Question 1

If an economy maintains a small rate of growth $$g$$ for a long period of time, then the size of the economy will:

Accepted Answer

increase by a large amount, due to compounding growth.

Question 2

Which of the following is NOT a major reason for differences in living standards across countries, according to economic growth theory?

Accepted Answer

Differences in the amount of government spending.

Question 3

Suppose a country’s real GDP grows from $$20$$ billion in 2018 to $$22$$ billion in 2019. What is the GDP growth rate during that period?

Accepted Answer

$$5\%$$

Question 4

According to the Production Possibilities Frontier (PPF) model, the cost of a higher investment in future growth is:

Accepted Answer

a lower current output of consumer goods.

Question 5

Which of the following is an example of investing in human capital?

Accepted Answer

A student attending college to learn new skills.

Question 6

If the productivity of workers in a country doubles, what is the most likely effect on the country’s output, assuming all else equal?

Accepted Answer

Output will double.

Question 7

Which of the following is NOT an example of productivity growth?

Accepted Answer

A company hires more workers to increase total output.

Question 8

Suppose the price level increases from $$P_1 to$$ $$P_2$$ and the nominal wage remains constant. What happens to the real wage?

Accepted Answer

The real wage decreases.

Question 9

A country increases its investment in physical capital per worker. According to economic growth theory, what is the most likely long-term effect?

Accepted Answer

A temporary increase in output per worker, with diminishing returns over time.

Question 10

Refer to the following scenario: A hair salon owner adopts a new scheduling system that allows her to serve more customers each day with the same number of employees. This is an example of:

Accepted Answer

An increase in productivity.

Question 11

If a country moves from a point inside its PPF to a point on the PPF, what does this represent?

Accepted Answer

An increase in resources or improved efficiency.

Question 12

Which of the following best describes the opportunity cost of investing in more capital goods today?

Accepted Answer

Fewer consumer goods available today.

Question 13

Suppose a country’s GDP per capita increases, but the total population also increases rapidly. What is the most likely effect on the standard of living?

Accepted Answer

The standard of living may not increase if GDP per capita does not rise faster than population.

Question 14

Which of the following is an example of technological progress?

Accepted Answer

A factory replaces old machines with new, more efficient ones.

Question 15

If a country’s production possibilities curve shifts outward, what does this indicate?

Accepted Answer

An increase in the country’s productive capacity.

Question 16

Which of the following is most likely to lead to sustained long-term economic growth?

Accepted Answer

Continuous improvements in technology.

Question 17

If a country’s GDP increases but its population grows even faster, what happens to GDP per capita?

Accepted Answer

GDP per capita decreases.

Question 18

Which of the following best illustrates diminishing returns to capital?

Accepted Answer

Each additional unit of capital increases output by less than the previous unit.

Question 19

Suppose a country’s current production possibilities are represented by the curve $$B in $$the PPF diagram. An increase in resources would be shown by:

Accepted Answer

A shift in the curve from $$B to$$ $$A.$$

Question 20

Which of the following is the best example of human capital investment?

Accepted Answer

A worker attending a training seminar to learn new skills.

Economic Growth and Productivity: Key Concepts and Applications

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