ECON 151 – Economic growth occurs if the

Subject: Economics    / General Economics
Question

1) Economic growth occurs if the

A) GDP this year exceeds the Real GDP this year.

B) Real GDP this year exceeds Real GDP last year.

C) unemployment rate this year is below the natural rate of unemployment.

D) per-capita Real GDP this year exceeds that of last year.

E) real per-capita GDP exceeds nominal per-capita GDP.

2) Economic growth can be explained as

A) the rate of growth in the productivity of labor.

B) the rate of growth in the productivity of capital.

C) the per capita rate of growth of labor plus the rate of capital accumulation.

D) the rate of growth of labor plus the rate of growth of capital plus the rate of growth in the productivity of labor and capital.

E) the per capita rate of growth of labor and capital adjusted for inflation.

3) Labor productivity is _________ related to education and _________ related to capital investment.

A) directly; inversely

B) inversely; directly

C) directly; directly

D) inversely; inversely

E) indirectly, positively

4) It is likely that a small increase in a country’s saving rate will have a

A) large effect on per capita real GDP immediately because the increase in saving leads to a slightly higher rate of economic growth which has large effects over time.

B) large effect on per capita real GDP immediately because the increase in saving leads to a much larger rate of economic growth.

C) small effect on per capita real GDP many years later because the increase in saving will have very little effect on the growth rate.

D) small effect on per capita real GDP many years later because the increase in saving will be offset in later years by a decrease in the saving rate.

E) large effect on per capita real GDP many years later because the increase in saving leads to a slightly higher rate of economic growth which has large effects over time.

5) To consume more in the future, a society must

A) maintain low inflation.

B) plan carefully.

C) consume less today.

D) have low tax rates on consumption.

E) consume more today

6) Many countries find it difficult to achieve economic growth. This is because

A) economic growth is not understood well by economists, so it is difficult to advise policy makers on the best policies to pursue.

B) economic growth is understood by economists, but not by policy makers or the general population, so policy makers fail to choose the best policies.

C) economic growth appears to be predetermined and not subject to factors that policy makers can have any affect on.

D) economic growth depends on technological change and technological change depends on non-economic factors such as the growth rate of scientific knowledge.

E) economic growth requires saving and saving means less consumption today. A poor country may find it difficult to consume less today.

7) Suppose two countries have per capita real GDP of $10,000 in 2003. Country A has a growth rate of 3 percent and Country B has a growth rate of 4 percent. By 2008, the per-capita real Gross Domestic Product (GDP)s for the two countries, respectively, are

A) $11,500 and $12,000.

B) $11,593 and $12,167.

C) $11,255 and $11,699.

D) $14,000 and $16,000.

E) Cannot be determined with the information provided.

8) Refer to the above table. Which country had the largest increase in real GDP?

A) A

B) B

C) C

D) D

E) Cannot be determined with the information provided.

9) Refer to the above table. Which country experienced the highest economic growth?

A) A

B) B

C) C

D) D

E) Cannot be determined with the information provided.

10) A higher rate of saving should lead to

A) higher current consumption.

B) more investment in stocks and bonds, and higher incomes for everybody.

C) higher consumption and investment.

D) a higher price level and reduced future consumption.

E) more investment, higher capital growth, and more future consumption.

11) A system of private property rights

A) encourages economic growth allowing property to be private.

B) discourages economic growth by discouraging the development of new ideas and ways of doing things.

C) reduces the efficiency of government, which reduces the growth rate of the economy over time.

D) encourages investment but discourages entrepreneurial activity, so the effect on economic growth is uncertain.

E) encourages economic growth by creating incentives to invest in capital and to be innovative.

12) Personal incentives provided by private resource ownership

A) are stronger in socialist economies than in capitalist economies

B) usually promote a more efficient use of property than state ownership provides

C) encourage greed and waste

D) discourage greed

E) are preferable to socialist incentives

13) Innovation typically increases when

A) market incentives and private property rights are encouraged.

B) government controls and directs the resource base.

C) high taxes are present to properly distribute incomes.

D) the legal system is weak so people can get away with inventing new things that increase labor productivity.

E) government directs the production and distribution of goods and services.

14) Other things being equal, an increase in consumption spending implies

A) a decline in saving and slower economic growth.

B) a decline in government spending.

C) a higher standard of living in the future.

D) that economic growth will soon increase.

E) a higher standard of living in the future provided by the government.

15) The aggregate supply and aggregate demand curves

A) are just like individual supply and demand curves in that prices of other goods are held constant.

B) are like individual demand curves in that income is constant.

C) differ from individual supply and demand curves in that the aggregate demand curve is not downward sloping.

D) differ from individual supply and demand curves in that the aggregate demand curve looks at the entire circular flow of income and product while the individual demand curve looks at only one good.

E) are like individual supply and demand curves in that the aggregate supply curve curves downward.

16) Long run aggregate supply is

A) the relationship between the price of a good and the quantity supplied of the good.

B) the quantity supplied of real GDP in the long run at each and every price.

C) the aggregate quantity supplied of a good at each and every price.

D) the aggregate quantity supplied of real GDP at each and every price level after all economic adjustments are complete.

E) the supply of the aggregate quantity of a good at each and every price level after all economic expectations have been met.

17) Aggregate demand is

A) the relationship between the price of a good and the quantity demanded of the good.

B) the quantity demanded of real GDP at each and every price after all economic adjustments are complete.

C) the aggregate quantity demanded of a good at each and every price.

D) the aggregate quantity demanded of real GDP at each and every price level.

E) demand of the aggregate quantity of a good at each and every price level after all economic expectations have been met.

18) When talking about aggregate supply, it is necessary to

A) focus on the short run.

B) focus on the long run.

C) distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve.

D) distinguish between the long-run aggregate supply curve and the long run aggregate demand curve when all adjustments to price level changes have been made.

E) focus on distinguishing between the long-run aggregate supply curve and the short run aggregate demand curve.

19) Holding nominal money balances constant, a decrease in the price level causes

A) the real value of the money balances to increase, in turn increasing the quantity of goods and services demanded.

B) the real value of the money balances to decrease, in turn decreasing the quantity of goods and services demanded.

C) the real value of the money balances to increase, thereby increasing the interest rate.

D) a reduction in the value of the money balances, leading to higher interest rates and a decrease in the quantity of goods and services demanded.

E) money balances to get out of balance and people in the economy to fall down.

20) An indirect effect of an increase in the price level works through

A) people substituting out of domestic goods and into foreign goods as exchange rates rise.

B) the government indirectly increasing consumption through transfer payments.

C) interest rates as people save more as the higher prices make their money balances less attractive.

D) interest rates as people borrow to maintain their money balances, bidding up interest rates and reducing the quantity demanded for goods and services.

E) changes in trade as domestic goods become more expensive, causing interest rates to move in the opposite direction from the change in the exchange rate.

21) If the price level increases, then

A) the exchange rate will increase, causing U.S. goods to become cheaper and increasing the quantity demanded for domestic goods.

B) imports increase but exports do not change. Therefore, there is no effect on the quantity demanded for goods and services.

C) foreigners buy fewer American goods, leaving more goods for Americans and an increase in the quantity demanded for goods and services produced domestically.

D) exports increase but imports do not change. Therefore, there is no effect on the quantity demanded for goods and services.

E) domestic goods are more expensive relative to foreign goods, which reduces quantity demanded for domestic goods.

22) Over the last twenty years, real GDP in the American economy has increased and there has been inflation. This indicates that aggregate demand has

A) increased while aggregate supply has been constant.

B) been constant while aggregate supply has increased.

C) increased more than aggregate supply.

D) increased less than aggregate supply.

E) decreased less than aggregate supply decreased.

23) In the long run, an increase in government spending, other things equal, generates

A) higher real GDP in the long run.

B) lower real GDP in the short run.

C) higher price levels.

D) both a higher real GDP and higher price levels.

E) higher real GDP.

24) Suppose real GDP equals $15.2 trillion when the CPI is 90. If the CPI were 95, real GDP would equal

A) cannot be determined with the information given.

B) less than $15.2 trillion.

C) $12.2 trillion.

D) more than $15.2 trillion but less than $15.8 trillion.

E) more than $15.8 trillion.

25) Which of the following would generate the most economic growth?

A) an increase in aggregate demand caused by an increase in the rate at which people consume goods and services

B) an increase in aggregate supply caused by an increase in government spending on transfer payments.

C) an increase in aggregate demand caused by an increase in government spending on infrastructure

D) an increase in aggregate demand caused by a weaker dollar

E) an increase in aggregate demand caused by an increase in investment spending by business firms