Question 3
According to Joseph Schumpeter, the theory of creative destruction describes a process by which
| A | some new products unleash a gale of destruction that drive other new products out of the market. |
| B | | new products unleash a gale of destruction that drives old products out of the market. |
| C | | new products are created by the destruction of capital. |
| D | | the creation of new products never involves the destruction of old products. |
Question 4
Which of the following countries had the highest GDP per capita in 2012?
| | A Qatar |
| B | | United States |
| C | | Japan |
| D | | Norway |
Question 5
________ save a ________ of their income. This ________ capital in their economy and raises economic growth.
| A | Developing countries; large proportion; decreases |
| B | | Developing countries; small proportion; increases |
| C | | High-income countries; large proportion; increases |
| D | | High-income countries; small proportion; increases |
Question 6
The demand for loanable funds is determined by the willingness of ________ to borrow money to engage in new investment projects.
A
| A | | government |
| B | | households |
| C | | banks |
| D | | firms |
Question 7
The U.S. economy has been more stable since 1950.
True
False
Question 8
When the economy reaches a trough in a business cycle, which of the following will occur?
| A | | Income, production, and employment will continue to fall. |
| B | | Income, production, and employment will begin to rise. |
| C | | Income and production will rise, but employment will continue to fall. |
| D | | Employment rises, but income and production will continue to fall. |
Question 9
In a closed economy, what is the relationship between saving and investment?
| A | | Saving is greater than investment. |
| B | | Investment is greater than saving. |
| C | | Investment is equal to saving. |
| D | | Investment may be greater or smaller than saving. |
Question 10
The per-worker production function shows the relationship between ________ per hour worked and ________ per hour worked, holding ________ constant.
| A | | labor; real GDP; technology |
| B | | capital; real GDP; technology |
| C | | labor; capital; real GDP |
| D | | capital; labor; real GDP |
Question 11
New growth theory states that increases in ________ capital will result in ________ at the ________ level.
| A | knowledge; increasing returns to scale; firm |
| B | physical; decreasing returns to scale; firm |
| C | knowledge; decreasing returns to scale; economy |
| D | | knowledge; increasing returns to scale; economy |
Question 12
Which of the following is not a reason why the Industrial Revolution occurred when and where it did?
| A | | The British government was committed to upholding private property rights. |
| B | | The British government was able to eliminate arbitrary increases in taxes. |
| C | | The British government was able to more easily seize wealth. |
| D | | Institutional changes by the British government helped protect wealth. |
Question 13
Growth in real GDP per capita for the world economy was greatest during
| A | | the seventeenth century. |
| B | | the eighteenth century. |
| C | | the nineteenth century. |
| D | | the twentieth century. |
Question 14
Which of the following is a normative statement about economic growth?
| A | | Economic growth is associated with higher labor productivity growth. |
| B | | Economic growth increases GDP per capita. |
| C | | Economic growth hurts developing countries. |
| D | | Foreign direct investment stimulates economic growth. |
Question 15
The effect of a recession on a company like Whirlpool Corporation is such that
| A | | sales decline more sharply for Whirlpool as compared to firms that do not produce durable goods. |
| B | | profits fall less sharply as compared to firms that do not produce durable goods. |
| C | | the decline in sales is more short-lived as compared to firms that do not produce durable goods. |
| D | | there is no difference in the impact of the recession on its profits as compared to firms that do not produce durable goods. |
Question 16
For the recessions in the United States since the 1950s,
| A | | cyclical unemployment has been non-existent. |
| B | | unemployment rises on average by about 1.2 percentage points 12 months after a recession begins. |
| C | | unemployment falls on average by 2 percentage points 12 months after a recession begins. |
| D | | unemployment rises on average about 5 percentage points 12 months after a recession begins. |
Question 17
You are an economic advisor to the president. You are asked to recommend a policy to promote long-term economic growth in the economy. Which of the following policies would you choose?
| A | | a reduction in sales taxes |
| B | | an investment tax credit |
| C | | a reduction in taxes on luxury yachts |
| D | | All of these |
Question 18
In comparison to a government that runs a balanced budget, when the government runs a budget deficit,
| A | the equilibrium interest rate will fall. |
| B | business investment will fall. |
| C | household savings will fall. |
| D | None of these |
Question 19
If labor productivity growth slows down in a country, this means that the growth rate in ________ has declined.
| A | | labor force participation |
| B | | the quantity of goods or services that can be produced by one hour of work |
| C | | the working-age population |
| D | | nominal GDP |
Question 20
Policies to promote growth by increasing saving and investment work through
| A | | decreasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital. |
| B | | increasing the supply of loanable funds, increasing the interest rate, raising the level of investment in physical capital. |
| C | | increasing the supply of loanable funds, lowering the interest rate, lowering the level of investment in physical capital. |
| D | | increasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital. |
