Practice Problems 8
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MACRO Practice Problems 8
1. A possible downside of industrial policy is that: A. the government cannot be trusted to identify
emerging technologiesB. markets allocate scarce resources better than
governments doC. it could evolve into a government giveaway
programD. money and competitive advantages could go to
the politically connectedE. All of the answers are correct
2. An increase in the amount of capital per worker iscalled:
A. capital deepeningB. marginal capitalC. per-worker production functionD. human capitalE. diminishing marginal returns from capital
3. The economic theory that states that as time passes,economic systems become much more similar, withcommon rates of growth, common employment
levels and common rates of inflation is known as: A. divergence theory B. parallel path theory C. convergence theory D. non-competing economic systems theory E. static state theory
4. One impediment to the convergence of worldeconomies is the vast differences in human capital.
A. TrueB. False
5. The difference between basic and applied research isthat:
A. basic research does not promote resourceproductivity while applied research does
B. applied research does not promote resourceproductivity while basic research does
C. basic research has less immediate payoff tosociety than applied research typically does
D. basic research occurs in science while appliedresearch occurs in industry
E. only the government promotes basic research
6. In the long run, changing technology on average hasled to:
A. lower employment and lower wage ratesB. higher employment and lower wage rates
C. lower employment with wage rates unchangedD. higher employment with wage rates unchangedE. higher incomes and more leisure time
7. The country of MiddleTerra has 200 people, 100 of them are working, and the real GDP is $5,000. Whatis the standard of living in MiddleTerra?
A. $10 per capitaB. $25 per capitaC. $50 per capitaD. $100 per capitaE. $5,000 per capita
8. The country of MiddleTerra has 200 people, 100 of them are working, and the real GDP is $5,000. Whatis the labor productivity in MiddleTerra?
A. $10 per workerB. $25 per workerC. $50 per workerD. $100 per workerE. $5,000 per worker
9. The country of MiddleTerra has 200 people, 100 of them are working, and the real GDP is $5,000. If 50refugees from LowTerra are arriving and they arenot allowed to work, what happens with the standardof living in MiddleTerra?
A. It doesn’t changeB. It increases by $20 per capitaC. It decreases by $20 per capitaD. It decreases to $20 per capitaE. It increases to $20 per capita
10. The country of MiddleTerra has 200 people, 100 of them are working, and the real GDP is $5,000. 50
refugees from LowTerra are arriving; all of them arehard workers, so they are allowed to work. As aresult, the real GDP is increasing by $1,000. Thenew standard of living in MiddleTerra is:
A. $5 per capitaB. $10 per capitaC. $24 per capitaD. $48 per capitaE. $250 per capita
11. The country of MiddleTerra has 200 people, 100 of them are working, and the real GDP is $5,000. 50refugees from LowTerra are arriving; all of them arehard workers, so they are allowed to work. As a
result, the real GDP is increasing by $1,000. Whathappens with the labor productivity in MiddleTerra?
A. It doesn’t changeB. It increases by $40 per workerC. It decreases by $40 per workerD. It increases to $40 per workerE. It decreases to $40 per worker
12. Per capita GDP in the United States has declinedsince 1950.
A. TrueB. False
13. Productivity growth is important because:
A. it is the only way an economy can increase GDPB. a small decrease in productivity growth causes alarge decline in GDP
C. a large increase in productivity growth causes asmall decrease in GDP
D. it causes an increase in the quantity of allresources available to an economy
E. it ultimately increases a nation's standard of living
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MACRO Practice Problems 8
14. Two neighboring countries, Richia and Pooria, havethe same number of workers, the same naturalresources, and the same amount of capital per
worker, yet Richians are richer than Poorians. Whichof the following could not explain the difference?
A. The Richians have better technology B. The Poorians have a higher labor productivity
than Richians
C. The Richians are better educated than PooriansD. The Poorians have older and less productivetechnology than Richians
E. The Richians have a stable government whereasPooria is in the middle of a civil war
15. The rules of the game include all of the followingexcept one. Which is the exception?
A. the laws, customs, conventions and otherinstitutional elements associated with trade
B. property rightsC. ensuring that the market process generates a fair
price to allD. a stable political environment
E. a stable legal system16. Which of the following is not be considered a
developed country? A. PakistanB. the United StatesC. JapanD. AustraliaE. Belgium
17. Which of the following is most likely to increaseproductivity growth, as measured using GDPstatistics?
A. reduced capital formationB. decreased human capitalC. increased research and developmentD. increased government regulationE. higher prices for raw materials
18. According to Nobel prize winner Simon Kuznets, thegreatest increase in output and economic growthcomes from changes in the:
A. quantities of resourcesB. quantities of natural resources (land)C. quantities of laborD. qualities of resourcesE. quantities of capital
19. The diminishing slope of the per-worker production
function reflects the law of diminishing marginalreturns.
A. TrueB. False
20. Improvements in technology shift the per-workerproduction function downward.
A. TrueB. False
21. The resource whose productivity is most commonly measured is:
A. laborB. capitalC. landD. energy E. money
22. Human capital represents:
A. the equipment that labor uses on-the-job toimprove labor productivity
B. a direct method of measuring output-per-workerC. the education, skills and training embodied in
workersD. the technology, developed by humans, that is
embodied in equipmentE. the social institutions created by people which
promote the accumulation of equipment forproduction
23. If Q is total real output, K is capital in use, L is laboremployed, and the productivity of labor grows, otherthings constant, then:
A. K/L risesB. L/K risesC. Q/L risesD. Q/K fallsE. (Q + K)/L falls
24. Labor productivity is measured by: A. total employment/total outputB. total output/total employmentC. labor force/total outputD. total output/labor forceE. total output/potential employment
25. The TransformNow moving company has 10 workers
and 5 trucks and they can move 20 tons of furnitureper day. The labor productivity is:
A. 1 ton of furniture per worker per day B. 2 tons of furniture per worker per day C. 4 tons of furniture per worker per day D. 10 tons of furniture per worker per day E. 20 tons of furniture per worker per day