Chapter 8—Productivity and Growth 1. Which of the following does not contribute to an improved standard of living? A. increases in the amount and quality of available resources B. better technology C. lower prices for the necessities of life D. improvements in the “rules of the game” E. increases in the quality of labor 2. The rules of the game refer to A. any factor that facilitates production and exchange, such as tax laws and property rights B. a gradual but consistent change in the price level until a fair price is attained C. the set of election laws that ensure that all elections are fair D. the requirements placed on firms in earning a profit E. the requirements that households must supply labor to firms 3. Which is the resource whose quality is most often enhanced by technological change A. capital B. land C. labor D. entrepreneurship E. credit 4. Long-term growth in production can be explained by A. an improvement in the quality of resources available B. a gradual but consistent rise in the price level C. a rapid and accelerating increase in the price level D. a trade surplus that leads to the accumulation of gold E. the peaks and troughs of economic fluctuations 5. "The most important factor in determining a nation's standard of living in the long run is the productivity of its resources." A. True B. False 6. "The most important factor in determining a nation's standard of living in the long run is the size of its labor force." A. True B. False 7. "The most important factor in determining a nation's standard of living in the long run is the openness of its economy." A. True B. False 8. If Q is total real output, K is capital in use, and L is labor employed, the productivity of labor is measured by A. K/L B. L/K C. Q/L D. Q/K E. (Q + K)/L 9. What is the definition of productivity? A. output plus quantity of input B. output minus quantity of input C. quantity of input divided by output D. output divided by quantity of input E. output times quantity of input 10. Labor productivity is measured by A. total employment/total output B. total output/total employment C. labor force/total output D. total output/labor force E. total output/potential employment 11. If Q is total real output, K is capital in use, L is labor employed, and the productivity of labor grows, other things constant, then A. K/L rises B. L/K rises C. Q/L rises D. Q/K falls E. (Q + K)/L falls 12. Productivity is defined as A. the ratio of a specific measure of output to a specific measure of input B. the production of worthwhile goods and services C. the market value of goods, services, and resources produced per time period (e.g., per year) D. the average input divided by average output E. total input divided by average output 13. Labor productivity tends to fall as the capital-labor ratio rises. A. True B. False 14. If the ratio of capital to labor increases, we can expect that labor productivity will increase. A. True B. False 15. If on-the-job experience causes labor productivity to increase, that is the result of an improvement in human capital. A. True B. False 16. Human capital includes the machinery, equipment and other manufactured creations used to produce goods and services. A. True B. False 17. The difference between human capital and physical capital is that A. human capital is used by humans whereas physical capital is not B. only human capital increases labor productivity C. human capital is not physical; an example of human capital is education D. physical capital requires investment, whereas human capital does not E. only physical capital increases labor productivity 18. An example of an increase in human capital would be A. a new machine that humans use to produce more capital B. an increase in wealth C. a more educated labor force D. all of the above E. both a and c 19. The resource whose productivity is most commonly measured is A. labor B. capital C. land D. energy E. money 20. Human capital represents A. the equipment that labor uses on-the-job to improve labor productivity B. a direct method of measuring output-per-worker C. the education, skills and training embodied in workers D. the technology, developed by humans, that is embodied in equipment E. the social institutions created by people which promote the accumulation of equipment for production 21. Labor productivity measures A. input per unit of labor B. output per unit of labor C. average input per unit of labor D. units of capital per unit of labor E. output per unit of capital 22. Labor productivity is measured as A. the value of total output times total employment B. total output of all workers employed C. total output divided by the number of units of labor employed D. total labor input divided by output E. average output per unit of capital 23. The diminishing slope of the per-worker production function reflects the law of diminishing marginal returns. A. True B. False 24. Improvements in technology shift the per-worker production function downward. A. True B. False 25. An increase in the amount of capital per worker will A. increase labor productivity but not capital productivity B. increase capital productivity but not labor productivity C. increase both labor and capital productivity D. shift the per-worker production function upward E. increase total output but not the productivity levels of individual workers 26. Exhibit 8-1 In Exhibit 8-1, Tasmania is currently operating at point A on the per-worker production function. If the number of workers is stable while Tasmania’s capital stock is growing it will produce a movement from A to A. B B. D C. E D. F E. G 27. Exhibit 8-1 In Exhibit 8-1, Tasmania is currently operating at point A on the per-worker production function. Capital deepening will produce a movement from A to A. B B. D C. E D. F E. G 28. Exhibit 8-1 In Exhibit 8-1, Tasmania is currently operating at point A on the per-worker production function. A war that destroys half of Tasmania’s capital stock without diminishing the workforce will result in a movement from A to A. B B. D C. E D. F E. G 29. Exhibit 8-1 In Exhibit 8-1, Tasmania is currently operating at point A on the per-worker production function. An improvement in technology will produce a movement from A to A. B B. D C. E D. F E. G 30. Exhibit 8-1 In Exhibit 8-1, Tasmania is currently operating at point A on the per-worker production function. An improvement in the quality of capital used by workers will produce a movement from A to A. B B. D C. E D. F E. G 31. Exhibit 8-1 In Exhibit 8-1, Tasmania is currently operating at point A on the per-worker production function. An improvement in technology will produce a movement from A to A. B B. D C. E D. F E. G 32. Exhibit 8-1 In Exhibit 8-1, Tasmania is currently operating at point A on the per-worker production function. An improvement in the “rules of the game” will produce a movement from A to A. B B. D C. E D. F E. G 33. Exhibit 8-1 In Exhibit 8-1, Tasmania is currently operating at point A on the per-worker production function. The takeover of Tasmania by a military dictator that destabilizes the political and economic system would produce a movement from A to A. B B. D C. E D. F E. G 34. Exhibit 8-2 The movement from point A to point B in Exhibit 8-2 could illustrate the result of A. an increase in the capital stock relative to the work force B. an increase in the labor productivity growth rate C. an increase in labor productivity because of higher quality capital D. all of the above E. a and b only 35. Exhibit 8-2 Point C in Exhibit 8-2 represents an unatainable output per worker with current technology. A. True B. False 36. Exhibit 8-2 A technological improvement would make point C in Exhibit 8-2 attainable. A. True B. False 37. Exhibit 8-2 The shape of the per-worker production function in Exhibit 8-2 illustrates the law of increasing marginal returns to capital. A. True B. False 38. Exhibit 8-2 The shape of the per-worker production function in Exhibit 8-2 illustrates the law of diminishing marginal returns to labor. A. True B. False 39. Which of the following does not contribute to labor productivity growth? A. a steepening of the per-worker production function B. an increase in amount of capital per unit of labor C. growth of the labor force D. an improvement in the quality of capital E. a decrease in the labor-capital ratio 40. Which of the following would not increase labor productivity? A. technological change B. an increased amount of capital per unit of labor C. a lower unemployment rate D. greater job experience for the work force E. all of the above increase labor productivity 41. If a nation moves upward along its per-worker production function relating output per worker to capital per worker, A. labor productivity rises B. labor productivity falls C. the amount of capital decreases, other things constant D. labor input decreases E. none of the above 42. If increases in capital per worker lead to increased output per worker, but by decreasing amounts as capital increases, the per-worker production function A. is linear B. has a decreasing slope C. has an increasing slope D. has a negative slope E. is horizontal 43. A decrease in the capital-labor ratio means A. higher labor productivity because labor does more work B. lower labor productivity because labor is working with relatively less capital C. higher labor productivity because labor is producing less capital and more of other goods D. lower labor productivity because more capital is available E. higher labor productivity because more capital is available 44. Which of the following would increase labor productivity? A. a decrease in amount of capital per unit of labor B. technological change C. a decrease in the unemployment rate D. an increase in the number of inexperienced workers entering the labor force E. a decrease in the quality of capital 45. The slope of the per-worker production function diminishes as the amount of capital per worker increases. This is a reflection of the law of A. increasing marginal returns B. diminishing marginal returns C. constant marginal returns D. first diminishing then increasing marginal returns E. demand 46. The per-worker production function illustrates the fact that as the amount of capital per worker increases, output per worker A. increases at an increasing rate B. increases then decreases C. decreases but at an increasing rate D. decreases E. increases but at a decreasing rate 47. The law of diminishing marginal returns states that as the quantity of capital per worker increases, other things constant, output per worker eventually A. increases at a constant rate B. increases at a decreasing rate C. increases at an increasing rate D. decreases E. remains constant 48. An improvement in the quality of capital would A. rotate the per-worker production function upward B. make the per-worker production function flatter C. shift the per-worker production function downward D. rotate the per-worker production function downward E. have no effect on the per-worker production function 49. An increase in the quantity of capital per worker would A. rotate the per-worker production function outward B. rotate the per-worker production function inward C. shift the per-worker production function downwards D. shift the per-worker production function upwards E. result in movement along the current per-worker production function 50. According to Simon Kuznets, A. the main force behind economic growth is increases in the quantity of labor B. the main force behind economic growth is increases in the quantity of capital C. the main force behind economic growth is increases in the quality of inputs D. government regulations increase labor productivity E. government regulations decrease labor productivity 51. Which of the following is most likely to increase productivity growth, as measured using GDP statistics? A. reduced capital formation B. decreased human capital C. increased research and development D. increased government regulation E. higher prices for raw materials 52. According to Nobel prize winner Simon Kuznets, the greatest increase in output and economic growth comes from changes in the A. quantities of resources B. quantities of natural resources (land) C. quantities of labor D. qualities of resources E. quantities of capital 53. Which of the following did Simon Kuznets find to be the driving force behind modern economic growth? A. changes in the quantity of labor B. changes in the quantity of capital C. changes in the quantities of labor and capital D. about half the growth is due to changes in quantity of inputs; the other half is due to changes in quality of inputs E. nearly all was due to improvements in input quality 54. The rules of the game refer to A. any factor that facilitates production and exchange B. a gradual but consistent change in the price level until a fair price is attained C. the set of election laws that ensure that all votes are counted in every election D. the requirements place on firms earning a profit E. the requirements that households must provide funding for the investments that firms need to make 55. The rules of the game include all of the following except one. Which is the exception? A. the laws, customs, conventions and other institutional elements associated with trade B. property rights C. ensuring that the market process generates a fair price to all D. a stable political environment E. a stable legal system 56. Which of the following would not be considered a developed country? A. Pakistan B. the United States C. Japan D. Australia E. Belgium 57. Since 1870, U.S. labor productivity growth has averaged roughly 2.1 percent annually. A. True B. False 58. Labor productivity the United States has never fallen has never fallen from one year to the next. A. True B. False 59. Between the 1880s and the early 21st century, U.S. productivity increased at a constant annual rate. A. True B. False 60. A small change in the rate of productivity growth will have A. a small impact on output in both the short run and the long run B. a large impact on output in both the short run and the long run C. a small impact on output in the short run but a large impact in the long run D. a large impact on output in the short run but a small impact in the long run E. no effect on output at all 61. The reason why small changes in productivity growth rates have large long-term effects on economic growth over the long run is that A. lower productivity growth makes labor discouraged, compounding the problem B. lower productivity growth effects on the economy are compounded over the years, leading to large cumulative effects C. when the productivity growth rate falls, output actually falls D. lower productivity growth for one resource means lower productivity growth for all resources E. output usually falls when productivity grows 62. Over the last century, U.S. labor productivity has A. fallen B. been constant, on average C. grown at about 2 percent per year D. grown at about 8 percent per year E. grown at about 15 percent per year 63. What was the average yearly increase in U.S. labor productivity growth between the 1870s and the early years of the 21st century? A. about 1 percent B. about 2 percent C. about 5 percent D. about 10 percent E. between 0 and 1 percent 64. The reason why productivity growth is so important is that A. it is the key to long-run increases in the standard of living B. per capita GDP ultimately depends on labor productivity C. total GDP cannot increase without increases in resource productivity levels D. all of the above E. both a and b 65. Productivity growth is important because A. it is the only way an economy can increase GDP B. a small decrease in productivity growth causes a large decline in GDP C. a large increase in productivity growth causes a small decrease in GDP D. it causes an increase in the quantity of all resources available to an economy E. it ultimately increases a nation's standard of living 66. Productivity growth averaged approximately 3 percent per year between 1948 and 1973; since that time it has averaged approximately 5 percent annually. A. True B. False 67. Over the past century in the United States, the growth of labor productivity was highest in the A. 1940s B. 1950s C. 1960s D. 1970s E. 1980s 68. Labor productivity in the United States has been A. growing at ever-increasing rates since World War II B. growing but at lower rates in the last 25 years compared to the 25 years immediately after World War II C. falling for the last 50 years D. largely unchanged over the last 50 years E. growing more rapidly in the last 50 years than in most other developed economies 69. Over the last 100 years, U.S. labor productivity grew the fastest A. during the Depression B. in the 1940s C. in the first half of the period D. during the 1960s E. during the 1980s 70. Over the last 100 years, the U.S. labor productivity growth rate experienced its largest declines A. during the Great Depression B. in the 1940s C. during the 1950s D. during the 1980s E. a and c 71. In the period 1996-2010, the annual productivity growth rate has been approximately A. 2.7 percent per year B. 3 percent per year C. 4.2 percent per year D. 5 percent per year E. 6 percent per year 72. Most economists agree that the most important factor contributing to the recent reduction in U.S. labor productivity growth rate has been the increased level of government regulation. A. True B. False 73. Which of the following would not slow down productivity growth? A. The composition of the work force changes so that more young people and fewer middle-aged people are working. B. The composition of the work force changes so that more women, who enter and leave the work force more frequently than men, are included. C. The quality of education decreases. D. Investment declines. E. Firms switch from providing services to producing goods. 74. Which of the following is not likely to cause a decrease in labor productivity? A. a decline in student achievement scores B. a service sector that is growing as a percentage of GDP C. decreased spending on research and development D. increases in capital formation E. high federal budget deficits 75. Which of the following would be likely to cause a decrease in the labor productivity growth rate? A. an increase in student achievement scores B. a service sector that is growing as a percentage of GDP C. increased spending on research and development D. increases in capital formation E. technological change 76. The process of adding more capital per worker is known as "capital deepening." A. True B. False 77. Physical capital includes all of the following except A. roads and bridges B. machinery and factories C. communications networks D. high school diploma or college degree E. a new dump truck 78. The productivity growth slowdown of the late 1970s and early 1980s may have been due, in part, to the environmental and workplace safety legislation. A. True B. False 79. Declining growth in productivity means that the standard of living has been falling over time. A. True B. False 80. The only way the standard of living can increase is for labor productivity to increase. A. True B. False 81. If labor productivity growth slows, the standard of living must decrease. A. True B. False 82. Per capita GDP in the United States has declined since 1950. A. True B. False 83. Between 1982 and 2002, U.S. GDP per capita grew at an average rate of 2.2 percent per year. A. True B. False 84. If population increases, which of the following must be true? A. GDP will increase. B. GDP per capita will fall. C. GDP must increase if the same standard of living is to be maintained. D. The labor force must increase if the same standard of living is to be maintained. E. Overall demand increases, but per capita aggregate demand remains constant. 85. Which of the following is the best indicator of the standard of living? A. nominal GDP B. real GDP C. real GDP per capita D. productivity E. productivity per unit of labor 86. If both total employment and total output always grew by 2 percent each year, what would the annual growth in labor productivity in an economy be over a decade? A. 0 percent B. 2 percent C. 10 percent D. 20 percent E. 2 percent times the size of the labor force 87. Suppose the growth rate of employment is positive but labor productivity remains unchanged. What will happen to real GDP? A. it will either decrease or remain constant B. it will decrease C. it will remain constant D. it will either increase or remain constant E. it will increase 88. An increase in labor productivity necessarily means an increase in real GDP per capita if A. real GDP increases B. the employment growth rate is greater than the population growth rate C. the employment growth rate is less than the population growth rate D. the size of the labor force remains constant E. real GDP increases more rapidly than nominal GDP 89. If per capita GDP growth exceeds labor productivity growth, A. human capital must be increasing B. the labor-capital ratio must be decreasing C. employment must be growing faster than the population D. the data are incorrect; this could not occur E. physical capital must be increasing 90. All of the following might cause an increase in economic growth, but which would be least certain to do so? A. a population increase B. an increase in the number in the labor force C. an increase in the labor force participation rate D. an increase in the resource base E. technological improvements 91. Between 1959 and 2003, the average annual growth rate of real GDP per capita in the United States was about A. 1 percent per year B. 2.2 percent per year C. 3.1 percent per year D. 4.2 percent per year E. 5 percent per year 92. In order for a society to have a rising standard of living, output per worker must grow A. more slowly than the labor force B. at the same rate as the population C. faster than the population D. more slowly than the population E. at a rate of 3 percent per year and population must grow at a rate of 5 percent per year 93. The major industrialized country with the highest level of per capita real output in 2003 was A. Canada B. the United States C. Italy D. France E. Germany 94. Since 1982, the major industrial country with the lowest growth rate in per capita GDP has been A. West Germany B. Italy C. the United States D. Great Britain E. Canada 95. Over the long run, technological change increases both labor productivity and unemployment rates. A. True B. False 96. In the long run, changing technology on average has led to A. lower employment and lower wage rates B. higher employment and lower wage rates C. lower employment with wage rates unchanged D. higher employment with wage rates unchanged E. higher incomes and more leisure time 97. Which of the following best describes the impact of technological change on labor? A. It causes unemployment in the short run and lower incomes in the long run. B. It causes unemployment in the short run and higher incomes in the long run. C. It causes unemployment in the long run and higher incomes in the short run. D. It causes unemployment in the long run and lower incomes in the short run. E. It causes unemployment and lower incomes in both the long run and the short run. 98. In the long run, the economy needs applied research, which is geared toward specific products, more than it needs basic research, which is not motivated by or directed toward manufacturing. A. True B. False 99. Basic research has less immediate payoff to society but is likely to be more important than applied research in fostering long-term growth. A. True B. False 100. Basic research seeks to answer specific questions or to apply scientific discoveries to the development of specific products. A. True B. False 101. Applied research is the search for knowledge without regard to how that knowledge will be used. A. True B. False 102. Research and development contributes most to productivity growth through its impact on the A. quantity of labor available B. quantity of capital goods available C. quality of labor available D. quality of capital goods available E. use of energy 103. Basic research A. usually has a larger immediate payoff than applied research B. is more practical than applied research C. is a search for general knowledge without a specific product or procedure in mind D. is research done by a firm to market a good E. is research done by a firm during production of a good 104. Applied research A. is designed to answer particular questions B. is more open-ended than basic research C. contributes less to visible output changes than does basic research D. is research done by a firm to market a good E. is research done by a firm during production of a good 105. The difference between basic and applied research is that A. basic research does not promote resource productivity while applied research does B. applied research does not promote resource productivity while basic research does C. basic research has less immediate payoff to society than applied research typically does D. basic research occurs in science while applied research occurs in industry E. only the government promotes basic research 106. Which of the following is an example of basic research? A. An animal test is used to determine if a product contains irritants. B. Soft-drink bottlers test consumer reactions to their advertisements. C. A statistician calculates the odds of winning a promotional sweepstakes that a company is running. D. A catalog-sales company times its operators to see how many calls each is handling per day. E. A chemist builds a mathematical model of the atmosphere of Jupiter. 107. Which of the following best defines basic research? A. the search for knowledge without regard to how that knowledge will be used B. research that is not complex since it addresses elementary questions C. research that seeks to apply scientific discoveries to the development of specific products D. the search for knowledge to solve a particular problem E. the search for a cure for skin cancer 108. The share of research and development funding supported by the federal government has increased over the past three decades. A. True B. False 109. In contrast to government research and development, private sector R&D has A. more impact on productivity, since much government R&D focuses narrowly on military applications B. more impact on productivity, since much government R&D focuses narrowly on the service sector C. more impact on productivity, since much government R&D focuses narrowly on not-for-profit activities D. less impact on productivity, since the government is more motivated and able to hire better people and facilities E. less impact on productivity, since firms tend to hold back on research when results are easily copied 110. The term industrial policy refers to A. the policy industries develop to promote growth B. industry policy related to marketing strategies C. the illegal activity that firms sometimes engage in to reduce competition D. government policy arrived at enhancing our competitiveness with foreign industry 111. Government policy that uses taxes, subsidies and regulation for the purpose of giving domestic industry an advantage, is known as A. research and development policy B. economic development policy C. industrial policy D. trade policy E. free trade 112. An increase in the amount of capital per worker is called A. capital deepening B. marginal capital C. per-worker production function D. human capital E. diminishing marginal returns from capital 113. Which of the following is the most important backbone of market exchange? A. laws B. manners C. customs D. conventions E. All the answers are equally important 114. Which of the following is not an example of an event that fosters instability? A. September 11, 2001 B. A greater threat to airport security C. The Frankfurt Book Fair where publishers from around the world gather D. Suicide bombers attacking shops and restaurants E. All of the answers foster instability 115. Education makes workers aware of the latest production techniques and more receptive to new approaches and methods. A. True B. False 116. A country that has a higher percentage of younger adults with at least a college degree is A. Norway B. Canada C. Japan D. France E. Italy 117. An example of industrial clustering is A. Hollywood stock brokerages B. Broadway casinos C. Boston theme parks D. Silicon Valley software makers E. Wall Street theaters 118. A possible downside of industrial policy is that A. the government cannot be trusted to identify emerging technologies B. markets allocate scarce resources better than governments do C. it could evolve into a government giveaway program D. money and competitive advantages could go to the politically connected E. All of the answers are correct 119. Many people believe that government should promote A. seriousness B. hard work C. greater happiness D. economic education E. wealth 120. Income and happiness are __________ related. A. negatively B. independently C. reluctantly D. positively E. Economist do not study such questions 121. In the U.S. the proportion of people who say they are happy has grown substantially after 60 years of economic growth. A. True B. False 122. People in affluent countries may not be getting any happier over time because A. people greatly value the luxuries they have and what matters is absolute income B. people begin taking luxuries for granted and income does not matter C. what matters is relative income and perceptions of luxuries do not matter D. people begin taking luxuries for granted and what matters is absolute income E. people begin taking luxuries for granted and what matters is relative income 123. People prefer to make more income than others even if that means making a lower real income. A. True B. False Test Bank for Macroeconomics: A Contemporary Introduction William A. McEachern 9781133188131, 9780538453776
Download
Close
Close
