Econ 1500 - Chapters 4-8

Front 1

Land would have constrained per capita growth in the 1800s if:
A. the law of diminishing marginal productivity had applied.
B. changes in technology and the capital stock had not occurred.
C. population growth had been slower.
D. the iron law of wages had applied.

Back 1

B. changes in technology and the capital stock had not occurred.

Front 2

According to the convergence hypothesis:
A. countries with higher per capita incomes should eventually grow faster than countries with lower per capita incomes and similar institutional structures
B. countries with higher per capita incomes should eventually grow slower than countries with lower per capita incomes and similar institutional structures.
C. all countries will grow at the same rate but will not necessarily have the same level of per capita income because of differences in institutional structures.
D. all countries will grow at the same rate because institutional structures are converging across both rich and poor countries.

Back 2

B. countries with higher per capita incomes should eventually grow slower than countries with lower per capita incomes and similar institutional structures.

Front 3

Unlike Classical growth theory, new growth theory emphasizes the importance of:

Back 3

technology.

Front 4

At the end of World War II when Korea was split into two parts, North and South Korea had similar per capita incomes. In the years since their per capita incomes have diverged. How can this divergence be best explained in reference to the convergence hypothesis?

Back 4

The convergence hypothesis assumes that countries have similar institutional structures, an assumption clearly violated in the case of Korea.

Front 5

Economic growth through the market has:
A. hurt the poor.
B. not affected the poor.
C. helped both rich and poor.
D. helped the poor at the expense of the rich.

Back 5

C. helped both rich and poor.

Front 6

If increasing returns to scale exist, then an increase in output of exactly 3 percent is most likely to be produced by:

Back 6

B. an increase in all inputs of less than 3 percent.

Front 7

If technological agglomeration increases in poor countries, we might expect that convergence in per capita income levels across rich and poor countries will:

Back 7

B. take less time to achieve.

Front 8

In the early 20th century the U.S. South was poor relative to the North. During the century the gap in per-capita income narrowed. Which of the following would have been a cause of this fact:
A. law of one price.
B. factor mobility.
C. common institutional environment.
D. all of the above.

Back 8

D. all of the above.

Front 9

Over the last three decades, the Chinese government has adopted a series of market-oriented reforms that have shifted control of many parts of the Chinese economy from government officials to market forces. These reforms have most likely stimulated China's growth for which of the following reasons?
A. they have provided individuals with a greater incentive to be efficient.
B. they have decreased domestic competition.
C. they have increased economies of scale.
D. they have decreased entrepreneurship.

Back 9

A. they have provided individuals with a greater incentive to be efficient.

Front 10

Which of the following would tend to inhibit growth?
A. Private property.
B. Limited liability for corporate owners
C. Government approval of all economic activity.
D. Freedom from regulation.

Back 10

C. Government approval of all economic activity.

Front 11

Investment relates to capital in the following way:
A. It is the same thing as capital stock.
B. It causes a decrease in capital over time.
C. It causes an increase in capital over time.
D. It is unrelated to capital.

Back 11

C. It causes an increase in capital over time.

Front 12

A concern about long-term economic growth was important in economics:

Back 12

from the time of Adam Smith and his Wealth of Nations.

Front 13

What effect would we expect in the market for loanable funds if some people discover a new business opportunity that requires investment?

Back 13

Demand will shift right and supply will not change.

Front 14

Economic growth causes the production possibility curve to:

Back 14

shift out.

Front 15

Which of the following is least likely to increase potential output?
A. Increased levels of entrepreneurship.
B. Higher levels of saving and capital accumulation.
C. Increased aggregate demand.
D. More rapid development of growth-compatible institutions.

Back 15

C. Increased aggregate demand.

Front 16

Steven Landsburg has suggested that Scrooge, a character invented by Charles Dickens, was not really so bad. What is Landsburg saying would happen in the market for loanable funds if all the misers of the world sold their assets and gave the money to the poor?

Back 16

Supply would shift left, causing investment to fall.

Front 17

Economic growth:
A. does not affect living standards at all.
B. has a relatively small effect on living standards over long periods of time.
C. has a relatively large effect on living standards over long periods of time.
D. is the sole determinant of living standards over any time period.

Back 17

C. has a relatively large effect on living standards over long periods of time.

Front 18

Economists are confident that the marginal product of labor is higher in the U.S. than it is in China. Why?

Back 18

China has a larger number of people relative to land and capital.

Front 19

The study of economic growth focuses on the factors that cause an:

Back 19

economy's production possibility curve to shift out.

Front 20

Real GDP is designed to measure:

Back 20

the change in a nation’s output over time.

Front 21

Does national income accounting have a category capturing the effects of depreciation?

Back 21

Yes; it is called Capital Consumption Allowance.

Front 22

Aggregate income includes all of the following except:
A. employee compensation.
B. interest.
C. rent.
D. transfer payments

Back 22

D. transfer payments

Front 23

If an economy produces 100 pencils valued at 25 cents apiece and 500 sheets of ruled paper at 1 cent apiece, using GDP as the measure of output:

Back 23

pencils are weighted as being 25 times more important than ruled paper.

Front 24

The distinction between consumption and investment is:

Back 24

somewhat arbitrary, since investment includes housing investment, which does not increase future productive capacity.

Front 25

Using the following information what is the economy's net domestic product? Consumption $4.2 trillion; Investment $1.3 trillion; Government purchases $1.5 trillion; Depreciation $0.4 trillion; and GDP $6.6 trillion

Back 25

$6.2 trillion

Front 26

Which of the following is not a part of U.S. GDP?
A. The payments for an insurance policy on an old BMW sold by a U.S. company.
B. The value of a BMW imported from Germany.
C. The value of a BMW produced in the U.S.
D. The commissions earned by a BMW dealership in the U.S.

Back 26

B. The value of a BMW imported from Germany.

Front 27

If real GDP has increased by 3% and nominal GDP has increased by 5%, then:
A. depreciation is 2%.
B. net factor income is 2%.
C. inflation is 2%.
D. net exports are 2%.

Back 27

C. inflation is 2%.

Front 28

Net domestic product equals:

Back 28

consumption + investment + government purchases + net exports - depreciation.

Front 29

Which of the following is an example of an intermediate product?
A. A pair of skis sold by a sporting goods retailer to a skier.
B. A share of IBM stock.
C. The lumber produced by Boise Cascade and sold to a builder of old houses.
D. An antique car sold to the highest bidder.

Back 29

C. The lumber produced by Boise Cascade and sold to a builder of old houses.

Front 30

GDP is $7 trillion. If consumption is $3.5 trillion, investment is $1.4 trillion, and government purchases are $2.1 trillion, then exports are ________ to imports.

Back 30

equal

Front 31

In 1996, the Boskin Commission Report found that past estimates of inflation overstated actual inflation by about 1.1 percent annually. Assuming that the findings of the Commission are accurate, it follows that:
A. both real and nominal GDP were higher than previously thought.
B. only real GDP was higher than previously thought.
C. only real GDP was lower than previously thought.
D. both real and nominal GDP were lower than previously thought.

Back 31

B. only real GDP was higher than previously thought.

Front 32

In 2004, U.S. net exports were more than -$600 billion, a record low. Assuming all other components remained the same, as a consequence U.S. GDP was $600 billion ________ than it would have been if net exports had equaled zero.

Back 32

lower

Front 33

If a firm's cost of materials is $100 and its sales are $500, its value added is:

Back 33

$400.

Front 34

In what category is the purchase of a computer by a business in national income accounting?

Back 34

It is a form of investment spending.

Front 35

If you decide not to spend $1,000 you earned at your summer job but to buy shares in MicroSoft, in economics this action would be classified as:

Back 35

saving.

Front 36

The difference between gross domestic product (GDP) and gross national product (GNP) is that GDP:

Back 36

measures the economic activity that occurs within a country while GNP measures the economic activity of all the people and businesses of a country.

Front 37

If U.S. imports of goods and services exceed exports U.S. GDP is ______ ______ the sum of consumption, investment, and government purchases.

Back 37

less than

Front 38

To calculate GDP:
A. sum the quantity of all final goods and services produced in an economy in a year.
B. sum the quantity of all goods and services sold in an economy in a year.
C. weight the output of each final good and service produced in an economy in a year by its price in that year and then sum the result.
D. weight the output of each good and service produced in an economy in a year by its price in that year and then sum the result.

Back 38

C. weight the output of each final good and service produced in an economy in a year by its price in that year and then sum the result.

Front 39

The current recession (Dec. 2007 to ?) has resulted in a large number of individuals who have quit looking for work and are classified as discouraged workers. These people are/are not counted in the labor force

Back 39

are not

Front 40

Given the current unemployment rate of 9.5 percent (as of July 2009):
A. the economy is beneath potential output.
B. the economy is at potential output.
C. the economy is above potential output.
D. potential output cannot be determined.

Back 40

A. the economy is beneath potential output.

Front 41

In 1969, the United States CPI was 37 (1982-84 = 100) and in 2006 it was 201.6. By what percent did prices increase in the United States between 1969 and 2006?

Back 41

445

Front 42

Keeping total employment the same, an increase in the number of people available and looking for work will:
_______ the labor force participation rate but ________ the employment-population ratio.

Back 42

increase
decrease

Front 43

People who work part-time, or have a full-time job that doesn't use all their skills, are included in:

Back 43

the underemployed

Front 44

Use the following information to calculate the unemployment rate: Civilian population, 300 million; People incapable of working, 25 million; People not looking for work, 75 million; and Unemployed workers, 8 million.

Back 44

4 percent.

Front 45

With respect to the unemployment problem, Classical economists generally take the position that:

Back 45

individuals should be responsible for finding their own jobs.

Front 46

If an economist says that real wages have fallen in the past year, what has most likely happened?
A. More earnings are being taken in the form of fringe benefits and less in the form of money.
B. Less earnings are being taken in the form of fringe benefits and more in the form of money.
C. Inflation has risen more rapidly than money wages.
D. The rich have gotten richer but the poor have gotten poorer.

Back 46

C. Inflation has risen more rapidly than money wages.

Front 47

Which of the following is a statement Keynesians would likely make?
A. All unemployment is frictional unemployment.
B. If a person isn't working, that's his or her choice.
C. Structural and cyclical unemployment are more common than frictional unemployment.
D. The unemployment rate overstates actual unemployment.

Back 47

C. Structural and cyclical unemployment are more common than frictional unemployment.

Front 48

Policies that affect work, capital accumulation, and technological change are primarily relevant to:

Back 48

to the long-run growth framework.

Front 49

If nominal output is $4.4 trillion and the GDP deflator is 110, then real output is:

Back 49

$4 trillion.

Front 50

The lowest sustainable rate of unemployment that policy makers believe is achievable under existing conditions is called:

Back 50

the target rate of unemployment.

Front 51

A price index in its base year is always equal to:

Back 51

100

Front 52

John has received a 3% pay increase but the rate of inflation is 6%. Economists would tell John that his real wage has:

Back 52

fallen by 3%.

Front 53

Which of the following people would not be included among the unemployed?
A. A construction worker laid off because of a slowdown in house building.
B. A young mother on welfare because her husband has left her and she must stay home to tend her children.
C. A recent high school graduate who has quit his first job as a stock clerk in a grocery store in order to look for a better job.
D. A recent college graduate who has not yet found a job.

Back 53

B. A young mother on welfare because her husband has left her and she must stay home to tend her children.

Front 54

Under pure capitalism, the main deterrent of unemployment is:
A. pure government intervention.
B. pure market intervention.
C. the fear of hunger.
D. new immigrants entering the country.

Back 54

C. the fear of hunger.

Front 55

Which of the following is a statement a Classical economist would likely make?
A. Most unemployment is frictional unemployment.
B. Frictional unemployment is only a small part of total unemployment.
C. The unemployment rate underestimates the true extent of unemployment.
D. Society owes a person a job commensurate with his or her training.

Back 55

A. Most unemployment is frictional unemployment.

Front 56

The long-run growth framework focuses on factors affecting:

Back 56

incentives to produce.

Front 57

Clark Kent, a middle-aged bachelor, quit his news reporter job and currently is looking for a better job. The Bureau of Labor Statistics counts Clark as:

Back 57

unemployed.

Front 58

The target rate of unemployment can be affected by all of the following except the:

Back 58

level of output.

Front 59

The law of supply states that, other things equal, as the price of a good goes:
A. up, the quantity supplied goes up.
B. up, the supply goes down.
C. down, the quantity supplied goes up.
D. down, the supply goes down.

Back 59

A. up, the quantity supplied goes up.

Front 60

Which of the following explains the increase in demand and price of a college education?
A. More colleges have been established.
B. The cost of text books has increased dramatically.
C. Income in the United States has risen.
D. The price of all other goods in the economy has decreased.

Back 60

C. Income in the United States has risen.

Front 61

Compared to last year, fewer oranges are being purchased and the selling price has decreased. This could have been caused by
A. an increase in demand.
B. an increase in supply.
C. a decrease in demand.
D. a decrease in supply.

Back 61

C. a decrease in demand.

Front 62

When applied to labor markets, the law of supply suggests that:
A. an increase in the wages earned by nurses will cause the quantity of nurses supplied to increase.
B. a decrease in the wages earned by nurses will cause the quantity of nurses supplied to increase.
C. an increase in the wages earned by nurses will cause the quantity of nurses demanded to increase.
D. a decrease in the wages earned by nurses will cause the quantity of nurses demanded to increase.

Back 62

A. an increase in the wages earned by nurses will cause the quantity of nurses supplied to increase.

Front 63

Which of the following would likely result in an increase in the demand for beef?
A. A decrease in the supply of beef.
B. An increase in family incomes, assuming beef is a normal good.
C. An increase in the price of feed grains.
D. A decrease in the price of pork.

Back 63

B. An increase in family incomes, assuming beef is a normal good.

Front 64

A 2004 Wall Street Journal headline stated, "Carbs and Fats and Trends in Snacking All Conspire against Oreo and Others." Which of the following best describes the likely effect of this trend on the Oreo market?
A. Demand shifted to the left leading to a decline in equilibrium price and quantity.
B. Quantity demanded fell leading to a decline in equilibrium price and quantity
C. Supply shifted to the left leading to a rise in equilibrium price and a decline in equilibrium quantity.
D. Demand and supply both shifted to the left leading to a decline in equilibrium price and quantity.

Back 64

A. Demand shifted to the left leading to a decline in equilibrium price and quantity.

Front 65

The explanation for the law of demand involves:
A. suppliers' ability to substitute inputs.
B. consumers' ability to substitute different goods.
C. the government's ability to set prices.
D. the market's ability to equate supply and demand.

Back 65

B. consumers' ability to substitute different goods.

Front 66

Which of the following is not held constant as you move along the demand curve?
A. The price of that good.
B. The price of other goods.
C. The incomes of consumers.
D. The preferences of consumers for the good.

Back 66

A. The price of that good.

Front 67

The supply of leather jackets would be expected to increase as a result of:
A. a decrease in the cost of producing leather jackets.
B. an increase in the price of leather jackets.
C. an increase in the popularity of leather jackets
D. the expectation that the price of leather jackets will rise in the future.

Back 67

A. a decrease in the cost of producing leather jackets.

Front 68

Given that diesel cars get much better gas mileage than the typical car, an increase in the price of gasoline would be expected to:
A. increase the demand for diesel cars.
B. decrease the demand for gasoline.
C. decrease the demand for diesel cars.
D. increase the demand for gasoline.

Back 68

A. increase the demand for diesel cars.

Front 69

If you observe a market where quantity demanded doesn't equal quantity supplied, a logical conclusion is that:

Back 69

social and political forces are likely to exist.

Front 70

If the price of chicken rises and the price of beef does not rise, consumers will respond by:

Back 70

substituting beef for chicken.

Front 71

If both buyers and sellers expect the price of a commodity to rise in the future, it is likely that equilibrium:

Back 71

price will rise with little change in equilibrium quantity.

Front 72

When the wage rate paid to labor is above equilibrium, the:

Back 72

number of workers seeking jobs exceeds the number of jobs available.

Front 73

If supply and demand both shift to the right, equilibrium quantity:

Back 73

rises, but the equilibrium price may rise, fall, or stay the same.

Front 74

Honey and jam are substitute products. If the price of honey increases, the demand for:

Back 74

jam will increase, causing the price of jam to increase as well.

Front 75

Which of the following would best explain a decrease in the supply of squash?

Back 75

An increase in the price of other vegetables.

Front 76

There are many more substitutes for good A than for good B.
A. The demand curve for good B will likely shift out further.
B. The demand curve for good B will likely be flatter.
C. You can't say anything about the likely relative flatness of the demand curves.
D. The demand curve for good A will likely be flatter.

Back 76

D. The demand curve for good A will likely be flatter.