Practice Chapter 11 – Economic Growth and the Wealth of Nations

Multiple Choice

Identify the choice that best completes the statement or answers the question.

1.      Economic growth is defined as:

a.        the percent change of gross domestic product (GDP).

b.        the percent change of real GDP.

c.        the percent change of real per capita GDP.

d.        the percent change of per capita GDP.

e.        the percent change of population.

2.      According to the textbook, which of the following countries is not considered a “wealthy nation”?

a.        Denmark

b.        Israel

c.        Germany

d.        Liberia

e.        the United States

3.      Higher rates of economic growth are negatively correlated with:

a.        better education.

b.        better health care.

c.        shorter life expectancy.

d.        the number of physicians per capita.

e.        adult literacy.

4.      Average world income began to increase rapidly during:

a.        the Enlightenment.

b.        the Dark Ages.

c.        the Second World War.

d.        the War of the Ring.

e.        the Industrial Revolution.

5.      If an economy experiences economic growth, does that mean that everyone in that economy will be better  off?

a.        No, it means that the average person is better off.

b.        Yes, that is the definition of economic growth.

c.        Yes, but only if there is little immigration during that time period.

d.        No, economic growth is not correlated with standards of living.

e.        Yes, but only if nominal gross domestic product (GDP) increases.

6.      In 2010, U.S. gross domestic product (GDP) was roughly $14.6 trillion. Given that the U.S. population was roughly 308 million people, per capita GDP in the United States in 2010 was roughly:

a.    $4,760.

b.    $0.22.

c.    $47,403.

d.    $22,000.

e.    $475,990.

7.      From 2011 to 2012, U.S. real GDP increased by 2.2% and the U.S. population grew by 1%. Therefore, per capita real GDP in the United States increased by:

a.    2.8%.

b.    1.2%.

c.    3.8%.

d.    1.8%.

e.    5.4%.

8.      Nominal gross domestic product (GDP) is a poor measure of economic growth because:

a.        it does not count investment by private businesses.

b.        it overstates the importance of consumer spending.

c.        it does not include government spending.

d.        it ignores imports and exports.

e.        it does not consider changes in prices or population growth.

9.      Annual real per capita gross domestic product (GDP) in the United States was roughly $44,000 in 2000. If it grew by 3% the following year, by 2001 the annual real per capita GDP would be:

a.    $57,200.

b.    $42,718.

c.    $33,846.

d.    $45,320.

e.    $1,320.

10.      From 2009 to 2010, nominal gross domestic product (GDP) in the United States grew by 3.8%. Given that prices increased by 1% and the population grew by 1%, we know that per capita real GDP grew by:

a.    3.8%.

b.    1.8%.

.      2.8%.

d.    4.8%.

e.    5.8%.

11.      From 2009 to 2010, nominal gross domestic product (GDP) in the United States grew by 3.8%. Given that prices increased by 1% and per capita real GDP grew by 1.8%, we know that the population grew by:

a.    2%.

b.    1.8%.

c.    1%.

d.    4.8%.

e.    5.8%.

12.      In 2010, real gross domestic product (GDP) in the United States was roughly $14.6 trillion. In 2011, real GDP      in the United States was roughly $15.1 trillion. Therefore, between 2010 and 2011, real GDP grew by:

a.    4.3%.

b.    3.4%.

c.    3.3%.

d.    4.5%.

e.    0.5%.

13.      In 2010, per capita real gross domestic product (GDP) in the United States was roughly $46,000. In 2011, per capita real GDP in the United States was roughly $48,400. Therefore, between 2010 and 2011, the rate of economic growth in the United States was:

a.    2.5%.

b.    2.4%.

c.    4.9%.

d.    5.2%.

e.    0.5%.

14.      From 2009 to 2010, per capita real gross domestic product (GDP) in the United States grew by 1.8%. Given  that prices increased by 1% and the population grew by 1%, we know that nominal GDP grew by:

a.    4.8%.

b.    1.8%.

c.    2.8%.

d.    3.8%.

e.    5.8%.

15.      In 2009, per capita real gross domestic product (GDP) in Croatia was $10,059.68. By 2010, it had increased      to $10,257.71. At what rate did Croatia’s economy grow in that time?

a.    1.97%

b.    1.93%

c.    2.08%

d.    4.54%

e.    3.33%

16.      If you attempted to determine  if the standard  of living of a country has increased by looking only at changes    in its nominal gross domestic product (GDP), what would you be missing?

a.        The fact that nominal GDP includes all economic activity, including sales of used goods and illegal goods

b.        The fact that nominal GDP only considers changes in the price level but ignores changes in population

c.        The fact that an increase in nominal GDP normally means that standards of living   are falling, not rising

d.        The fact that, in the long run, nominal GDP is the best measure of overall economic growth

e.        The fact that an increase in nominal GDP does not necessarily mean that standards    of living are rising, due to changes in prices and the population

17.      If your income increases at a rate of 2% per year, how long will it take to double your income?

a.        10 years

b.        25 years

c.        35 years

d.        50 years

e.        75 years

18.      James has worked for the same company his entire life. His current income is $100,000 per year. When he       was originally hired, he made $50,000 per year. The company has given James a consistent raise of 2% every year. How long has James been with the company?

a.        10 years

b.        25 years

c.        35 years

d.        50 years

e.        75 years

19.      From 2006 to 2010, per capita real gross domestic product (GDP) in China grew an average of 10.62% per  year. At that rate, according to the Rule of 70, in roughly how many years will Chinese per capita real GDP double in size, beginning in 2006?

a.        7.4 years

b.        5.9 years

c.        8.1 years

d.        6.6 years

e.        9.9 years

20.      From 2006 to 2010, per capita real gross domestic product (GDP) in the Philippines grew an average of 3.16% per year. At that rate, according to the Rule of 70, in roughly how many years will the Filipino economy double in size?

a.        21 years

b.        12 years

c.        22 years

d.        45 years

e.        33 years

21.      An increase in   would lead to an increase in long-run economic growth.

a.        consumer spending and borrowing

b.        government taxes and fees

c.        resources and technology

d.        imports and exports

e.        prices and interest rates

22.      Resources are:

a.        the output that firms produce.

b.        inputs used to produce goods and services.

c.        the technology that firms use to make things.

d.        the institutions that encourage efficiency.

e.        the cost of producing goods and services.

23.      Which of the following are the three major categories of resources?

a.        physical capital, technology, institutions

b.        land, labor, technology

c.        institutions, human capital, land

d.        natural resources, physical capital, human capital

e.        labor, physical capital, technology

24.      Which of the following would be classified as a natural resource?

a.        obtaining a college degree

b.        a factory

c.        coal

d.        a loaf of bread

e.        wireless networking equipment

25.      Lauren owns a bakery. She wants to increase her daily production of baked goods, so she knows she needs to acquire more resources. Which of the following actions would represent an increase in the physical capital resource at her bakery?

a.        moving into a larger space

b.        increasing employee training

c.        hiring more employees

d.        buying better-quality ingredients

e.        hiring an accountant to handle payroll

26.      Which of the following would be classified as human capital?

a.        obtaining a college degree

b.        a factory

c.        coal

d.        a loaf of bread

e.        wireless networking equipment

27.      Steve owns a bike shop. He wants to increase the number of bikes he sells each month, so he knows he needs    to acquire more resources. Which of the following actions would represent an increase in the human capital resource at his bike shop?

a.        purchasing more bikes for his showroom

b.        increasing the training for his employees

c.        increasing the hours of operation

d.        increasing the size of his shop

e.        buying more bike-repair equipment

28.      Nathan owns a coffee shop. He wants to increase the weekly number of coffee drinks he sells, and he wants to   use a technological advance to do so.   would represent a technological advance at his coffee shop.

a.        An increase in the number of employees

b.        An improvement in the quality of coffee drinks he serves

c.        An increase in the number of tables and chairs for his customers

d.        Acquiring a new espresso machine that can prepare coffee drinks faster than his current model

e.        A larger building

29.      As they relate to economic growth, institutions are:

a.        resources, like labor and capital, for example.

b.        wealth, income, and prices.

c.        different levels of government: federal, state, and local.

d.        personal relationships between members of a society.

e.        significant practices, relationships, or organizations in society.

30.      In 1950, residents in Liberia were wealthier than those in Taiwan. Today, per capita gross domestic product (GDP) in Taiwan is more than 20 times that of Liberia. Which of the following best explains why Taiwan is  now so much wealthier than Liberia?

a.        Taiwan is a very large country with lots of resources, while Liberia is very small.

b.        Liberia lacks the sort of institutions that promote growth that Taiwan has.

c.        Taxes in Liberia are very high and prevent the economy from growing.

d.        All production in Taiwan is managed by the government, while in Liberia, the free market allocates resources.

e.        Liberia does not trade with other countries, while Taiwan has many trading partners.

31.      Which of the following is an example of an institution that promotes economic growth?

a.        private property rights

b.        bartering as a means of trade

c.        high barriers to international trade

d.        constant war and conflict

e.        collective property ownership

32.      Beginning in the late 1970s, economic reform in China allowed farmers, for the first time, to keep a portion         of their crops and to sell them to others. Previously, all food was collectively farmed and shared. How did this basic reform improve China’s economic growth?

a.        It gave local governments an incentive to tax farmers.

b.        It gave farmers an incentive to be more productive.

c.        It gave farmers an incentive to work less.

d.        It gave the national government an incentive to import food.

e.        It gave consumers an incentive to eat less.