Self-Check Quiz/Self-Test Quiz

### The key statistic used to measure economic growth is:

real GDP/population size.

### In the U.S., GDP per capita is ________ five times what it was in 1900 causing a ______ in the standard of living.

over; large increase

70 years.

### Why is the average worker today produces far more than his or her counterpart a century ago?

The modern worker has access to the century's accumulation of technical progress, and more physical capital and human capital as compared to his or her 19th century counterpart.

### Which of the following is the most important cause of productivity growth in the U.S.?

progress in technology

### When the amount of human capital and technology stays fixed and workers are given more and more physical capital, then output:

rises at a decreasing rate, since adding more capital results in diminishing returns when labor and technology are fixed.

### Diminishing returns to physical capital may disappear if:

technology improves.

### Real GDP per worker in the country of Esperano has grown at 4% per year for the last 30 years. The labor force has grown at 1% per year and the quantity of physical capital has grown at 5% per year A 1% increase in average physical capital per worker (all other things being equal) raises productivity by 0.5%. Average education has not changed. How much has productivity grown?

Output per worker has grown by 4%, because output has grown by 4% and labor has grown by 1%.

### Real GDP per worker in the country of Esperano has grown at 4% per year for the last 30 years. The labor force has grown at 1% per year and the quantity of physical capital has grown at 5% per year A 1% increase in average physical capital per worker (all other things being equal) raises productivity by 0.5%. Average education has not changed. How much has growing physical capital per worker contributed to productivity growth?

2.5%: Physical capital has grown by 5%. This increase in capital raises output per worker, or productivity, by 5% x 0.5 = 2.5%.

### Real GDP per worker in the country of Esperano has grown at 4% per year for the last 30 years. The labor force has grown at 1% per year and the quantity of physical capital has grown at 5% per year A 1% increase in average physical capital per worker (all other things being equal) raises productivity by 0.5%. Average education has not changed. How much has technological progress contributed to productivity growth?

1.5%: The growth in physical capital per worker has contributed 2.5% to the 4% total productivity growth. 4% - 2.5% = 1.5%. So 1.5% of the growth is due to technology. Human capital did not contribute to growth because it did not change.

### Increasing a country's natural resources should ____________ output, and the impact of this factor should be considered a ______ important source of productivity growth as compared to human capital.

increase; less (Increasing natural resources increase output and natural resources are less important source of productivity growth.)

### The U.S. became the world's leading economy in part because:

American firms were among the first to make research and development a part of their operations.

### The prime reason most countries grow is that they have ________ by drawing upon ________.

high rates of investment; high rates of domestic savings

### The convergence hypothesis states that relatively poor countries:

should have higher rates of per capita GDP growth than rich countries do.

### The empirical evidence for the convergence hypothesis:

holds true for wealthy nations.

### Long-run economic growth depends primarily on:

productivity. Per capita output rises when each worker can produce more goods and services.

### A sustained increase in per capita GDP arises from:

higher productivity. Additions to the stock of physical and human capital will expand the productive capacity of the economy.

### To the extent that the U.S. workforce is becoming more educated,

there is an increase in the amount of human capital. Increases in human capital enhance productivity.

### Which of the following is NOT a determinant of productivity?

the level of wages, NOT the level of technology, or the amount of physical/human capital per worker.

### As more physical capital is added to the production process while the number of workers remains constant,

the amount of output per worker increases, but at a decreasing rate.

### Total factor productivity is a measure of:

technological progress. Total factor productivity cannot be observed directly, but it is calculated as the residual component of growth not explained by observable factors.

### The inputs of the aggregate production function are:

physical capital per worker, human capital per worker, and technology.

### The evidence seems to suggest that innovations in information technology made the most significant contributions to productivity:

when they changed the way office work is done.

### In order to increase its stock of physical capital, an economy must:

engage in investment spending. Investment spending provides a way for goods that are produced today to be devoted to creating higher output in the future.

### A healthy banking system can contribute to the growth of an economy by:

providing a way for savings to be channeled into business investment.

### Education provided for the citizens of an economy will enhance economic growth by:

adding to the stock of human capital.

### Governments that provide and maintain a good infrastructure for economic activity can enhance productivity and growth.

One of the key elements of good infrastructure is public health.

### East Asia's "economic miracle" has been attributed to all of the following:

its very good basic education, its very high savings rates, and its substantial technological progress, EXCEPT important discoveries of new sources of natural resources.

### Those who question whether long-run economic growth is sustainable emphasize that:

whether it can continue in the face of the limited supply of natural resources and the impact of economic growth on the environment.

Example: