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Chapter 8 Tutorial Answers

Macroeconomics – Tutorial Chapter 08

 

1. A supply factor in economic growth would be:  
A. A fall in the efficient use of resources 
B. A rise in the rate of resource depletion 
C. An increase in the quantity of labor 
D. An increase in consumption spending

 

2. Which is not a supply factor in economic growth?  
A. An efficient allocation of resources 
B. Natural resources 
C. The quantity and quality of labor 
D. Technological knowledge

 

3. Which is a demand factor in economic growth?  
A. More human and natural resources 
B. Technological progress and innovation 
C. An increase in the economy's stock of capital goods 
D. An increase in total spending in the economy

 

4.

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Assume a nation's current production possibilities are represented by the curve AB in the above diagram. Positive economic growth would best be indicated by a:  
A. Shift in the curve from AB to CD 
B. Shift in the curve from AB to EF 
C. Movement from point 1 to point 2 
D. Movement from point 3 to point 4

 

5. Refer to the above diagram. If the production possibilities curve for an economy is at AB but the economy is operating at point 4, the reasons are most likely to be because of:  
A. Supply and environmental factors 
B. Demand and efficiency factors 
C. Labor inputs and labor productivity 
D. Technological progress

6. Refer to the above diagram. If there is a movement away from the full employment of resources in an economy with production possibilities curve AB, this can be shown by:  
A. A shift of the curve from AB to CD 
B. A movement from point 3 to point 1 
C. A movement from point 2 to point 4 
D. Point 5 in the diagram

 

7. Refer to the above diagram. Negative economic growth can be shown by a shift of:  
A. EF to AB 
B. EF to CD 
C. AB to CD 
D. CD to AB

 

8. Refer to the above diagram. A shift in the production possibilities curve from AB to CD is most likely due to:  
A. The use of the economy's resources in an efficient way 
B. An increase in the spending of business and consumers 
C. An increase in government purchase of the economy's output 
D. An increase in the quantity and quality of labor resources

 

9. Real GDP or total output in any year is equal to:  
A. Labor inputs divided by resource outputs 
B. Labor productivity multiplied by real output 
C. Worker-hours multiplied by labor productivity 
D. Worker-hours divided by labor productivity

 

10. If total output in an economy is $600,000 and the total work-hours in the economy are 40,000, labor productivity is:  
A. $7 
B. $9 
C. $13 
D. $15

 

11. Which will NOT increase the average productivity of labor?  
A. An increase in the stock of real capital 
B. Improvements in the education and health of the labor force 
C. Technological progress as reflected in more efficient capital goods 
D. An increase in the size of the labor force

 

12. The basic determinants of labor inputs (total hours of work) include:  
A. Economies of scale and technological advance 
B. Education and training, and allocative efficiency 
C. The size of the labor force and average hours of work 
D. The quantity and quality of capital and human resources

 

13. Negative economic growth can be shown as a:  
A. Rightward shift of the production possibilities curve 
B. Leftward shift of the production possibilities curve 
C. Movement from a point on the production possibilities curve to one outside of it 
D. Movement from one point on the production possibilities curve to another point on the curve

 

14. Assume that an economy has 1500 workers, each working 2000 hours per year. If the average real output per worker-hour is $20, then total output or real GDP will be:  
A. $3 million 
B. $30 million 
C. $45 million 
D. $60 million

 

15.

The table below shows the quantity of labor (measured in hours) and the productivity of labor (measured in real GDP per hour) in a hypothetical economy in three different years. 

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Refer to the above table. Between Year 2 and Year 3, the productivity of labor:  
A. Increased by 5 percent and the quantity of labor increased by 10 percent 
B. Increased by 2 percent and the quantity of labor increased by 10 percent 
C. Remained the same, but the quantity of labor increased by 5 percent 
D. Remained the same, but the quantity of labor increased by 10 percent

 

16. Refer to the above table. Between Year 1 and Year 2, real GDP increased by:  
A. 1.5 percent 
B. 2.5 percent 
C. 5.0 percent 
D. 6.0 percent

 

17. Refer to the above table. In Year 2, the economy's real GDP was:  
A. $400,000 
B. $420,000 
C. $462,000 
D. $500,000

 

18. Refer to the above table. Between Year 1 and Year 2, the productivity of labor increased by:  
A. 1.0 percent 
B. 3.0 percent 
C. 5.0 percent 
D. 7.0 percent

 

19. Refer to the above table. What explains the increase in real GDP from Year 1 to Year 3? An increase in:  
A. Labor productivity between Year 2 and Year 3 
B. The quantity of labor between Year 1 and Year 2 
C. Labor productivity between Year 1 and Year 2 and an increase in the quantity of labor between Year 2 and Year 3 
D. Labor productivity between Year 2 and Year 3 and an increase in the quantity of labor between Year 1 and Year 2

 

20. Refer to the above table. Between Year 2 and Year 3, real GDP increased by:  
A. 2 percent due to 2 percent increase in labor productivity 
B. 5 percent due to 5 percent increase in labor productivity 
C. 10 percent due to 5 percent increase in the quantity of labor 
D. 10 percent due to 10 percent increase in the quantity of labor

 

21. What economic concept would be most closely associated with a situation where an aluminum plant uses extensive computerization on the production line to reduce per-unit costs of production?  
A. Infrastructure 
B. Human capital 
C. Network effects 
D. Economies of scale

 

22. One of the distinguishing features of the New Economy is:  
A. Decreasing returns to scale in manufacturing 
B. The need for less specialized inputs in manufacturing 
C. Technological progress from the investment in the space program 
D. Technological progress from the microchip and information technology

 

23. If there is an increase in labor productivity:  
A. The production possibilities curve would shift outward and the long-run aggregate supply curve would shift rightward 
B. The production possibilities curve would shift inward and the long-run aggregate supply curve would shift leftward 
C. The production possibilities curve would shift outward and the long-run aggregate supply curve would shift leftward 
D. The production possibilities curve would shift inward and the long-run aggregate supply curve would shift rightward

 

24. The knowledge and skills that make a productive worker are referred to by economists as:  
A. Human capital 
B. Increasing returns 
C. Resource allocation 
D. Simultaneous consumption

25. If the annual growth in a nation's productivity is 2.5 percent rather than 1.5 percent, then the nation's standard of living will double in about:  
A. 20 years 
B. 28 years  
C. 46 years 
D. 56 years

 

26. A source of increasing returns to scale in the New Economy is:  
A. Less specialized inputs 
B. Less investment in technology 
C. Simultaneous consumption 
D. The labor-force participation rate

 

27. Increasing returns would be a situation where a firm increases its workforce and other inputs by:  
A. 10 percent and its output increases by 5 percent 
B. 5 percent and its output increase by 10 percent 
C. 8 percent and its output increases by 8 percent 
D. 12 percent and its output increases by 10 percent

 

28. Increases in the value of the product to each user, including existing users, as the total number of users rises is called:  
A. Network effects 
B. Simultaneous consumption 
C. Learning by doing 
D. The spreading of development costs

 

29. A major argument for economic growth is that it:  
A. Creates an equal distribution of income 
B. Protects common property resources 
C. Leads to a higher standard of living 
D. Reduces the amount of taxation

 

30. One of the macroeconomic implications of the New Economy is that it can achieve:  
A. A higher rate of frictional unemployment 
B. A lower natural rate of unemployment 
C. A lower rate of simultaneous consumption 
D. A higher rate of inflation

 

31. A skeptic of the New Economy would argue that it is:  
A. A short-run trend 
B. A network effect 
C. The result of learning by doing 
D. Designed to lower the natural rate of unemployment

 

 

32. Does the New Economy mean the business cycle is dead?  
A. Yes, the faster rate of productivity growth will eliminate recession 
B. Yes, the changes in technology have a compound, positive effect on the economy 
C. No, the trend line for economic growth is just steeper, but there can still be economic downturns 
D. No, the fact there are many start-up firms means that there will be more bankruptcies that will hurt the economy

 

33. The movement of workers from lower productivity jobs to higher productivity jobs would be an example of a(n):  
A. Technological advance 
B. Network effects 
C. Simultaneous consumption 
D. Improved resource allocation

 

34. "Show me a pastoral society with an untouched environment, an abundance of leisure, and nonsecular values, and I will show you an underdeveloped, poverty-ridden country." This statement is most likely to be made by a(n):  
A. Advocate of learning by doing 
B. Advocate of network effects 
C. Proponent of economic growth 
D. Critic of economic growth

 

35. An example of public investment in infrastructure would be:  
A. A construction company 
B. An oil and gas pipeline 
C. A manufacturing plant 
D. A waste water treatment system

 

36. One of the main arguments against further growth for industrialized nations focuses on the problem of:  
A. Technological knowledge 
B. Environmental quality 
C. Feedback mechanisms 
D. Infrastructure

 

37. One of the basic economic defenses of economic growth rests on the conclusion that:  
A. Growth makes workers less obsolete and more secure in employment 
B. Growth reduces the cost to society of "common property" resources 
C. Growth makes the gap between unlimited wants and scarce resources less acute 
D. A growth-oriented society confers a "work and look to the future" attitude on the members of society

 

 

 

 

38. If a nation's real GDP is growing 4 percent a year on average, the real GDP in the nation will double in about:  
A. 10.5 years 
B. 17.5 years 
C. 24.2 years 
D. 29.2 years

 

39. An antigrowth view would be that there may be a significant tradeoff between productivity and:  
A. Education 
B. Employment 
C. Economies of scale 
D. The quality of life

 

40, Nation A has a sustained growth rate of 5 percent. Nation B has a sustained growth rate of 2 percent. Over 70-years, real GDP will double in:  
A. 7 years in Nation A and 21 years in Nation B 
B. 14 years in Nation A and 21 years in Nation B 
C. 14 years in Nation A and 35 years in Nation B 
D. 21 years in Nation A and 35 years in Nation B

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