Macroeconomics lesson 7

The traditional view of the production process is that capital is subject to:

• increasing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries.

• increasing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries.

• diminishing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries.

• diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries.

Refer to Figure 25-1. The curve becomes flatter as the amount of capital per worker increases because of:

• A) diminishing returns to labor.

• B) increasing returns to capital.

• C) diminishing returns to capital.

• D) increasing returns to labor.

In order to promote growth in living standards, policymakers must:

• minimize accumulation of factors of production.

• protect property rights and maintain political stability.

• rise taxes to increase government revenue.

• promote bureaucracy.

In an economy where net exports are zero, if saving rises in some period, then in that period:

• A) consumption rises and investment falls.

• B) consumption falls and investment fall.

• C) consumption falls and investment rises.

• D) consumption rises and investment falls.

Which of the following is an example of a nonrenewable resource?

• Livestock

• The knowledge possessed by scientists

• Profitable business

• Lumber

A policy that increases saving will

• improve economic growth but worsen health outcomes.

• worsen economic growth, but improve health outcomes.

• improve economic growth and health outcomes.

• worsen economic growth and health outcomes.

Which of the following statements is correct?

• Human capital per worker is a determinant of productivity.

• Human capital and technological knowledge are the same thing.

• A nation cannot be highly productive in producing goods and services without abundant quantities of natural resources.

• All technological knowledge is proprietary.

Other things the same, a country that increases its savings rate will have:

• higher future capital but not higher future real GDP per person.

• higher future real GDP per person but not higher future capital.

• higher future capital and higher future real GDP per person.

• neither higher future capital nor higher future real GDP per person.

Last year real GDP in the imaginary nation of Olympus was 445.0 billion and the population was 2.2 million. The year before, real GDP was 390.0 billion and the population was 2.1 million. What was the growth rate of real GDP per person during the year?

• 14.1 percent

• 8.9 percent

• 1.09 percent

• 0.09 percent

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 country to catch up?

• The poor country heavily invests in education.

• The poor country has a health epidemic such as the Zika virus.

• The poor country uses a lot of resources to promote free trade policies.

• The poor country wasted resources fighting corruption.