ECON 2315 Chapter 3: Chapter 3- Productivity, Output, and Employment
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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. |
The opportunity cost of one more slice of pizza in terms of sodas is the
Ā | Ā |
the total number of pizza slices that we have divided by the total number of sodas that we have. |
Ā | Ā |
the number of sodas we have to give up to get one extra pizza slice. |
Ā | Ā |
the number of pizza slices we have to give up to get one extra soda. |
Ā | Ā |
the total number of sodas that we have divided by the total number of pizza slices that we have. |
1 point
QUESTION 2
A production possibilities frontier shows
Ā | Ā |
how money can be allocated among two kinds of goods. |
Ā | Ā |
the limits to the future growth of a nation. |
Ā | Ā |
the various combinations of output a nation can produce at a certain time, given its available resources and technology. |
Ā | Ā |
that if the price of one good decreases, the price of the other has to increase. |
1 point
QUESTION 3
When a production possibilities frontier is bowed outward, as more of one good is produced, its opportunity cost
Ā | Ā |
remains constant. |
Ā | Ā |
might increase, decrease, or remain constant depending on how much people value the additional units of the good. |
Ā | Ā |
increases. |
Ā | Ā |
decreases. |
1 point
QUESTION 4
When all of the available factors of production are being efficiently employed, the
Ā | Ā |
the economy is producing at a point within its PPF. |
Ā | Ā |
PPF disappears. |
Ā | Ā |
the economy is producing at a point beyond its PPF. |
Ā | Ā |
the economy is producing at a point on its PPF. |
1 point
QUESTION 5
If a nation devotes a larger share of its current production to consumer goods, then
Ā | Ā |
its PPF will shift inward. |
Ā | Ā |
its economic growth will slow down. |
Ā | Ā |
its PPF will shift outward. |
Ā | Ā |
some productive factors will become unemployed. |
1 point
QUESTION 6
A point on the production possibilities frontier reflects an
Ā | Ā |
the attainable point with full employment of all resources. |
Ā | Ā |
attainable point without full employment of all resources. |
Ā | Ā |
unattainable point without full employment of all resources. |
Ā | Ā |
the unattainable point with full employment of all resources. |
1 point
QUESTION 7
When drawing a production possibilities frontier, which of the following is held constant?
Ā | Ā |
the available factors of production and the state of technology |
Ā | Ā |
the amount of money in the economy |
Ā | Ā |
the prices of goods and services |
Ā | Ā |
the quantity of the goods and services that are produced |
1 point
QUESTION 8
As we move along the production possibilities frontier,
Ā | Ā |
more of both goods can be produced. |
Ā | Ā |
the possibilities of tradeoffs diminish. |
Ā | Ā |
a tradeoff is not possible because nations need all goods. |
Ā | Ā |
the production of one good increases as the production of the other good decreases. |
1 point
QUESTION 9
Which of the following is an assumption used when drawing a production possibilities frontier?
i.Human wants and desires are limited to what is available.
ii. Only two goods are considered.
iii. The level of technology is fixed and unchanging.
Ā | Ā |
I and iii |
Ā | Ā |
ii only |
Ā | Ā |
I, ii, and iii |
Ā | Ā |
I only |
1 point
QUESTION 10
To achieve gains from trade, a country
Ā | Ā |
needs to have an absolute advantage in the production of all goods. |
Ā | Ā |
specializes in producing a good in which it has a lower opportunity cost. |
Ā | Ā |
must produce at a point beyond its PPF. |
Ā | Ā |
should produce at the midpoint of its PPF. |
1 point
QUESTION 11
Relative to Al, Joe has ________ if Joe can produce a good at a lower opportunity cost than Al.
Ā | Ā |
a comparative advantage |
Ā | Ā |
more production efficiency |
Ā | Ā |
a marginal benefit |
Ā | Ā |
a comparative benefit |
1 point
QUESTION 12
Does economic growth depend upon which of the following?
i.Improving the quality of labor
ii. Technological advancement
iii. Increasing the amount of capital
Ā | Ā |
iii only |
Ā | Ā |
ii only |
Ā | Ā |
I only |
Ā | Ā |
I, ii, and iii |
1 point
QUESTION 13
In one hour John can produce 20 loaves of bread or 18 cakes. In one hour Phyllis can produce 30 loaves of bread or 15 cakes. Which of the following statements is true?
Ā | Ā |
John has a comparative advantage in producing cakes. |
Ā | Ā |
Phyllis has an absolute advantage in both goods. |
Ā | Ā |
Phyllis has a comparative advantage in producing cakes. |
Ā | Ā |
John has an absolute advantage in both goods. |
1 point
QUESTION 14
As an economy produces more of one of the goods on a bowed out production possibilities frontier, what happens to the opportunity cost of producing the good?
Ā | Ā |
It decreases. |
Ā | Ā |
It might increase, decrease, or remain constant depending on how much people value the additional units of the good. |
Ā | Ā |
It remains constant. |
Ā | Ā |
It increases. |
1 point
QUESTION 15
The production possibilities frontier illustrates the
Ā | Ā |
goods and services that people want. |
Ā | Ā |
maximum combinations of goods and services that can be produced. |
Ā | Ā |
resources the economy possesses, but not it is the level of technology. |
Ā | Ā |
limits to people's wants. |
1 point
QUESTION 16
The United States produced approximately ________ worth of goods and services in 2007.
Ā | Ā |
$14 billion |
Ā | Ā |
$14 trillion |
Ā | Ā |
$140 billion |
Ā | Ā |
$140 trillion |
1 point
QUESTION 17
The fact of increasing opportunity cost when moving on the PPF means that
Ā | Ā |
to increase the production of one product requires smaller and smaller sacrifices of the other good. |
Ā | Ā |
to decrease the production of one product requires smaller and smaller sacrifices of the other good. |
Ā | Ā |
to increase the production of one product requires larger and larger sacrifices of the other good. |
Ā | Ā |
when the government forces a movement from one point on the PPF to another point, no production is lost. |
1 point
QUESTION 18
Other things equal, if India devotes more resources to educate its population than China,
Ā | Ā |
China will grow faster than India. |
Ā | Ā |
India will be able to eliminate scarcity faster than China. |
Ā | Ā |
India will be able to eliminate opportunity cost faster than China. |
Ā | Ā |
India will grow faster than China. |
1 point
QUESTION 19
For Ireland to grow more potatoes, wool production must decrease. This situation is an example of
Ā | Ā |
zero opportunity cost. |
Ā | Ā |
producing at a point that lies beyond the PPF. |
Ā | Ā |
opportunity benefit. |
Ā | Ā |
a tradeoff. |
1 point
QUESTION 20
Moving from one point to another on a production possibilities frontier implies
Ā | Ā |
increasing the production of both goods. |
Ā | Ā |
increasing the production of one good and decreasing the production of another. |
Ā | Ā |
holding the production levels of both goods constant. |
Ā | Ā |
decreasing the production of both goods. |
1 point
QUESTION 21
The United States is one of the richest nations in the world,
Ā | Ā |
but it can still benefit from specialization and trade. |
Ā | Ā |
so does not need to trade with poor nations to achieve any gains from trade. |
Ā | Ā |
so might not have a comparative advantage in producing any goods. |
Ā | Ā |
so it must have a comparative advantage in the production of all goods. |
1 point
QUESTION 22
"Comparative advantage" is defined as a situation in which one person can produce
Ā | Ā |
more of all goods than another person. |
Ā | Ā |
a good for a lower opportunity cost than another person. |
Ā | Ā |
a good for a lower dollar cost than another person. |
Ā | Ā |
more of a good than another person. |
1 point
QUESTION 23
The idea of increasing opportunity cost is reflected in the
Ā | Ā |
the linear shape of the production possibilities frontier. |
Ā | Ā |
bowed in the shape of the production possibilities frontier. |
Ā | Ā |
bowed out the shape of the production possibilities frontier. |
Ā | Ā |
the positive slope of the production possibilities frontier. |
1 point
QUESTION 24
Suppose that after specializing according to comparative advantage, a country is trading with another nation that also specializes according to its comparative advantage. Which of the following statements are true for the first country?
i)It enjoys gains from trade.
ii)It must have an absolute advantage in the production of the good it produces.
iii)It is producing at a point beyond its PPF.
Ā | Ā |
I only. |
Ā | Ā |
I and ii. |
Ā | Ā |
I and iii. |
Ā | Ā |
ii and iii. |
1 point
QUESTION 25
If society moves from a period of time with significant unemployment to a time with full employment, its production possibilities frontier will
Ā | Ā |
shift rightward. |
Ā | Ā |
not shift because the society moves from one point on the frontier to a point inside the frontier. |
Ā | Ā |
not shift because the society moves from a point inside the frontier to a point on the frontier. |
Ā | Ā |
shift leftward. |
1 point