Question 1

Which of the following is the best definition of productivity in the context of macroeconomics?

Accepted Answer

The quantity of goods and services produced from each hour of a worker’s time.

Question 2

According to the concept of diminishing returns, what happens when an economy with a high level of capital increases its capital stock further?

Accepted Answer

Each additional unit of capital leads to a small increase in output.

Question 3

If a country increases its saving rate, what is the most likely long-run effect according to the theory of diminishing returns?

Accepted Answer

A higher level of productivity and income, but not a permanently higher growth rate.

Question 4

Which of the following is NOT a determinant of productivity?

Accepted Answer

The inflation rate

Question 5

Suppose Country A has a lower initial capital stock than Country B. According to the catch-up effect, which country is likely to experience faster growth if both increase their saving rates?

Accepted Answer

Country A, because it starts off poor and benefits more from additional capital.

Question 6

Which of the following policies is most likely to promote long-run economic growth in a poor country?

Accepted Answer

Offering tax incentives for investment by foreign firms.

Question 7

What is the main reason why economists are generally not concerned that natural resources will limit economic growth?

Accepted Answer

Technological progress and substitution have kept resource prices from rising over time.

Question 8

Which of the following best describes the 'brain drain' phenomenon?

Accepted Answer

The immigration of highly educated workers from poor to rich countries.

Question 9

How does political instability typically affect economic growth?

Accepted Answer

It threatens property rights and discourages investment.

Question 10

Which of the following is an example of a positive externality associated with education?

Accepted Answer

Increased productivity that benefits society as a whole.

Question 11

Suppose a country implements policies that improve health and nutrition. What is the likely effect on economic growth?

Accepted Answer

Higher productivity and faster economic growth.

Question 12

Which of the following statements about free trade is most accurate?

Accepted Answer

Free trade can promote economic growth similar to a major technological advance.

Question 13

If a country experiences rapid population growth, what is a possible negative effect according to the theory of capital dilution?

Accepted Answer

Lower productivity because capital is spread more thinly among workers.

Question 14

Which of the following best explains why technological knowledge is considered a public good?

Accepted Answer

It can be used by one person without reducing its availability to others.

Question 15

Given the following growth rate formula, calculate the approximate number of years it takes for an economy to double its real GDP per person if the growth rate is 2% per year: $$ t = \frac{70}{g} $$ where $$ t  is $$the doubling time and $$ g  is $$the growth rate.

Accepted Answer

$$ t = \frac{70}{2} = 35 $$ years

Question 16

Which of the following is a likely outcome if a country adopts the Universal Replicator technology described in the classroom activity?

Accepted Answer

The price of goods would likely fall due to increased supply.

Question 17

Which of the following best describes the relationship between health and economic growth?

Accepted Answer

There is a virtuous cycle where better health promotes growth and growth improves health.

Question 18

Which of the following is an example of foreign direct investment?

Accepted Answer

A Canadian company builds and operates a factory in Mexico.

Question 19

According to Thomas Robert Malthus, what was the main consequence of unchecked population growth?

Accepted Answer

It would put stress on the economy’s ability to produce food, dooming humans to remain in poverty.

Production and Economic Growth: Determinants, Policies, and Global Perspectives

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