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MACRO - CHAP25

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MACRO - CHAP25

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hangvu.31231025442
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CHAPTER 25: PRODUCTION AND GROWTH

TEST
1. Which of the following is a good gauge of economic progress?
a. the level of real GDP per person, but not the growth rate of real GDP per
person
b. the level of real GDP per person and the growth rate of real GDP per person
c. the growth rate of real GDP per person, but not the level of real GDP per
person
d. neither the level nor the growth rate of real GDP per person

2. A nation’s standard of living is determined by


a. the percentage of its GDP that is accounted for by government purchases.
b. the quantity of natural resources with which it is endowed.
c. the productivity of its workers.
d. factors and events that are beyond the nation’s control.

3. A nation's standard of living is best measured by its


a. real GDP.
b. real GDP per person.
c. nominal GDP.
d. nominal GDP per person.

4. In 2011, the imaginary nation of Maconia had a population of 8,200 and


real GDP of 210,500.
Maconia had 5% growth in real GDP per person. In 2012 it had a
population of 8,400. To the nearest dollar what was real GDP in Maconia
in 2012?
a. 216,815
b. 221,025
c. 226,416
d. None of the above is correct.

Solution:
1. Calculate GDP per person in 2011:
○ GDP in 2011: 210,500 (convert to millions if easier: 210.5 million)
○ Population in 2011: 8,200
○ GDP per person in 2011 = GDP / Population = 210.5 million /
8,200 ≈ $25,695.12 (round to two decimals for accuracy)
2. Apply GDP growth rate:
○ Growth rate: 5%
3. Calculate GDP per person in 2012:
○ Increase GDP per person by growth rate: 25,695.12 * (1 +
5/100) ≈ $26,934.88
4. Calculate total GDP in 2012:
○ Population in 2012: 8,400
○ Total GDP in 2012 = GDP per person * Population = 26,934.88
* 8,400 ≈ $226,415,854.72
5. Round to nearest dollar:
○ Real GDP in 2012 ≈ $226,415,855
Therefore, the closest answer to the nearest dollar is 226,416.

5. Which of the following pairs of terms refer to the same thing?


a. “capital” and “physical capital”
b. “technological knowledge” and “human capital”
c. “standard of living” and “human capital”
d. “standard of living” and “productivity”

6. Last year real GDP in the imaginary nation of Populia was 907.5 billion
and the population was 3.3 million. The year before real GDP was 750
billion and the population was 3 million. What was the growth rate of real
GDP per person during the year?
a. 10 percent
b. 14 percent
c. 17 percent
d. 21 percent

Solution:
● Last year's GDP per person: 907.5 billion / 3.3 million = 275 billion per person
(approximately)
● The year before GDP per person: 750 billion / 3 million = 250 billion per person
(approximately)
● Growth rate: ((275 billion - 250 billion) / 250 billion) * 100 = 10% (approximately)

7. Suppose that real GDP grew more in Country A than in Country B last
year.
a. Country A must have a higher standard of living than country B.
b. Country A's productivity must have grown faster than country B's.
c. Both of the above are correct.
d. None of the above are correct.

8. Given that a country’s real output has increased, in which of the


following cases can we be sure that its productivity also has increased?
a. The total number of hours worked rose.
b. The total number of hours worked stayed the same.
c. The total number of hours worked fell.
d. Both b and c are correct.

9. Which of the following items plays a role in determining productivity?


a. physical capital
b. natural resources
c. technological knowledge
d. All of the above are correct.

10. Industrial machinery is an example of


a. a factor of production that in the past was an output from the production
process.
b. physical capital.
c. something that influences productivity.
d. All of the above are correct.

11. The equipment and structures available to produce goods and services
are called
a. physical capital.
b. human capital.
c. the production function.
d. technology.

12. Which of the following is not an example of physical capital?


a. a new factory building
b. a delivery van
c. the knowledge of workers
d. the office chair in a lawyer’s office
13. Which of the following would increase productivity?
a. an increase in the physical capital stock per worker
b. an increase in human capital per worker
c. an increase in natural resources per worker
d. All of the above are correct.

14. Which of the following is a determinant of productivity?


a. human capital per worker
b. physical capital per worker
c. natural resources per worker
d. All of the above are correct.

15. Accumulating capital


a. requires that society sacrifice consumption goods in the present.
b. allows society to consume more in the present.
c. decreases saving rates.
d. involves no tradeoffs.

16. “When workers have a relatively small quantity of capital to use in


producing goods and services, giving them an additional unit of capital
increases their productivity by a relatively large amount.” This statement
a. is an assertion that production functions have the property of constant returns
to scale.
b. is consistent with the view that capital is subject to diminishing returns.
c. is inconsistent with the view that it is easier for a country to grow fast if it
starts out relatively poor.
d. All of the above are correct.

17. If there are diminishing returns to capital, then


a. capital produces fewer goods as it ages.
b. old ideas are not as useful as new ones.
c. increases in the capital stock eventually decrease output.
d. increases in the capital stock increase output by ever smaller amounts.

18. An understanding of the best ways to produce goods and services is


called
a. human capital.
b. physical capital.
c. technology.
d. productivity.

19. Human capital is the


a. knowledge and skills that workers acquire through education, training, and
experience.
b. stock of equipment and structures that is used to produce goods and services.
c. total number of hours worked in an economy.
d. same thing as technological knowledge.

20. Which of the following is considered human capital? Knowledge


acquired from
a. early childhood education programs
b. job training
c. on-the-job experience
d. All of the above are correct.

21. Which of the following is an example of human capital?


a. the comfortable chair in your dorm room where you read economics texts
b. the amount you get paid each week to work at the library
c. the things you have learned this semester
d. any capital goods that require a human to be present to operate

22. Which of the following are human capital and physical capital,
respectively?
a. for an accounting firm: the accountants’ knowledge of tax laws and computer
software
b. for a grocery store: grocery carts and shelving
c. for a school: chalkboard and desks
d. for a library: the building and the reference librarians’ knowledge of the
Internet

23. Some poor countries appear to be falling behind rather than catching
up with rich countries. Which of the following could explain the failure of a
poor county to catch up?
a. The poor country has outward-oriented trade policies.
b. The poor country allows foreign direct investment.
c. The poor country has poorly developed property rights.
d. All of the above are correct.

24. Last year the imaginary nation of Freedonia had a population of 2,700
and real GDP of 16,200,000. This year it had a population of 2,500 and real
GDP of 14,640,000. What was the growth rate of real GDP per person
between last year and this year?
a. -2.4 percent
b. -0.7 percent
c. 4.4 percent
d. 5.2 percent

Solution:
Last year's GDP per person in Freedonia was 16,200,000 / 2,700 = 6,000.
This year's GDP per person is 14,640,000 / 2,500 = 5,856.

The growth rate is ((5,856 - 6,000) / 6,000) * 100 = -2.4%

25. When the Japanese car maker Toyota expands one of its car factories in
Vietnam, what is the likely impact of this event on the GDP and GNI of
Vietnam?
a. GDP rises and GNI falls.
b. GNI rises and GDP falls.
c. GDP shows a larger increase than GNI.
d. GNI shows a larger increase than GDP.

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