Chapter 13 Study Guide 1.

The best currently available measure of the standard of living in a country is: A) the nominal GDP per capita. C) the unemployment rate. B) the real GDP per capita. D) the growth rate of productivity. 2. Suppose a panel of economists is predicting that a nation's real GDP per capita will have an average annual growth rate of 2%. Based upon the Rule of 70, how many years will it take for this nation's real GDP per capita to double? A) 35 B) 70 C) 140 D) 20 3. A) B) C) D) All of the following policies boost economic growth except: Offer tax incentives for investment by local firms Give cash payments for good school attendance Restrict imports to protect domestic industries Crack down on government corruption D) fertility

4. Rising high school graduation rates are an example of an increase in: A) technological progress. B) human capital. C) population stock. rates. 5. Which of the following doesn't necessarily increase the level of productivity? A) increase in physical capital C) rapid technological progress B) increase in human capital D) high population growth 6. A) B) C) D) If a country's saving rate increases, then in the long run both productivity growth and income growth increase. only productivity growth increases. only income growth increases. only the level of productivity increases.

7. The economy of Anaconda produces 800 million rocking chairs with 200 workers. If rocking chair is the only product this country produces, what is the productivity in Anaconda? A) 4 million chairs per person C) 800 million chairs B) 160000 million chairs D) 1000 million chairs per person 8. Senator George prescribed some policies that the U.S. should do in order to help poor countries develop. In fact he mentioned the following four ideas but only one of these ideas is likely to help poor countries grow. Which one is this good idea? A) Prevent U.S. corporations from investing in poor countries because they take profits that the poor countries should have. B) Not import goods from poor countries that use child labor. C) Work to promote political stability in poor countries D) Reduce poor countries reliance on market forces in their economies. 9. Economists believe that the best way to stimulate investment in physical capital is to encourage: A) higher rates of human capital. C) conservation of natural resources. B) more spending on infrastructure. D) higher rates of national savings.

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10. A) B) C) D) 11. A) B) C) D)

Chapter 13 Study Guide One of the most important types of infrastructure that government can provide is: a good tax system. basic health measures such as a clean water supply and disease control. the kind that private companies would provide if they were allowed to. greater intervention in the market mechanism. The convergence hypothesis helps explain why: highly educated people converge in high-income countries. high-income individuals marry other high-income individuals. high-income countries continue their high growth rates. high-income countries tend to have slower growth rates compared to lower-income countries.

12. In the last two decades, Chinas economic growth rate was about 9% while United States' growth rate was about 2%. The relatively higher economic growth in China is due to the fact that: A) an additional capital invested in China is more productive than in the U.S.. B) an additional capital invested in the U.S. is more productive than in China. C) China has larger population than the U.S. has. D) labor is more productive in China than in the U.S.. 13. A) B) C) D) In the past 30 years, both China and India have experienced substantial economic growth: and as a result, they are almost as rich as the U.S. today. but they continue to be poorer than the U.S. was 30 years ago. which was fueled by both countries' increases in consumption. which came about because of their relatively low levels of saving.

14. Diminishing returns to physical capital implies that, when human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to: A) a smaller increase in productivity. C) a decrease in productivity. B) a larger increase in productivity. D) negative productivity.

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Chapter 13 Study Guide Use the following to answer question 15: Figure: Technological Progress and Productivity Growth

15. (Figure: Technological Progress and Productivity Growth) If there is an increase in physical capital per worker (all other factors remaining unchanged), then this is best indicated by a move from: A) A to B. B) B to A. C) C to B. D) B to C. 16. A) B) C) D) Government spending is like investment in each of the following cases except when: it goes to help pay for education. it helps provide infrastructure for the economy. it is used for public health measures. it is used for a personal income tax rebate.

17. In 1820, Mexico had a higher real GDP per capita than Japan. Yet now, Japan is one of the richer countries and Mexico is a poorer nation. Japan's high rate of economic growth can be explained by all of the following except: A) high investment in physical capital. C) high investment in technological progress. B) high investment in human capital. D) high level of government interference. 18. A) B) C) D) An action that would hinder growth would be: government provision of basic health measures. government support for research and development endeavors. the lack of government oversight for property rights. government encouragement of increased saving.

Answer Key
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 B A C B D D A C D B D A B A A D D C

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