ch. 16 macroeconomics

1. When a country's real GDP is increasing at a faster rate than its population, a. per capita GDP will be rising.
b. per capita GDP will be falling.
c. per capita GDP will remain constant.
d. none of the above.
Click the card to flip 👆
1 / 18
Terms in this set (18)
1. When a country's real GDP is increasing at a faster rate than its population, a. per capita GDP will be rising.
b. per capita GDP will be falling.
c. per capita GDP will remain constant.
d. none of the above.
a. per capita GDP will be rising.
2. The rule of 70 is
a. a formula used to determine the number of years it takes for something to double at a given growth
rate.
b. a theory explaining why countries tended to grow more rapidly during the 1970s.
c. the principle, that for growth, a country needs government spending of at least 70 percent of GDP.
d. a formula to compute the change in GDP that will occur as investment rises.
a. a formula used to determine the number of years it takes for something to double at a given growth
rate.
3. A 2 percent growth rate will bring about a doubling of real GDP in about how many years? a. 1
b. 2 c. 35 d. 70
c. 35
4. A 7 percent growth rate will bring about a doubling of real GDP in about how many years? a. 1
b. 7 c. 10 d. 70
c. 10
5. The major sources of economic growth are
a. gains from trade, entrepreneurial discovery, and investment in physical and human capital. b. price controls, heavy regulations, and high inflation.
c. tariffs to protect domestic industries from foreign competition and budget deficits.
d. a good climate, high levels of foreign aid, and abundant natural resources.
a. gains from trade, entrepreneurial discovery, and investment in physical and human capital.
6. Trade is a source of economic growth and prosperity because it
a. moves goods, services, and resources from people who value them less to people who value them
more.
b. helps trading partners achieve larger outputs through division of labor, specialization, and adoption
of methods of mass production.
c. serves as a zero-sum game in which the gains to one trading partner are offset by losses to the other
trading partner.
d. both a and b, but not c.
d. both a and b, but not c.
7. Which of the following will be required for a low-income country to move up the income ladder and achieve high-income status?
a. rapid growth of the money supply to increase inflation and prices
b. restrictions limiting the import of goods from other nations
c. high tax rates to support a large government sector d. a high rate of sustained economic growth
d. a high rate of sustained economic growth
8. Which of the following will most likely contribute to the growth of a country? a. secure property rights and low marginal tax rates
b. price controls that keep the cost of agricultural products low
c. rapid monetary growth
d. exchange rate controls and export restrictions
a. secure property rights and low marginal tax rates
9. Which of the following is a true statement with regard to competitive markets?
a. Self-interested individuals do not promote the general welfare in competitive markets, only in regu-
lated markets.
b. Competition promotes prosperity best when price controls are implemented.
c. Policies that make it easy to enter and exit business promote competition and economic progress.
d. All of the above are correct.
c. Policies that make it easy to enter and exit business promote competition and economic progress.
10. Which of the following is not one of the major sources of economic growth? a. a large government sector
b. investment in physical and human capital
c. advancements in technology
d. institutions and policies that improve economic efficiency
a. a large government sector
11. How do high tariffs and other restraints on international trade affect the prosperity of a nation? a. They increase domestic employment and thereby promote the growth of real GDP. b. They prevent the nation from fully realizing potential gains from specialization, exchange, and com- petition, thereby reducing economic growth. c. They tend to reduce rent-seeking and lobbying by producers and thereby promote economic growth. d. Both a and c are correct.b. They prevent the nation from fully realizing potential gains from specialization, exchange, and com- petition, thereby reducing economic growth.12. If the political leaders of a country wanted to promote economic growth, which of the following policy alternatives would be most effective? a. price controls in order to keep the price of food low b. expansionary monetary policies designed to increase the rate of inflation c. increasing marginal tax rates in order to increase government subsidies and transfers d. elimination of price controls and trade restraints and establishment of a monetary policy consistent with long-run price stability (a low rate of inflation)d. elimination of price controls and trade restraints and establishment of a monetary policy consistent with long-run price stability (a low rate of inflation)13. Which of the following is not a government policy that can enhance economic growth? a. having free international trade b. keeping marginal tax rates low c. adopting regulations fixing interest rates at low levels d. protecting and enforcing private property rights and contractsc. adopting regulations fixing interest rates at low levels14. A "stable monetary environment" is used to describe monetary policy consistent with a. keeping the money income of citizens constant while population grows. b. keeping the rate of inflation low. c. minimizing the year-to-year fluctuations in the inflation rate. d. both (b) and (c).d. both (b) and (c).15. The most important factor for producing long-run economic growth is a. abundant natural resources. b. foreign aid. c. good policies and institutions. d. slow population growth.c. good policies and institutions.16. The poor economic performance of countries located in tropical areas is due to a. their hot climate. b. poor institutional quality in these countries. c. a lack of natural resources. d. not enough foreign aid.b. poor institutional quality in these countries.17. Individuals are more likely to engage in productive activities when institutions and policies a. create a fair and unbiased judicial system. b. provide for monetary stability. c. restrict the ability of government to transfer wealth through taxation and regulation. d. All of the above.d. All of the above.18. (I) When a country's institutions and policies provide secure property rights, a fair and balanced judicial system, monetary stability, and effective limits on government's ability to transfer wealth through taxa- tion and regulation, creative individuals are more likely to engage in product development, investment, and other productive activities. (II) When a country's legal and regulatory environment fails to protect property rights and is often used to favor some at the expense of others, individuals are instead more likely to engage in attempts to manipulate the political and legal process in order to plunder wealth from others. a. I is true, II is false. b. I is false, II is true. c. Both I and II are true. d. Both I and II are false.c. Both I and II are true.