Question 1

Suppose an economy uses only two inputs in production: capital and labour. The following table describes a production function, where y stands for output per worker and k is capital per worker.
a) Draw approximately this production function with y on the vertical axis.
b) Show that this production function exhibits diminishing returns to scale.
c) Suppose there are two countries, A and B. The economies of the two countries can be described by this production function. If Country A has initially a capital-labour ratio k = 0.167 and Country B has k = 0.412, show that an equal increase in capital produces more extra output in country A than in Country B.

Accepted Answer

a) Here is a graph of the given producti...

Question 2

What is the most appropriate measure of a nation's standard of living?

Accepted Answer

A)   real GDP
B)   real GDP per person
C)   nominal GDP
D)   nominal GDP per personE) A) and B)
F) B) and C)

Question 3

According to economic historian Robert Fogel, what proportion of the British population in 1780 was so malnourished that they could not perform manual labour?

Accepted Answer

A)   15 percent
B)   20 percent
C)   30 percent
D)   40 percentE) A) and C)
F) All of the above

Question 4

Other things the same, if a country increased its saving rate what would that country likely have in 40 years?

Accepted Answer

A)   higher productivity and a higher growth rate of real GDP
B)   higher productivity but not a higher growth rate of real GDP
C)   the same productivity and growth of real GDP it began with
D)   higher productivity growth rate and higher real GDPE) B) and C)
F) A) and B)

Question 5

From 2001 to 2018, what was the growth in Canadian productivity?

Accepted Answer

A)   0.7 percent
B)   1.5 percent
C)   2.0 percent
D)   2.7 percentE) A) and B)
F) A) and C)

Question 6

The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, what would we expect to happen to the growth rate in Turan?

Accepted Answer

A)   It will fall temporarily, but will return to where it was when the new owners learn how to farm.
B)   It will increase because the total amount of human capital in the country will increase as the new owners learn how to farm.
C)   It will fall and remain lower for a long time because other farmers may expect their farms to be seized as well, and therefore they do not improve their farms.
D)   It will increase because friends can better cooperate with each other, avoiding wasteful competition.E) A) and B)
F) A) and C)

Question 7

Suppose that Poland undertakes policy to increase its saving rate. What will this policy most likely do?

Accepted Answer

A)   It will have no impact on GDP growth.
B)   It will lead to somewhat higher GDP growth for a few years.
C)   It will lead to substantially higher GDP growth for a period of several decades.
D)   It will lead to a permanently higher growth rate.E) B) and C)
F) A) and D)

Question 8

If the number of workers in an economy doubled, all other inputs stayed the same, and there were constant returns to scale, what would happen to productivity?

Accepted Answer

A)   It would fall to half its former value.
B)   It would fall, but by less than half.
C)   It would stay the same.
D)   It would rise, but by less than double.E) C) and D)
F) None of the above

Question 9

What indicates greater scarcity of a natural resource?

Accepted Answer

A)   an increase in its demand
B)   a decrease in its supply
C)   an increase in its price
D)   a decrease in its stockE) A) and D)
F) None of the above

Question 10

Compare and contrast the population theories of Malthus and Kremer.

Accepted Answer

The difference is that Malthus predicted...

Question 11

Which situation is an example of the "brain drain"?

Accepted Answer

A)   A country's most highly educated workers immigrate to rich countries.
B)   A country has such a poor educational system that knowledge is lost over time.
C)   A country's population grows so fast that the educational system can't keep up.
D)   A country steals patented technology from another country.E) B) and D)
F) B) and C)

Question 12

Which country had the highest growth rate between 1900 and 2014?

Accepted Answer

A)   China
B)   Brazil
C)   Mexico
D)   the United KingdomE) B) and D)
F) None of the above

Question 13

Which of the following would be considered physical capital?

Accepted Answer

A)   the projector at a cinema
B)   milk and cheese
C)   the skills and knowledge of a chef
D)   the number of hours people spend in the gymE) A) and C)
F) All of the above

Question 14

Clive Lloyd is a professor. Which of the following is a part of his human capital?

Accepted Answer

A)   his experience in the classroom
B)   the computer he uses
C)   the software he uses to assess students' work
D)   the amount of time he spends with his studentsE) B) and D)
F) B) and C)

Question 15

In 2018, real GDP in the Kingdom of Fife was $500 billion and the population was 2 million. In 2019, real GDP was $660 billion and the population was 2.2 million. What was the approximate growth rate of real GDP per person?

Accepted Answer

A)   11 percent
B)   14 percent
C)   17 percent
D)   20 percentE) All of the above
F) C) and D)

Question 16

Investment in both human and physical capital has opportunity costs.

Accepted Answer

A) True 
 B)False

Question 17

What does diminishing returns to capital imply?

Accepted Answer

A)   Capital produces fewer goods as it ages.
B)   The value of new technology decreases over time.
C)   Increases in the capital stock eventually decrease output.
D)   Increases in the capital stock increase output by ever smaller amounts.E) B) and C)
F) B) and D)

Question 18

What is the effect of a higher saving rate in the long run?

Accepted Answer

A)   It decreases the capital stock.
B)   People must consume less in the future.
C)   It increases productivity.
D)   It leads to higher growth in real GDP.E) A) and D)
F) A) and C)

Question 19

Some economists argue that it is possible to raise the standard of living by reducing population growth. As an economist interested in incentives rather than coercion, what kind of policy would you recommend to slow population growth?

Accepted Answer

Since bearing a child has an opportunity...

Question 20

What might the African governments do to foster higher economic growth?

Accepted Answer

They could make, perhaps with outside su...

Exam 7: Production and Growth

What does diminishing returns to capital imply?

Correct Answer
verified

Which situation is an example of the "brain drain"?

Correct Answer
verified

If the number of workers in an economy doubled, all other inputs stayed the same, and there were constant returns to scale, what would happen to productivity?

Correct Answer
verified

From 2001 to 2018, what was the growth in Canadian productivity?

Correct Answer
verified

Which of the following would be considered physical capital?

Correct Answer
verified

Other things the same, if a country increased its saving rate what would that country likely have in 40 years?

Correct Answer
verified

Some economists argue that it is possible to raise the standard of living by reducing population growth. As an economist interested in incentives rather than coercion, what kind of policy would you recommend to slow population growth?

Correct Answer
verified
Since bearing a child has an opportunity...
View Answer

Clive Lloyd is a professor. Which of the following is a part of his human capital?

Correct Answer
verified

What is the effect of a higher saving rate in the long run?

Correct Answer
verified

Correct Answer
verified
a) Here is a graph of the given producti...
View Answer

Correct Answer
verified

Investment in both human and physical capital has opportunity costs.

Correct Answer
verified

Which country had the highest growth rate between 1900 and 2014?

Correct Answer
verified

What indicates greater scarcity of a natural resource?

Correct Answer
verified

According to economic historian Robert Fogel, what proportion of the British population in 1780 was so malnourished that they could not perform manual labour?

Correct Answer
verified

Compare and contrast the population theories of Malthus and Kremer.

Correct Answer
verified
The difference is that Malthus predicted...
View Answer

What is the most appropriate measure of a nation's standard of living?

Correct Answer
verified

In 2018, real GDP in the Kingdom of Fife was $500 billion and the population was 2 million. In 2019, real GDP was $660 billion and the population was 2.2 million. What was the approximate growth rate of real GDP per person?

Correct Answer
verified

Suppose that Poland undertakes policy to increase its saving rate. What will this policy most likely do?

Correct Answer
verified

What might the African governments do to foster higher economic growth?

Correct Answer
verified
They could make, perhaps with outside su...
View Answer

Exam 7: Production and Growth

What does diminishing returns to capital imply?

Correct AnswerverifiedShow Answer

Which situation is an example of the "brain drain"?

Correct AnswerverifiedShow Answer

If the number of workers in an economy doubled, all other inputs stayed the same, and there were constant returns to scale, what would happen to productivity?

Correct AnswerverifiedShow Answer

From 2001 to 2018, what was the growth in Canadian productivity?

Correct AnswerverifiedShow Answer

Which of the following would be considered physical capital?

Correct AnswerverifiedShow Answer

Other things the same, if a country increased its saving rate what would that country likely have in 40 years?

Correct AnswerverifiedShow Answer

Some economists argue that it is possible to raise the standard of living by reducing population growth. As an economist interested in incentives rather than coercion, what kind of policy would you recommend to slow population growth?

Correct AnswerverifiedSince bearing a child has an opportunity...View AnswerShow Answer

Clive Lloyd is a professor. Which of the following is a part of his human capital?

Correct AnswerverifiedShow Answer

What is the effect of a higher saving rate in the long run?

Correct AnswerverifiedShow Answer

Correct Answerverifieda) Here is a graph of the given producti...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Investment in both human and physical capital has opportunity costs.

Correct AnswerverifiedShow Answer

Which country had the highest growth rate between 1900 and 2014?

Correct AnswerverifiedShow Answer

What indicates greater scarcity of a natural resource?

Correct AnswerverifiedShow Answer

According to economic historian Robert Fogel, what proportion of the British population in 1780 was so malnourished that they could not perform manual labour?

Correct AnswerverifiedShow Answer

Compare and contrast the population theories of Malthus and Kremer.

Correct AnswerverifiedThe difference is that Malthus predicted...View AnswerShow Answer

What is the most appropriate measure of a nation's standard of living?

Correct AnswerverifiedShow Answer

In 2018, real GDP in the Kingdom of Fife was $500 billion and the population was 2 million. In 2019, real GDP was $660 billion and the population was 2.2 million. What was the approximate growth rate of real GDP per person?

Correct AnswerverifiedShow Answer

Suppose that Poland undertakes policy to increase its saving rate. What will this policy most likely do?

Correct AnswerverifiedShow Answer

What might the African governments do to foster higher economic growth?

Correct AnswerverifiedThey could make, perhaps with outside su...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Since bearing a child has an opportunity...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a) Here is a graph of the given producti...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The difference is that Malthus predicted...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
They could make, perhaps with outside su...
View Answer