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Exam 7: Economic Growth, Productivity, and Living Standards

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Question 31

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The benefits of economic growth are _____, while the costs of economic growth are _____.

A) increased output per person; too small for concern
B) increased output per person; the consumption sacrificed in exchange for capital formation
C) increased output per person; less future consumption
D) more current consumption; less future consumption

E) A) and D)
F) C) and D)

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Question 32

Multiple Choice

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Real GDP per person in Westland is $30,000, while real GDP in Eastland is $10,000, However, Westland's real GDP per person is growing at 3 percent per year, and Eastland's real GDP per person is growing at 3 percent per year. If these growth rates persist indefinitely, then:

A) Eastland's real GDP per person will rise until it equals Westland's real GDP per person.
B) Westland's real GDP per person will always be at least $20,000 greater than Eastland's.
C) Eastland's real GDP per person will always be exactly $20,000 less than Westland's.
D) Eastland's real GDP per person will eventually be greater than Westland's.

E) A) and B)
F) None of the above

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Question 33

Multiple Choice

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Business managers are people who:

Alpha has $40,000 of capital per worker, while Beta has $5,000 of capital per worker. In all other respects, the two countries are the same. According to the principle of diminishing returns to capital, an additional unit of capital will increase output ______ in Alpha compared to Beta, holding other factors constant.

In order to promote growth through increased quantities of physical capital, governments must promote:

Diminishing returns to capital is a consequence of firms' incentives to use each piece of capital as productively as possible and illustrates the:

In symbolic terms where Y equals real GDP, POP equals total population, and N equals the number of employed workers, Y/POP must equal:

Small differences in annual growth rates of real GDP generate large differences in real GDP over time because of the:

______ start new economic enterprises, while ______ run the enterprises on a day-to-day basis.

Higher future living standards require:

Well-defined property rights:

Getting a college degree is an example of investing in:

Providing a constant number of workers with additional capital with which to work will ______ average labor productivity at a ______ rate.

The application of new technologies to the production process will increase:

A government policy of providing free public education is an example of a policy to promote economic growth by:

The key variable in determining changes in a country's standard of living is the:

In Econland, 500,000 of the 2 million people in the country are employed. Average labor productivity in Econland is $15,000 per worker. Real GDP per person in Econland totals:

The introduction of new technologies to production is ______ source of productivity improvement.

The population of Alpha totals one million people, 40 percent of whom are employed. Average output per worker in Alpha is $20,000. Real GDP per person in Alpha totals:

In order to increase the capital stock, society must divert ______ that could be otherwise used to increase the supply of _____.