B) will eventually stop because of population growth. C) occurs because of hard-working citizens. D) is merely an illusion. E) decreases the supply of labor.

Q: Classical growth theory predicts that increases in real GDP per person will A) not last because higher income leads to a population explosion. B) last because higher growth leads to new technology. C) last because people make choices in the pursuit of higher profits. D) not last because higher income encourages smaller families and a lower population growth rate. E) last only if the government directs firms to make more investments in capital and new technology.

Q: According to classical growth theory, if labor productivity increases, A) the population grows and eventually real GDP returns to the subsistence level. B) the population grows but more slowly than real GDP so that people's incomes are permanently higher. C) the pursuit of profit causes further increases in capital per hour and technology and economic growth continues indefinitely. D) the growth rate of real GDP per person permanently increases. E) people save more, which increases the capital per hour even more, and so economic growth continues indefinitely.

Q: If real GDP per person rises above the subsistence level then, according to classical growth theory, A) population growth will slow down. B) a population explosion will occur. C) labor productivity growth permanently increases. D) real GDP per person will remain above the subsistence level. E) real GDP per person will fall below the subsistence level.

Q: Which of the following are predicted by the classical growth theory? i. Population growth will end economic growth. ii. Real GDP per person will return to subsistence level. iii. Technology drives persistent economic growth. A) i and ii B) i, ii and iii C) i only D) ii only E) i and iii

Q: According to classical growth theory, people earn only a subsistence real income because of growth in A) technology. B) capital. C) population. D) employment. E) labor productivity.

Q: Classical growth theory predicts that in the long run there will be A) zero economic growth. B) positive economic growth. C) negative economic growth. D) sustained increases in the productivity growth rate. E) sustained increases in economic growth.

Q: The classical theory was developed in the late 18th and early 19th centuries A) and therefore is not accepted today. B) during a time of population decline. C) and has proponents today who fear population growth and overpopulation. D) and cannot be explained using the modern tool of the productivity function. E) and still applies to the most developed nations today, though not to the less developed nations.

Q: A key element of the classical growth theory is that A) economic growth can be sustained as long as government intervention does not occur. B) increases in technology drive economic growth. C) an increase in population leads to increase in labor supply and a decline in real GDP per person. D) low taxes promote economic growth. E) market forces drive economic growth.

Q: The Malthusian theory A) is also called the classical growth theory and predicts that we will run out of resources. B) is also called the neoclassical growth theory. C) predicts that the real GDP per person will continue to increase as long as technology increases. D) claims that the subsistence wage will increase over time. E) shows that the production function will shift upward continuously.

Q: Thomas Malthus was an economist who contributed to the ________ theory of growth. A) classical B) neoclassical C) new growth D) socialist E) Keynesian

Q: The productivity curve shifts upward when A) physical capital increases. B) human capital decreases. C) hours of labor increase. D) hours of labor decrease. E) technology advances.

Q: Growth in physical capital depends most directly upon the A) amount of saving and investment. B) number of firms in the nation. C) speed of population growth. D) amount of government expenditures. E) level of human capital.

Q: Which of the following lists gives factors that increase labor productivity? A) saving and investment in physical capital, and wage increases B) expansion of human capital, labor force increases, and discovery of new technologies C) expansion of human capital, population growth, and discovery of new technologies D) saving and investment in physical capital, expansion of human capital, and discovery of new technologies E) labor force increases and wage increases

Q: If aggregate hours are 100 billion hours and labor productivity is $40 an hour, than real GDP equals A) $100 billion. B) $40 billion. C) $100 trillion. D) $2.5 trillion. E) $4 trillion.

Q: If real GDP is $1,200 billion, the population is 60 million, and aggregate hours are 80 billion, labor productivity is A) $5.00 an hour. B) $6.67 an hour. C) $15.00 an hour. D) $20,000. E) $150 an hour.

Q: Labor productivity equals A) real GDP divided by the capital stock. B) real GDP divided by the population. C) total wages divided by real GDP. D) real GDP divided by aggregate hours. E) aggregate hours divided by employment.

Q: Labor productivity equals ________. A) real GDP aggregate hours B) real GDP aggregate hours C) aggregate hours real GDP D) aggregate hours labor productivity E) aggregate hours labor productivity

Q: Increases in capital per worker ________ because ________. A) increase real GDP; they shift the productivity curve downward B) increase real GDP; they shift the productivity curve upward C) increase real GDP; they create a movement downward along the productivity curve D) increase real GDP; they create a movement upward along the productivity curve E) may increase or decrease real GDP; the result is a movement along the productivity curve but the direction depends on other factors not given

Q: The expansion of human capital and the discovery of new technologies ________ because ________. A) decrease real GDP; they shift the productivity curve downward B) decrease real GDP; they shift the productivity curve upward C) increase real GDP; they shift the productivity curve downward D) increase real GDP; they shift the productivity curve upward E) increase real GDP; they result in a movement upward along the productivity curve

Q: A technological change ________ and a change in the capital stock ________. A) shifts the productivity curve; shifts the productivity curve B) shifts the productivity curve; creates a movement along the productivity curve C) creates a movement along the productivity curve; shifts the productivity curve D) does not change the productivity curve; creates a movement along the productivity curve E) does not change the productivity curve; shifts the productivity curve

Q: If the level of technology rises, GDP per hour of labor A) increases for any level of capital per hour of labor. B) increases because the level of capital per hour of labor increases. C) decreases for a given level of capital per hour of labor. D) decreases because the level of capital per hour of labor decreases. E) does not change because GDP increases only when capital or labor increases.

Q: If capital per hour of labor decreases, real GDP per hour of labor A) decreases because the level of technology decreases. B) increases because the level of technology increases. C) increases for a given level of technology. D) decreases for a given level of technology. E) changes only if technology also advances.

Q: If capital per hour of labor increases, GDP per hour of labor A) decreases for a given level of technology. B) increases because the level of technology advances. C) increases for a given level of technology. D) decreases because the level of technology decreases. E) changes only if technology also advances.

Q: Suppose that an Intel worker rearranges existing machines and labor and increases the quantity of chips Intel can produce. Using the productivity curve graphed, this innovation would be described as A) a movement upward along the curve. B) a movement downward along the curve. C) a shift of the curve upward. D) a shift of the curve downward. E) no change to the productivity curve.

Q: The productivity curve A) has a positive slope. B) has a negative slope. C) is vertical. D) is horizontal. E) is U-shaped.

Q: A diagram of a productivity curve has A) real GDP per hour of labor on the y-axis and capital per hour of labor on the x-axis. B) real GDP per hour of labor on the y-axis and hours of labor on the x-axis. C) capital per hour of labor on the y-axis and real GDP per hour of labor on the x-axis. D) real wages per hour on the y-axis and real GDP per hour of labor on the x-axis. E) real GDP per hour of labor on the y-axis and real wages per hour on the x-axis.

Q: The productivity curve is a relationship between ________ and ________. A) real GDP; hours of labor B) real GDP; capital C) real GDP per hour of labor; capital D) capital per hour of labor; labor per hour of capital E) real GDP per hour of labor; capital per hour of labor

Q: The productivity curve is a relationship between A) real GDP per hour of labor and capital per hour of labor, with technology held constant. B) nominal GDP per hour of labor and capital per hour of labor, with technology held constant. C) real GDP per hour of labor and capital per hour of labor whenever technological growth occurs. D) real GDP per unit of capital and capital per hour of labor, with technology held constant. E) capital per hour of labor and technological growth.

Q: The shape of the productivity curve reflects the A) effects of capital accumulation. B) effects of technological progress. C) change in labor productivity as human capital increases. D) law of diminishing marginal returns. E) effects of population growth.

Q: According to the law of diminishing returns, an additional unit of A) capital produces more output than an additional unit of labor. B) labor decreases output. C) capital produces the same amount of output as an additional unit of labor. D) capital produces more output than the previous unit. E) capital produces less output than the previous unit.

Q: The law of diminishing marginal returns states that A) output increases at a constant rate as more capital is added. B) output decreases at a constant rate as more capital is added. C) as both labor and capital are increased, output does not change. D) as both labor and capital are increased, output increases at a decreasing rate. E) output increases at a decreasing rate as more capital is added.

Q: Over the last 50 years, U.S. labor productivity grew the fastest during the ________ because of ________. A) 1900s; the war on terror and return to the basics of education B) 1990s; advancements in healthcare due to the unlocking of the human genome C) 1980s; the invention of the computer and the oil embargo D) 1970s; an increase in government taxes and expanded regulations E) 1960s; fast paced technological change and large increases in human capital accumulation

Q: U.S. labor productivity slowed during the 1970s because of i. increasing government taxes and regulations on production. ii. the necessity to cope with energy price increases. iii. inflation, which shortened the horizon over which businesses made their borrowing plans. A) i only B) ii only C) iii only D) Both i and ii E) i, ii, and iii

Q: ________ increases with education, training, and job experience. i. Physical capital ii. Human capital iii. Financial capital A) i only B) ii only C) iii only D) both ii and iii E) i, ii, and iii

Q: Labor productivity increases if i. human capital decreases. ii. technology advances. iii. quality of education decreases. A) i only B) ii only C) iii only D) Both i and ii E) Both ii and iii

Q: The expansion of human capital and the discovery of new technologies ________ because ________. A) are subject to diminishing returns; they shift the productivity curve downward B) are subject to diminishing returns; they shift the productivity curve upward C) are not subject to diminishing returns; they shift the productivity curve downward D) are not subject to diminishing returns; they shift the productivity curve upward E) are not subject to diminishing returns; they result in a movement along the productivity curve

Q: Advances in technology and growth in human capital ________ because ________. A) shift the productivity curve downward; labor and capital become less productive B) shift the productivity curve downward; labor and capital become more productive C) shift the productivity curve upward; labor and capital become less productive D) shift the productivity curve upward; labor and capital become more productive E) do not shift the productivity curve; there is a movement along the productivity curve

Q: Human capital is acquired A) only in school. B) only through on-the-job training. C) only through job experience. D) through schooling, job training, and experience. E) only at birth, that is, it's people's inborn talents.

Q: Expansion of a nation's human capital can be achieved through A) education and training. B) education and saving. C) education and technology improvements. D) education only. E) nothing because human capital is determined by the skills people are born with.

Q: Increases in human capital can come A) only from formal schooling. B) from employing more machinery. C) only from on-the-job experience. D) from formal education and on-the-job learning. E) from nowhere because whatever human capital an individual possesses is what he or she was born with.

Q: Human capital is defined as the A) amount of machinery human beings have. B) number of factories built for human beings. C) accumulated skill and knowledge of human beings. D) accumulated amount of machinery and factories human beings own. E) skills that people are born with.

Q: Human capital refers to the A) accumulated skill and knowledge of human beings. B) accumulated equipment used by human beings. C) accumulation of money by human beings. D) accumulation of money and equipment used by human beings. E) accumulated financial capital people have acquired.

Q: A reason for an increase in labor productivity growth is A) an increase in people's human capital. B) a decrease in the capital stock so that firms must hire more workers. C) growth in the supply of labor. D) an increase in the population so that firms hire more workers. E) an increase in the quantity of labor.

Q: Which of the following are required for economic growth? i. more goods and services produced per hour of work ii. an increase in the average hours of labor per person iii. an increase in prices A) i and iii B) i and ii C) ii and iii D) i only E) ii only

Q: An increase in capital brings a large increase in output at a ________ quantity of capital and a small increase in output at a ________ quantity of capital because of ________. A) small; large; increasing returns along the productivity curve B) small; large; diminishing returns along the productivity curve C) large; small; diminishing returns along the productivity curve D) large; small; increasing returns along the productivity curve E) large; small; the greater the quantity of capital the greater the output

Q: The widespread adoption of computers in the workplace has likely led to A) no change in the quantity of labor hours. B) an increase in labor productivity because computers are a capital good. C) a decrease in labor productivity because computers are a capital good. D) a decrease in human capital because computers are physical capital. E) an increase in the supply of labor because people are needed to operate the computers.

Q: If the stock of physical capital (that is machinery, equipment, etc.) and human capital remains the same and the population increases, then A) labor productivity will increase. B) labor productivity will decrease. C) the standard of living will increase. D) the new labor will be more productive. E) real GDP decreases.

Q: In recent years, Taiwan has experienced increases in savings and investment. As a result of the higher investment and saving, we expect i. increases in physical capital. ii. increases in the inflation rate. iii. advances in technology. A) i and iii B) i and ii C) ii only D) ii and iii E) i, ii and iii

Q: Labor force productivity has increased from $30 per hour to $32 per hour over the past year. This could result from A) only an increase in real GDP. B) an increase in real GDP with no change in the aggregate hours or a decrease in aggregate hours with no change in real GDP. C) only a decrease in aggregate hours. D) an increase in the labor force participation rate. E) an increase in population.