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Test Bank For Modern Principles of Economics 4th Edition Tyler Cowen Alex Tabarrok
Test Bank For Modern Principles of Economics 4th Edition Tyler Cowen Alex Tabarrok
Test Bank For Modern Principles of Economics 4th Edition Tyler Cowen Alex Tabarrok
3. Which statement best describes the cross-country evidence on the relationship between
a nation's GDP per capita and standard measures of societal well-being?
A) GDP per capita is negatively related to measures of societal well-being.
B) GDP per capita is positively related to measures of societal well-being.
C) There is no relationship between GDP per capita and measures of societal
well-being.
D) The relationship between GDP per capita and societal well-being is positive at
times and negative at times.
4. There is:
A) a strong positive correlation between per capita GDP and infant survival.
B) a weak positive correlation between per capita GDP and infant survival.
C) no correlation between per capita GDP and infant survival.
D) a weak negative correlation between per capita GDP and infant survival.
5. In general, increases in a country's wealth will cause infant survival rates to:
A) increase.
B) decrease.
C) remain unchanged.
D) become unpredictable.
6. Every year, 1.8 million children in poor countries die of diarrhea. What is most effective
in preventing these deaths?
A) government subsidies
B) political reform
C) economic growth
D) humanitarian aid
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7. A country's GDP per capita and infant survival rates usually are:
A) not correlated.
B) somewhat correlated.
C) strongly correlated.
D) correlated only in poor countries.
8. Piped water and flush toilets together can reduce infant mortality from diarrhea by
approximately:
A) 20%.
B) 40%.
C) 60%.
D) 70% or more.
9. The correlation between infant mortality and real GDP per capita is:
A) zero.
B) positive.
C) negative.
D) unpredictable.
11. When economists speak of “long-run economic growth,” they mean increasing the:
A) real GDP of a country.
B) per capita real GDP of a country.
C) geographic size of a country.
D) population of a country.
12. For most of recorded human history, real GDP per capita has:
A) increased at a rapid rate.
B) increased at a modest rate.
C) remained about the same.
D) decreased at a modest rate.
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13. Beginning in the _____ century, economic growth became a clear trend in parts of the
world.
A) sixteenth
B) seventeenth
C) eighteenth
D) nineteenth
14. If real GDP per capita in a country was $14,000 in year 1 and $14,280 in year 2, then
the economic growth rate for this country from year 1 to year 2 was:
A) 1%.
B) 2%.
C) 3%.
D) 4%.
15. If real GDP per capita in a country was $14,000 in year 1 and $14,560 in year 2, then
the economic growth rate for this country from year 1 to year 2 was:
A) 1%.
B) 2%.
C) 3%.
D) 4%.
16. If real GDP per capita in a country was $14,000 in year 1 and $14,140 in year 2, then
the economic growth rate for this country from year 1 to year 2 was:
A) 1%.
B) 2%.
C) 3%.
D) 4%.
17. If real GDP per capita in a country was $14,000 in year 1 and $14,420 in year 2, then
the economic growth rate for this country from year 1 to year 2 was:
A) 1%.
B) 2%.
C) 3%.
D) 4%.
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19. Around the world, about one _____ people have incomes of less than $2 per day.
A) thousand
B) million
C) billion
D) trillion
20. Two thousand years ago, per capita GDP (in 2010 dollars) was:
A) less than $1,000.
B) about $10,000.
C) more than $50,000.
D) about the same as today.
21. Today, real GDP per capita is about _____ as large in the richest countries as in the
poorest countries.
A) twice
B) 10 times
C) 20 times
D) 50 times
23. Roughly what percent of the world's population live in countries with per capita GDP
lower than the average world per capita GDP?
A) 75%
B) 50%
C) 25%
D) 10%
24. Fully 73% of the world's population live in countries with a GDP:
A) less than the world average.
B) more than the world average.
C) per capita less than the world average.
D) per capita more than the world average.
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25. For most of recorded history, economic growth has been:
A) about the same as today.
B) virtually nonexistent.
C) a source of continuously rising living standards.
D) a way to equalize the distribution of wealth around the world.
26. At an average growth rate of 4%, approximately how long would it take for an economy
to double its GDP?
A) 17.5 years
B) 25 years
C) 50 years
D) 70 years
27. If the average annual growth rate of a country increases from 2%to 3%, how much
faster will its GDP double?
A) 10 years
B) 11 2/3 years
C) 17 years
D) 25 years
28. At an annual growth rate of 2%, approximately how long does it take for real GDP per
capita to increase from $30,000 to $60,000 in a country?
A) 15 years
B) 25 years
C) 35 years
D) 45 years
29. At an annual growth rate of 0.7%, approximately how long does it take for real GDP per
capita to increase from $30,000 to $60,000 in a country?
A) 50 years
B) 100 years
C) 200 years
D) 400 years
30. At an annual growth rate of 1.4%, approximately how long does it take for real GDP per
capita to increase from $30,000 to $60,000 in a country?
A) 50 years
B) 100 years
C) 200 years
D) 400 years
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31. At an annual growth rate of 3.5%, approximately how long does it take for real GDP per
capita to increase from $30,000 to $60,000 in a country?
A) 5 years
B) 10 years
C) 15 years
D) 20 years
32. If U.S. per capita GDP is $50,000 and grows at 2% per year, what will U.S. per capita
GDP be in 70 years?
A) $100,000
B) $200,000
C) $400,000
D) $800,000
33. If U.S. per capita GDP is $50,000 and grows at 3% per year, what will U.S. per capita
GDP be in 70 years?
A) $100,000
B) $200,000
C) $400,000
D) $800,000
34. If U.S. per capita GDP is $50,000 and grows at 5% per year, what will U.S. per capita
GDP be in 70 years?
A) $400,000
B) $800,000
C) $1.2 million
D) $1.6 million
35. One key fact about economic growth around the world is that:
A) most poor countries lack natural resources.
B) all countries used to be poor.
C) growth has occurred throughout human history.
D) the dispersion of GDP per capita has become more equal across countries over
time.
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36. For most of recorded human history, long-run economic growth was:
A) much higher than it has been in recent decades.
B) the same as it is today.
C) the highest during the Dark Ages.
D) almost nonexistent.
37. According to the rule of 70, a country with an annual growth rate of 10% will double its
GDP per capita in:
A) 70 years.
B) 10 years.
C) 7 years.
D) less than 1 year.
38. According to the rule of 70, a country with an annual growth rate of 7% will double its
GDP per capita in:
A) 70 years.
B) 10 years.
C) 7 years.
D) less than 1 year.
39. If the GDP of country X is 4 times the GDP of country Y and if the GDP of country X
remains constant while GDP of country Y grows at a rate of 7% per year, which of the
following statements is true?
A) Country Y's GDP will be equal to country X's GDP in 10 years.
B) Country Y's GDP will be equal to country X's GDP in 20 years.
C) Country Y's GDP will be equal to country X's GDP in 40 years.
D) Country Y's GDP will never catch up with country X's GDP.
41. Low rates of economic growth sustained over long periods produce:
A) small changes in per capita GDP.
B) large changes in per capita GDP.
C) no changes in per capita GDP.
D) unpredictable changes in GDP.
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42. The rule of 70 states that if the annual growth rate of a variable is x%, the necessary
time for doubling is:
A) 70 plus x.
B) 70 minus x.
C) 70 times x.
D) 70 divided by x.
43. The rule of 70 indicates that an increase in the growth rate of a variable will _____ the
time needed to double living standards.
A) reduce
B) increase
C) have no effect on
D) have an unpredictable effect on
45. If a country's real GDP per capita in 1950 was $10,000, and it grew to $20,000 by year
2000, then the country's annual growth rate during this period would have been
approximately:
A) 1.4%.
B) 1.8%.
C) 2%.
D) 2.2%.
46. Suppose a country's real GDP per capita was $9,000 in 1990, and it grew to $18,000 by
2000. What is the annual growth rate of the country's real GDP per capita during this
period?
A) 7%
B) 10%
C) 20%
D) 25%
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47. Suppose a country's annual growth rate of real GDP per capita is approximately 2%. By
which year would the country double its real GDP per capita from $10,000 in 1950 to
$20,000?
A) 1970
B) 1985
C) 2000
D) 2005
48. Over the past 200 years, economic growth in the United States has been:
A) among the slowest in the world.
B) the fastest in the world.
C) slow and consistent.
D) volatile.
49. Two countries that may be considered examples of growth miracles are:
A) Mexico and China.
B) the United States and Spain.
C) Denmark and Luxembourg.
D) South Korea and Japan.
50. Relative to Japan, Argentina was _____ in 1950 and _____ in 2000.
A) poor; poor
B) rich; rich
C) poor; rich
D) rich; poor
51. Relative to South Korea, Argentina was _____ in 1950 and _____ in 2000.
A) poor; poor
B) rich; rich
C) poor; rich
D) rich; poor
52. Relative to the United States, Argentina was _____ in 1950 and _____ in 2000.
A) poor; poor
B) rich; rich
C) poor; rich
D) rich; poor
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53. Relative to China, Argentina was _____ in 1950 and _____ in 2007.
A) poor; poor
B) rich; rich
C) poor; rich
D) rich; poor
54. Which statement best describes the economic growth patterns in the world since World
War II?
A) Japan and South Korea experienced rapid growth, while Argentina and Nigeria
experienced slow growth.
B) Japan and South Korea experienced slow growth, while Argentina and Nigeria
experienced rapid growth.
C) Most countries in the world experienced rapid growth.
D) Most countries in the world except the United States experienced no growth at all.
55. Which country had a growth miracle beginning in the late 1970s?
A) United States
B) Japan
C) South Korea
D) Nigeria
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58. (Figure: The Distribution of World Income) Refer to the figure. Based on the data in the
figure, about how many times wealthier is the richest country when compared to the
poorest countries in the world?
A) 500
B) 100
C) 10
D) 30
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59. (Figure: The Distribution of World Income) Refer to the figure. Based on the data in the
figure, living standards in the United States are about how many times higher than the
world average?
A) 3
B) 10
C) 40
D) 50
60. In the year 2014, the world's average per capita GDP was $14,517. What percent of the
world's population lived in a country with per capita GDP that was below $14,517?
A) 21%
B) 43%
C) 56%
D) 73%
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61. What percentage of the world's population lives in a country that has a GDP per capita
above the world average?
A) 12%
B) 27%
C) 51%
D) 73%
62. The world's average level of GDP per capita was $14,517 as of 2014. This was a little
less than the living standard in which nation?
A) China
B) Mexico
C) Nigeria
D) India
63. (Figure: Economic Growth in Major World Regions) Refer to the figure, which shows
real GDP per capita over time in different regions of the world. The figure shows that all
regions of the world:
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64. (Figure: Economic Growth in Major World Regions) Refer to the figure, which shows
real GDP per capita over time in different regions of the world. The figure shows that:
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65. (Figure: Economic Growth in Major World Regions) Refer to the figure, which shows
real GDP per capita over time in different regions of the world. The figure shows that
living standards in different regions began to _____ at the beginning of the nineteenth
century.
A) diverge
B) converge
C) equalize
D) fall
66. The United States and Western European countries began to experience accelerated
economic growth during which century?
A) twelfth
B) sixteenth
C) fifteenth
D) nineteenth
67. If real GDP in an economy increases from $20,000 billion to $20,200 billion from 2010
to 2011, what is the annual growth rate in this economy?
A) 10%
B) 5%
C) 2.01%
D) 1%
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68. If a country's initial real GDP is $60,000 and its annual growth rate is 5%, use the rule
of 70 to determine approximately how many years it would take for this economy to
double its GDP.
A) 70
B) 20
C) 14
D) 12
69. Imagine an economy that has a growth rate of 2% per year. Use the rule of 70 to
estimate how long it would take for this economy to quadruple its GDP per capita.
A) 14 years
B) 35 years
C) 70 years
D) 140 years
70. Suppose economies A and B have the same initial level of GDP per capita at $15,000,
and each economy begins with a constant growth rate of 1% per year. (Neither country
has good institutions for economic growth at first.) Then country A enters an era of
political stability, establishes property rights, and installs incentives for
entrepreneurship. Country A's economic growth rate consequently improves to 5%.
Assuming population growth rates remain unaffected, how much longer will it take
country B to double its per capita GDP level compared to country A?
A) 70 years
B) 14 years
C) 56 years
D) 28 years
71. If a nation doubles its GDP per capita in 20 years, what is its annual growth rate?
A) 3.5%
B) 4.2%
C) 6.5%
D) 7%
72. If you receive a constant annual rate of return of 7% on an investment of $10,000, how
many years will it take before you have $20,000?
A) 10 years
B) 7 years
C) 35 years
D) 2.86 years
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73. If real GDP per capita in the United States is currently $50,000 and grows at 2.5% per
year, it will take approximately how many years to reach $200,000?
A) 28
B) 56
C) 84
D) 112
75. What is the most immediate (or direct) cause of growth in real GDP per capita?
A) factors of production
B) institutions
C) the political system in the economy
D) incentives
76. Factors of production that contribute to growth in per capita GDP include:
A) proximal and ultimate factors of production.
B) physical capital, human capital, and technological knowledge.
C) organization of resources.
D) institutions.
77. A rural village in a developing country has an economy based on agriculture. Then the
government of the country provides the village with newly developed hybrid seeds that
more than double the agricultural yield per acre. This story illustrates the growth of per
capita GDP in the village through which factor(s) of production?
A) physical capital
B) human capital
C) technological knowledge
D) both human capital and technological knowledge
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78. One measure of student output is number of completed math problems produced. Using
pen and paper only, a student can complete 50 math problems in 2 hours. Using pen,
paper, and a calculator, the same student can complete 100 math problems in 2 hours.
(The student is already familiar with, and knows how to use, the calculator.) This
scenario illustrates the use of which factor of production?
A) physical capital
B) human capital
C) technological knowledge
D) both human capital and technological knowledge
79. Countries that have high per capita GDP tend to have:
A) high levels of physical capital per worker.
B) high levels of human capital per worker.
C) high levels of technology per worker.
D) high levels of all three factors of production.
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83. Which are immediate causes of the wealth of nations?
A) institutions and incentives
B) technical knowledge and human capital
C) customs, practices, and social norms
D) property rights and honest government
84. What are the four factors of production that combine to contribute to the wealth of
nations?
A) incentives, institutions, organization, technical knowledge
B) international trading partners, natural resources, efficient government, low taxes
C) human capital, physical capital, technical knowledge, organization
D) property rights, honest government, political stability, a dependable legal system
85. Farmers who use tractors instead of horse-drawn plows have greater yields. Which
factor of production explains this result?
A) organizational skills
B) natural resources
C) technical knowledge
D) physical capital
86. A business that pays for its workers to attend a technical college is increasing its:
A) physical capital.
B) human capital.
C) organizational skills.
D) technical knowledge.
88. Increasing the amount of physical capital tends to _____ output per hour of workers and
_____ the value of workers.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase
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89. Workers' ability to use various tools is known as _____.
A) technological knowledge
B) human capital
C) knowledge
D) experience
91. A developing country could buy (or be given) _____ and _____ more easily than _____.
A) technological knowledge; physical capital; human capital
B) physical capital; human capital; technological knowledge
C) human capital; technological knowledge; physical capital
D) human capital; work experience; technological knowledge
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95. High-income economies generally have _____ that incentivize individuals' self-interest
by using _____.
A) institutions; profit-seeking motives
B) government mandates; legal penalties
C) central planners; profit-seeking motives
D) institutions; legal penalties
96. Countries with high GDP per capita tend to have a lot of:
A) physical capital per worker.
B) human capital per worker.
C) technological knowledge per worker.
D) physical capital, human capital, and technological knowledge per worker.
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101. A tractor is an example of:
A) human capital.
B) physical capital.
C) production technology.
D) technical knowledge.
103. A typical worker in India works with _____ a typical worker in the United States.
A) many times more physical capital than
B) about the same amount of physical capital as
C) much less physical capital than
D) slightly more physical capital than
105. Development of new computer software that increases productivity is an example of:
A) human capital.
B) physical capital.
C) production technology.
D) technical knowledge.
106. U.S. farms today produce _____ output using _____ land as they did in 1950.
A) more; less
B) about the same; less
C) more; about the same amount of
D) about the same; about the same amount of
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107. Which is NOT a factor of production?
A) incentives
B) human capital
C) physical capital
D) technological knowledge
110. The stock of tools, including machines, structures, and equipment, used to produce
output is called:
A) physical capital.
B) human capital.
C) technological knowledge.
D) real capital.
111. The productive knowledge and skills that workers acquire through education, training,
and experience is called:
A) physical capital.
B) human capital.
C) technological knowledge.
D) real capital.
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113. Compared to workers in most of the world, U.S. workers have:
A) a relatively large amount of physical capital.
B) a relatively small amount of physical capital.
C) roughly the same amount of physical capital.
D) an unlimited supply of physical capital.
114. _____ is the knowledge and skills that a worker needs to understand to make productive
use of technology, whereas _____ is knowledge about how the world works that is used
to produce goods and services.
A) Technological knowledge; human capital
B) Human capital; technological knowledge
C) Technological knowledge; organizational skills
D) Organizational skills; technological knowledge
115. Which best describes the growth process from its ultimate to its immediate causes?
A) incentives → institutions → factors of production → real GDP per capita
B) institutions → incentives → factors of production → real GDP per capita
C) factors of production → incentives→ institutions → real GDP per capita
D) factors of production → institutions→ incentives → real GDP per capita
116. Which would be most effective in ensuring sustained long-term economic growth?
A) increasing technological knowledge
B) increasing human capital
C) increasing government control of land use
D) increasing physical capital
117. Institutions and incentives are _____ causes, and factors of productions are _____
causes of the wealth of nations.
A) ultimate; immediate
B) immediate; ultimate
C) ultimate; indirect
D) immediate; direct
118. Why does South Korea have a higher level of real GDP per capita than North Korea?
A) South Korea started with more human capital than North Korea.
B) South Korea started with more physical capital than North Korea.
C) South Korea has a better system of incentives than North Korea.
D) South Korea has more natural resources than North Korea.
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119. Which is NOT an institution that leads to sustained long-term economic growth?
A) a dependable legal system
B) a stable political system
C) an honest government
D) a more equal income distribution
120. Countries with high per capita GDP have institutions that make it in people's
self-interest to invest in:
A) physical capital.
B) human capital.
C) technology.
D) all of the factors of production.
121. Institutions:
A) are not important in market economies.
B) structure economic incentives.
C) matter only when backed by law.
D) are important only in market economies.
122. Which of the following defines the “rules of the game” that structure economic
incentives?
A) institutions
B) economic laws
C) factors of production
D) technical knowledge
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125. Which of the following has the greatest potential for solving free-rider problems?
A) property rights
B) a stable political system
C) an honest government
D) the rule of law
126. Which of the following would be most effective in reducing “free riding” in a
communal farming system?
A) assigning property rights
B) increasing supervision of workers
C) increasing penalties for low production
D) increasing physical capital
127. Which scenario has the greatest potential for free riding?
A) an unstable political system
B) a system in which work effort and pay are not connected
C) a dishonest government that promotes corruption
D) secure property rights
128. A country that has enforceable property rights, a noncorrupt political system, abundant
factors of production, and a change in leadership and form of government every few
years should suspect that economic growth will be _____ because _____.
A) slow; of a lack of a dependable legal system
B) slow; of uncertainty due to an unstable political system
C) high; most of the institutions needed for growth are in place
D) high; once a group comes to power all the institutions needed for growth exist
129. When the Communist Party took over China, “The Great Leap Forward” was instituted
as a system to encourage the growth of agricultural production in China. Yet, during this
time, millions of people starved to death. Why did this occur?
A) Farmers' self-interest was not aligned with social interest.
B) The land and its output were controlled by a few wealthy individuals.
C) The farmers violated government policy.
D) The farmers were being jailed.
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130. Between 1978 and 1983, food production in China rose by 50% and 170 million people
rose above the international poverty line. This occurred because of the:
A) rising popularity of free-riding behavior in China.
B) return to private property rights in farming.
C) fall of communism in China.
D) teachings of Mao Zedong.
131. Agricultural productivity in China declined sharply during the country's experiment
with communal farming. This was primarily a result of:
A) a decade-long drought in China.
B) the transition to open markets in China.
C) a lack of property rights for farm land.
D) political instability.
132. Someone who consumes a resource without working or contributing to the resource's
upkeep is called a(n):
A) easy rider.
B) free rider.
C) double rider.
D) outlaw.
133. The most important factor that contributed to China's rapid growth at the end of the
1970s and early 1980s was:
A) improvements in physical capital.
B) increases in human capital.
C) advances in technology.
D) institutional reforms.
134. Why did so many Chinese farmers and workers starve under “The Great Leap
Forward”?
A) The number of workers on communes was reduced.
B) The Chinese people did not know how to farm in certain geographic areas.
C) The incentive to work hard was low, since the rewards were so minimal.
D) A long, severe drought drastically decreased agricultural production.
135. Why do more corrupt countries have lower levels of GDP per capita?
A) Corrupt countries have no rule of law.
B) Corrupt countries have higher than average taxes.
C) Corrupt countries provide less incentive to produce and create wealth.
D) Corrupt countries follow the doctrine of communism.
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136. What is a result of a high level of government corruption?
A) There are few entrepreneurs.
B) Government officials have a low standard of living.
C) Politicians hold little power over the market.
D) The form of government tends toward Communism.
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142. Due to economies of scale, average costs decline as:
A) production levels increase.
B) physical capital increases.
C) human capital increases.
D) technology increases.
143. When industries are limited by the size of the domestic market, opening trade to the
world markets will likely lead to _____ and _____ real GDP per capita in the domestic
country.
A) economies of scale; increase
B) economies of scale; decrease
C) diseconomies of scale; increase
D) diseconomies of scale; decrease
144. One of the best explanations for why some countries are rich and others are poor is that:
A) technological knowledge is more advanced in rich countries than in poor countries.
B) rich countries organize their factors of production more efficiently than poor
countries do.
C) rich countries may have simply gotten lucky and poor countries remain unlucky.
D) rich countries have far greater natural resources than poor countries do.
146. Someone who consumes a resource without contributing to its upkeep is referred to as a:
A) nonsubscriber.
B) freeloader.
C) nonpayer.
D) free rider.
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148. The ultimate cause for the different economic performance in North Korea and South
Korea is:
A) more corruption in South Korea than in North Korea.
B) better economic institutions in South Korea than in North Korea.
C) more foreign aid from the United States in South Korea than in North Korea.
D) more abundant natural resources in South Korea than in North Korea.
149. The difference between per capita GDP in North Korea and South Korea is due to:
A) human capital.
B) culture.
C) geography.
D) institutions.
150. South Korea has a per capita GDP _____ as high as that of North Korea.
A) twice
B) 5 times
C) 8 times
D) nearly 20 times
152. The main reason for the influence of institutions on the wealth of nations is that good
institutions:
A) raise people's incentives to build wealth.
B) keep the economy in tight control of the government.
C) help distribute wealth more evenly among the people.
D) allow government to more easily convert private property into collective property.
153. According to the text, we can understand the “wealth of nations” best by examining:
A) how natural resources are distributed around the world.
B) the extent to which governments support the domestic markets.
C) the laws and regulations that affect people's incentives to work and invest.
D) the amount of technological knowledge obtained from other countries.
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154. Which is NOT an example of an institution that creates incentives aligning self-interest
with the interest of society?
A) well-defined property rights
B) political stability
C) low inflation
D) competitive markets
155. Institutions:
A) are the advantages of large-scale production that reduce average cost as quantity
increases.
B) are the rules of the game that structure economic incentives.
C) are the framework that allows the government to control the economy.
D) do not vary much from country to country.
157. Which of the following is NOT a kind of institution that encourages investment and the
efficient organization of resources?
A) private property rights
B) political stability
C) a dependable legal system
D) closed markets
159. Property rights are important institutions for encouraging investment because:
A) they eliminate corruption.
B) they increase the total funds available to invest.
C) people won't invest if they feel their property is at risk and that they may not
realize a return on their investment.
D) they tend to support industrial sectors more than agricultural sectors.
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160. Which statement is TRUE for “The Great Leap Forward” period in China?
A) Technological advancement was strong because of the hard work of farmers.
B) A lack of private property rights provided no incentive for farmers to be
productive.
C) Communal property in agricultural land helped align farmers' self-interest with the
social interest.
D) Collective property rights failed to improve farming productivity because of the
existence of private property rights.
161. The key reason for China's growth miracle beginning in the late 1970s was:
A) the enforcement of communal property.
B) the assignment of private property rights.
C) increases in foreign investment from developed countries.
D) pure luck.
162. A legal system that helps raise a nation's productivity is one that:
A) makes it easy for people to engage in contracts and to establish property rights.
B) has a lot of regulations and procedures for people and businesses to follow.
C) allows people and businesses to act freely and to do just about everything they
want.
D) protects domestic producers from foreign competition.
164. History has shown that when collective property rights are converted to private property
rights:
A) investment in physical capital increases.
B) work effort increases.
C) productivity increases.
D) work effort, investment, and productivity all increase.
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166. Under communal property, effort is:
A) divorced from payment, so there is great incentive to work.
B) divorced from payment, so there is little incentive to work.
C) rewarded with payment, so there is great incentive to work.
D) rewarded with payment, so there is little incentive to work.
167. When an economic system changes from using a collective property rights system to
something closer to private property rights, the immediate effect is:
A) less efficient organization of resources.
B) to increase regulation, resulting in less market activities.
C) to decrease investment, work effort, and productivity.
D) to increase investment, work effort, and productivity.
169. What is the best way for a government to encourage economic growth?
A) mandate university education for all its citizens
B) make natural resources public property so that people feel a stronger sense of
ownership
C) increase its provision of public goods
D) reduce corruption
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172. Which statement is TRUE regarding the effects of corruption?
A) Corruption helps promote economic growth.
B) Corruption reduces the incentive to build wealth by imposing a tax on
entrepreneurs.
C) Corruption raises investment by making it easier to run a business.
D) Corruption is the best way for the government to obtain revenues needed to run
growth-promoting policies.
175. Which country was among the top 10 least-corrupt countries in the year 2000?
A) Angola
B) Myanmar
C) Singapore
D) Taiwan
176. Which country was among the top 10 most-corrupt countries in the year 2000?
A) North Korea
B) Bermuda
C) Kenya
D) Saudi Arabia
177. There is _____ relationship between levels of corruption and living standards in
countries around the world.
A) a strong positive
B) a strong negative
C) a weak
D) no
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178. Political stability _____ economic growth.
A) impedes
B) has no effect upon
C) fuels
D) has an indeterminate effect upon
180. India could be on the order of four times richer than it is today if it were to:
A) avoid civil war.
B) confiscate all private property.
C) accept more foreign aid.
D) make its markets open and competitive.
181. Economies more open to foreign trade are more efficient in production partly because:
A) more open economies tend to receive more foreign aid.
B) foreign producers are more productive than domestic producers.
C) economies of scale occur in larger markets.
D) property rights are less important in a more open economy.
182. Economies more open to foreign trade are more efficient in production partly because:
A) more open economies tend to receive more foreign aid.
B) foreign producers are more productive than domestic producers.
C) free trade opens a country up to new ideas and innovation.
D) property rights are less important in a more open economy.
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184. An ultimate cause for the rapid economic growth during the Industrial Revolution was:
A) the development of good institutions that provide people with incentives to engage
in business and invention.
B) the strengthening of government control in markets and its role in income
redistribution.
C) the discovery of wind power to generate electricity.
D) Great Britain's colonization activity around the world.
185. Which is NOT likely an ultimate cause of economic growth around the world?
A) historical differences
B) geographical locations
C) communal resources
D) luck
186. Which statement explains why China experienced a dramatic increase in agricultural
productivity after the 1970s?
A) China started exporting its agricultural products to other countries.
B) China lifted the import restrictions on agricultural products.
C) China changed its institutions from collective farming to individual farming.
D) China changed its institutions from individual farming to collective farming.
188. Countries that are NOT landlocked tend to grow _____ because _____.
A) faster; easy access to water naturally opens a country to trade
B) slower; easy access to water naturally opens a country to trade
C) faster; fewer resources are required to build a strong military
D) slower; fewer resources are required to build a strong military
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190. Which of the following is an ultimate cause of economic growth among countries
around the world?
A) history
B) culture
C) geography
D) History, culture, and geography are all ultimate causes of growth.
191. What is an ultimate cause of economic growth among countries around the world?
A) luck
B) culture
C) geography
D) Luck, culture, and geography are all ultimate causes of growth.
194. The most promising idea for creating a growth miracle in a country is:
A) building more schools in the country.
B) opening the country to more foreign investment.
C) changing the institutions in the country.
D) allowing more foreign aid in the country.
195. Higher GDP per capita tends to be correlated with higher life expectancy, lower infant
mortality, and better nutrition.
A) True
B) False
196. Virtually every indicator of societal well-being tends to increase with wealth.
A) True
B) False
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197. Countries with low levels of GDP per capita tend to have lower rates of death caused by
contagious disease.
A) True
B) False
201. GDP per capita does not vary much among nations.
A) True
B) False
202. Half of the world's population earns the average world GDP per capita of roughly
$20,000.
A) True
B) False
203. For most of recorded human history, people were poor and there was no economic
growth.
A) True
B) False
204. Economic growth has occurred during most of recorded human history.
A) True
B) False
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205. A country that grows at an average rate of 5% will double its living standard every 10
years.
A) True
B) False
206. A country that grows at an average rate of 7% will double its living standard every 10
years.
A) True
B) False
207. For most of human history, essentially everyone was poor by today's standards.
A) True
B) False
208. There have always been some very wealthy countries, even by today's standards.
A) True
B) False
209. Living standards across countries are more equal today than at any time in history.
A) True
B) False
210. The rule of 70 implies that poor countries tend to catch up with rich countries over time.
A) True
B) False
212. In the context of world history, economic growth is the normal state of affairs, and
growth disasters rarely occur.
A) True
B) False
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213. China, currently a poor country in terms of GDP per capita, is growing at an average
annual rate between 7%and 8%.
A) True
B) False
214. For most of recorded human history, there was no long-run growth in real per capita
GDP.
A) True
B) False
215. Following World War II, Japan was one of the richest countries in the world.
A) True
B) False
216. Today, most of the world's people have a relatively high standard of living.
A) True
B) False
217. For most of recorded history, there was long-run growth in real per capita GDP.
A) True
B) False
218. For most of recorded human history, there has been a steady, sustained growth in real
GDP per capita.
A) True
B) False
219. The United States has had sustained long-run economic growth for over 200 years. It
would be impossible for a poor country today to catch up to the United States' level of
per capita real GDP.
A) True
B) False
220. If a country's GDP in 1950 was $25,000 and it had a continual rate of economic growth
of 2%, its GDP would reach $50,000 in the year 2000.
A) True
B) False
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221. The difference between human capital and technological knowledge is that human
capital relates to skills and education that reside within an individual, while
technological knowledge is ideas and discoveries about how the world works.
A) True
B) False
222. The difference between human capital and physical capital is that human capital
measures the intelligence we are born with and physical capital refers to the machines
that we create with our intelligence.
A) True
B) False
226. One difference between technological knowledge and human capital is that
technological knowledge is discovering new ideas about how the world works, while
human capital is knowing how to use the tools that come from those discoveries.
A) True
B) False
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229. Technological knowledge is the stock of tools, including machines, structures, and
equipment, used to produce goods and services.
A) True
B) False
230. The organization and efficiency with which a country's factors of production are used is
an immediate cause of economic growth.
A) True
B) False
231. The factors of production are considered ultimate causes of economic growth.
A) True
B) False
232. Geography, history, and luck can be considered ultimate causes of economic growth.
A) True
B) False
234. Countries that use markets to organize production tend to have higher growth rates.
A) True
B) False
235. “The Great Leap Forward” in China was an economic miracle, doubling agricultural
production in the nation.
A) True
B) False
236. China's “Great Leap Forward” caused agricultural production to plummet, and millions
starved to death as a result.
A) True
B) False
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237. China's experiment with communal farming caused agricultural production to plummet,
and millions starved to death as a result.
A) True
B) False
238. China's experiment with communal farming failed because of free riding.
A) True
B) False
239. China's experiment with communal farming failed because work effort was divorced
from payment, and there was little incentive to work.
A) True
B) False
240. China's impressive growth in recent decades is a result of policies that began during its
“Great Leap Forward” program.
A) True
B) False
241. China's impressive growth in recent decades is a result of institutional changes that
provided secure property rights and the ownership of private land.
A) True
B) False
242. Openness to foreign investment and freer trade is part of the explanation for China's
recent growth miracle.
A) True
B) False
243. China's recent growth miracle is a result of institutional changes that began in the late
1970s.
A) True
B) False
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245. Countries that have corrupt governments tend to have lower real GDP per capita.
A) True
B) False
246. The origins of institutions that lead to economic growth are well known.
A) True
B) False
247. Differences in growth rates across countries are attributed mostly to differences in
technological knowledge.
A) True
B) False
248. The key to producing and organizing factors of production to increase economic growth
is having institutions that create the proper incentives.
A) True
B) False
249. A country with a high GDP per capita is likely to have a lot of physical and human
capital organized by means of the best technological knowledge available.
A) True
B) False
250. Institutions that promote economic growth include the enforcement of property rights.
A) True
B) False
251. Corruption increases the returns to entrepreneurship by giving new businesses easy
access to government officials.
A) True
B) False
252. Competitive markets are not important for economic growth as long as the government
enforces private property rights.
A) True
B) False
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253. Incentives are important in determining people's willingness to invest in physical
capital, human capital, and technical knowledge.
A) True
B) False
255. Landlocked countries tend to grow faster than countries that have access to water.
A) True
B) False
256. Landlocked countries tend to grow slower than countries that have access to water.
A) True
B) False
257. Openness to international trade tends to promote growth because it also opens a country
to new ideas and innovation.
A) True
B) False
258. Openness to international trade tends to hinder growth because it allows a country's
technical knowledge to be exploited by other countries.
A) True
B) False
259. A country's institutions can ultimately be shaped by its history, culture, geography, and
even luck.
A) True
B) False
260. Data in the textbook show that life expectancy rises and infant mortality falls with
higher real GDP per capita. Explain why this is the case.
261. How has the recent growth experience in China benefited the ordinary citizen in China?
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262. Explain why real GDP per capita is a better measure of economic growth than real GDP.
263. Why is it important to remember that all countries used to be poor, that some countries
remain poor today while others are rich, and that the differences between the rich and
poor today are vast?
According to the information in the figure, Argentina had a higher real GDP per capita
in 2000 than it did in 1900. Explain how it can still be considered a growth disaster.
Also, discuss what other aspects of Argentina you would study to gain a complete
understanding of its economic growth.
265. With China growing at rates in excess of 7% per year in recent decades, what has
happened to the standard of living in China? Explain using the rule of 70.
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266. Figure: The Distribution of World Income
In light of the recent growth that has occurred in China, how does its living standard
compare to that of other developed countries in the world? Refer to Figure 7.2 (27.2) in
the text to explain.
Page 47
267. Figure: Understanding the Wealth of Nations
Explain the role “organization” plays in determining the wealth of nations, as shown in
Figure 7.5 (27.5) in the text.
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268. Some of the poorest countries in the world are rich with natural resources. Explain why
these resource-rich nations still struggle with low economic growth.
269. List the causes of growth from the “ultimate” to the “immediate” causes.
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270. Figure: Understanding the Wealth of Nations
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271. Korea was divided into North Korea and South Korea at the end of World War II. What
similarities did the two nations have at that time? What differences contributed to the
fact that South Korea now has a per capita GDP that is nearly 20 times higher than that
of North Korea?
272. What are “incentives” and why are they important in the growth process?
273. List the institutions that are important for economic growth as discussed in this chapter.
274. Based on your understanding of the causes of the wealth of nations, discuss three
reasons why you think countries fail to grow.
275. Explain how “good institutions” enhance the incentives for entrepreneurship.
276. Discuss China's agricultural productivity from 1949 to 1983. In your discussion, state
the main factor(s) that altered its productivity during the 1949–1978 and 1978–1983
time periods.
277. What factors best explain China's increased rate of growth after 1978?
279. Why do economists look at a government's honesty when they study national wealth?
280. Suppose that the annual real GDP per capita in India is currently $2,000 and in the
United States it is $50,000. If the United States is growing at 3% per year, at what
growth rate would India need to grow in order to have the same annual real GDP per
capita as the United States 50 years from today? Show all of your work.
Page 51
Answer Key
1. A
2. D
3. B
4. A
5. A
6. C
7. C
8. D
9. C
10. A
11. B
12. C
13. D
14. B
15. D
16. A
17. C
18. A
19. C
20. A
21. D
22. D
23. A
24. C
25. B
26. A
27. B
28. C
29. B
30. A
31. D
32. B
33. C
34. D
35. B
36. D
37. C
38. B
39. B
40. D
41. B
42. D
43. A
44. D
Page 52
45. A
46. A
47. B
48. C
49. D
50. D
51. D
52. A
53. B
54. A
55. C
56. A
57. D
58. B
59. A
60. D
61. B
62. B
63. A
64. C
65. A
66. D
67. D
68. C
69. C
70. C
71. A
72. A
73. B
74. C
75. A
76. B
77. C
78. A
79. D
80. A
81. B
82. C
83. B
84. C
85. D
86. B
87. D
88. A
89. B
90. A
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91. A
92. A
93. B
94. D
95. A
96. D
97. D
98. C
99. A
100. B
101. B
102. B
103. C
104. A
105. D
106. A
107. A
108. C
109. D
110. A
111. B
112. C
113. A
114. B
115. B
116. A
117. A
118. C
119. D
120. D
121. B
122. A
123. D
124. C
125. A
126. A
127. B
128. B
129. A
130. B
131. C
132. B
133. D
134. C
135. C
136. A
Page 54
137. D
138. B
139. A
140. B
141. B
142. A
143. A
144. B
145. A
146. D
147. D
148. B
149. D
150. D
151. D
152. A
153. C
154. C
155. B
156. D
157. D
158. B
159. C
160. B
161. B
162. A
163. C
164. D
165. D
166. B
167. D
168. B
169. D
170. C
171. D
172. B
173. B
174. B
175. C
176. A
177. B
178. C
179. C
180. D
181. C
182. C
Page 55
183. A
184. A
185. C
186. C
187. C
188. A
189. B
190. D
191. D
192. D
193. D
194. C
195. A
196. A
197. B
198. B
199. B
200. A
201. B
202. B
203. A
204. B
205. B
206. A
207. A
208. B
209. B
210. B
211. A
212. B
213. A
214. A
215. B
216. B
217. B
218. B
219. B
220. B
221. A
222. B
223. A
224. B
225. A
226. A
227. A
228. B
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229. B
230. A
231. B
232. A
233. A
234. A
235. B
236. A
237. A
238. A
239. A
240. B
241. A
242. A
243. A
244. B
245. A
246. B
247. B
248. A
249. A
250. A
251. B
252. B
253. A
254. B
255. B
256. A
257. A
258. B
259. A
260.
261.
262.
263.
264.
265.
266.
267.
268.
269.
270.
271.
272.
273.
274.
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Test Bank for Modern Principles of Economics, 4th Edition, Tyler Cowen, Alex Tabarrok
275.
276.
277.
278.
279.
280.
Page 58