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.17.Technological advance permits us to economize on labor, land, or even capital.18.One of the most important determinants of economic growth is the saving rate.19.Investment alone does not guarantee economic growth.20.An important link between research and development and capital investment means that when capital depreciatesover time, it is replaced with new equipment that embodies the latest technology.21.In most developed countries, property rights are effectively protected by the government; but in developing countries,such protection is not normally the case.22.Free-trade policies will tend to increase the value of total output in an economy.23.Trade can make economies more productive, even if individual enterprises don t become more efficient.24.The correlation between per capita output and the proportion of the population that is unable to read and write is small.25.Education is both a consequence of economic growth and a cause of economic growth.Multiple Choice1.John Maynard Keynes, who once said that in the long run, we are all dead, was primarily concerned witha.long-run economic growth.b.long-run price stability.c.redirecting short-run fluctuations in the business cycle.d.Keynes was equally concerned with all these issues.673 95469_24_Ch24-p657-678.qxd 16/1/07 2:55 PM Page 6742.Economists typically measure economic growth by trackinga.the employment rate.b.the unemployment rate.c.the expansion index.d.real GDP per capita.e.nominal GDP.3.Economic growth refers to a(n) in the output of goods and services in an economy.The greater the economic growth, the goods citizens and their descendants will haveto consume.a.decrease; lessb.decrease; morec.increase; mored.increase; less4.Economic growth is usually measured by the annual percent change ina.nominal GDP.b.nominal GDP per capita.c.real GDP.d.real GDP per capita.5.How much the economy can produce at its natural rate of output depends ona.technology.b.the quantity of available natural resources.c.the productivity of labor.d.the stock of available capital.e.all of the above.6.The natural level of real output in a country will tend to fall ifa.technology advances.b.an increasing fraction of the population retires.c.increased investment adds to the capital stock.d.existing supplies of natural resources are depleted.e.either b or d occurs.7.The standard of living will decline ifa.nominal GDP grows at a faster rate than real GDP.b.nominal GDP grows at a slower rate than real GDP.c.the rate of population growth exceeds the rate of growth of real GDP.d.the rate of population growth is less than the rate of growth of real GDP.8.An economy s production possibilities curve will shift outward over time ifa.technological progress occurs.b.the stock of available capital decreases.c.emigration results in a decrease in the supply of available labor.d.the productivity of labor increases.e.either a or d occurs.9.Which of the following would not result in increasing the natural rate of output in a country?a.increasing current consumption by reducing current savingb.draining swampland to allow cultivationc.improving the transportation systemd.raising the fraction of resources that the country devotes to educatione.All of the above would tend to increase the natural rate of output in a country.674 95469_24_Ch24-p657-678.qxd 16/1/07 2:56 PM Page 67510.Which one of the following will cause the production possibilities curve to shift outward?a.improved public educationb.improved health care systemsc.larger budgets for research, development, and explorationd.all of the above11.According to the Rule of 70, if a nation grows at a rate of 5 percent per year, it will take roughlyfor national income to double.a.10 yearsb.7 yearsc.70 yearsd.14 yearse.none of the above12.A country will roughly double its GDP in 10 years if its annual growth rate isa.5 percent.b.7 percent.c.10 percent.d.12 percent.e.20 percent.13.According to the Rule of 70,a.if a country is growing at 7 percent per year, its output will double in approximately 10 years.b.if a country is growing at 3.5 percent per year, its output will double in approximately 20 years.c.if a country is growing at 1 percent per year, its output will double in approximately 70 years.d.all of the above are true.e.none of the above is true.14.According to the Rule of 70, if a country s growth rate doubled, the amount of time before its output doubledwould bea.quartered.b.halved.c.doubled.d.quadrupled.15.In the long run, the most important determinant of a nation s standard of living isa.its rate of productivity growth.b.its ability to export cheap labor.c.its ability to control the nation s money supply.d.its endowment of natural resources.16.Per capita real output would tend to rise, other things being equal,a.if the labor force participation rate in the country rose.b.if the population rose.c.if the population fell and the labor force participation rate in the country fell.d.in all of the above cases.e.in none of the above cases.17.If both the capital stock and the technology in a country increased, other things being equal, the country s potentialoutput woulda.rise.b.fall.c.remain unchanged.d.change in an indeterminate direction.675 95469_24_Ch24-p657-678.qxd 16/1/07 2:56 PM Page 67618.If a country reduced its spending on education and used the resources to build capital goods, economic growth inthat countrya.would tend to rise.b.would tend to fall.c.would tend to remain the same.d.could rise, fall, or remain the same.19.Technological advances can bea.labor saving.b.capital saving.c.land (natural resource) saving.d.any of the above.20.If Goodland s population grows faster than Badland s population, but Badland s labor force participation rate isgrowing faster than Goodland s, other things being equal,a.real GDP will be growing faster in Badland.b.real GDP per capita will be growing faster in Badland.c.real GDP will be growing faster in Goodland.d.real GDP per capita will be growing faster in Goodland.e.both b and d will be true.21.If a country increased its saving rate,a.its current consumption would have to fall.b.its current consumption would have to rise.c.its future consumption possibilities will fall.d.its future consumption possibilities will rise.e.both a and d will occur.22.Which of the following statements is incorrect?a.One of the most important determinants of economic growth is a nation s saving rate.b.Injections of foreign capital from abroad may contribute to a nation s economic growth
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