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Macroeconomics Principles and Policy 12th Edition Baumol Test Bank Full Chapter PDF
Macroeconomics Principles and Policy 12th Edition Baumol Test Bank Full Chapter PDF
Macroeconomics Principles and Policy 12th Edition Baumol Test Bank Full Chapter PDF
TRUE/FALSE
1. College tuition costs have risen faster than prices in general from 1979 to 2009.
2. Service sector outputs could be expected to increase in price less than industrial sector outputs as an
economy grows.
3. For a given technology, a higher capital stock will decrease labor productivity.
6. Improvements in the level of technology will generally shift the production function downward.
7. A superior level of technology is an important reason the productivity of workers in rich countries is
high.
8. Human capital includes the tools and equipment that human beings work with.
269
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or posted to a publicly accessible website, in whole or in part.
ANS: F PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
10. Productivity levels are higher in rich countries compared to poor countries.
11. Productivity growth rates are usually higher in rich countries than in poor countries.
12. The convergence hypothesis suggests that poor countries may close the income gap with rich countries.
13. Imitation is not only the highest form of flattery but also an easier way for poorer countries to develop
new technology.
14. The poorest countries in Africa have some of the highest growth rates, thus proving the convergence
hypothesis.
15. A nation's capital consists mainly of stocks, bonds, and other financial assets.
16. The term "capital formation" actually implies adding new equipment to a nation's factories.
17. As the level of real interest rates rise, the amount of new investment will rise also.
270
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or posted to a publicly accessible website, in whole or in part.
ANS: F PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
18. Capital investment becomes more profitable for a business firm as the real interest rate decreases.
19. When the economy devotes more of its resources to investment goods, it must devote fewer resources to
consumer goods.
20. Some politicians argue that reducing the corporate income tax will increase business investment
spending.
21. By enjoying more consumer goods today, the economy spurs growth in future consumer goods.
22. In 2010 President Obama proposed more generous tax write-offs for businesses that invest in additional
equipment in order to stimulate investment spending.
23. The slowing of the American economy in 2008-2009 gave businesses a strong incentive to raise capital
investment.
24. The capital gains tax cut enacted in 2003 will hinder capital formation.
25. The threat of confiscated private property diminishes the incentive to invest.
26. In the United States, the wage rates for high school graduates are growing faster than the wage rates for
college graduates.
271
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or posted to a publicly accessible website, in whole or in part.
ANS: F PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
27. The wage premium in the United States for college graduates over high school graduates has remained
constant from 1978 to 2000.
28. All other things being equal, a greater supply of scientists and engineers will increase the level of
technology.
29. Because the Soviet Union educated more scientists and engineers than the United States, their level of
economic growth was higher.
30. Investment spending, capital formation, and rapid technological progress are directly related.
31. Because it is a market economy, in the United States all research and development is done by private
business firms.
32. Productivity growth rates in the United States have remained fairly constant from 1948 to 2000.
33. Economists are still puzzled why growth rates in the United States fell from 1973 to 1995.
34. There is now general agreement among economists regarding the sources of the U.S. productivity
slowdown that occurred between 1973 and 1995.
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
35. The change in the contribution of capital formation was the chief cause of the productivity slowdown in
1973-1995.
36. Technological change was a major contributor to the productivity speed-up from 1995-2000.
37. Improvements in human capital and education played a major role in the productivity improvements of
the U.S. economy from 1995 to 2009.
38. Real wages usually lag behind the increases in labor productivity.
39. The fastest growing productivity increases in the United States have occurred in the personal services
sector.
40. The prices of telecommunications services have decreased due to productivity increases.
41. The "cost disease of personal services" phenomenon helps explain why medical care has become so
expensive.
273
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or posted to a publicly accessible website, in whole or in part.
42. The "cost disease of personal services" phenomenon predicts that the price of tickets to baseball games
and cell phone rates will increase at approximately the same rate.
44. Foreign direct investment generally leads to technological advancements in poorer countries.
45. Industrialized countries generally have higher levels of educational attainment compared with poorer
countries.
46. The productivity slowdown in the U.S. can be explained by geographic limitations and instability in the
government.
47. Poor health in developing countries encourages economic growth because working is a matter of life and
death.
48. When the difference between potential GDP and actual GDP increases, the nation usually suffers from
increased inflation.
49. The fall of actual GDP below the level of potential GDP is a signal that the economy is in a recession.
MULTIPLE CHOICE
274
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or posted to a publicly accessible website, in whole or in part.
1. Which of the following services have experienced declines in relative prices due to productivity
increases?
a. medical services
b. restaurant meals
c. theatrical performances
d. Internet access services
ANS: D PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
3. The graph that relates hours of labor input to output is called the
a. consumption function.
b. conjunction function.
c. capital function.
d. production function.
ANS: D PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
8. Which of the following would tend to shift the production function upward?
a. an increase in the number of hours worked
b. an increase in population
c. an increase in the size of the labor force
d. an increase in the level of technology
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
10. Which furniture production process would have the highest production function?
a. furniture made by handsaw and hammer
b. furniture made with power equipment
c. furniture made by grade school-educated workers
d. furniture made in an automated furniture factory
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
11. Which furniture production process would have the highest furniture prices?
a. furniture made by handsaw and hammer
b. furniture made with power equipment
c. furniture made by grade school-educated workers
d. furniture made in an automated furniture factory
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
12. Which furniture production process would have the highest wage rates?
a. furniture made by handsaw and hammer
276
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or posted to a publicly accessible website, in whole or in part.
b. furniture made with power equipment
c. furniture made by grade school-educated workers
d. furniture made in an automated furniture factory
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
13. Which retail operation would have the highest costs per book sold?
a. a small independent bookstore
b. a large retail bookstore chain
c. an Internet seller of books
d. All would have the same costs.
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
14. Which retail operation would have the lowest costs per book sold?
a. a small independent bookstore
b. a large retail bookstore chain
c. an Internet seller of books
d. All would have the same costs.
ANS: C PTS: 1 DIF: Moderate NAT: Reflective
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
17. For given inputs of labor and capital, if technology is better, labor productivity will be
a. higher.
b. lower.
c. unchanged.
d. characterized by increasing returns to scale.
ANS: A PTS: 1 DIF: Easy NAT: Analytic
LOC: Labor markets TOP: The Three Pillars Of Productivity Growth
277
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or posted to a publicly accessible website, in whole or in part.
18. For a given technology and a given labor force, labor productivity will be ____ when the capital stock is
____.
a. higher; larger
b. lower; larger
c. lower; unchanged.
d. higher; smaller
ANS: A PTS: 1 DIF: Easy NAT: Analytic
LOC: Labor markets TOP: The Three Pillars Of Productivity Growth
19. For given inputs of labor and capital, if technology is more primitive, labor productivity will be
a. higher.
b. lower.
c. unchanged.
d. characterized by increasing returns to scale.
ANS: B PTS: 1 DIF: Easy NAT: Analytic
LOC: Labor markets TOP: The Three Pillars Of Productivity Growth
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
d. all of the above.
ANS: D PTS: 1 DIF: Easy NAT: Analytic
LOC: Labor markets TOP: The Three Pillars Of Productivity Growth
25. One of the key factors in the economic success of South Korea was
a. an increase in years of schooling.
b. a reduction in the amount of imports.
c. the creation of new technology.
d. all of the above.
ANS: A PTS: 1 DIF: Easy NAT: Analytic
LOC: Labor markets TOP: The Three Pillars Of Productivity Growth
26. Which of the following was NOT a factor in Japan's post-World War II economic success?
a. a high rate of investment
b. a well-educated workforce
c. a high rate of natural resource discovery
d. a high rate of technological adoption
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
27. Which of the following is not one of the three pillars of productivity growth?
a. rate of capacity utilization
b. rate of technological improvement
c. rate of improvement in workforce quality
d. rate of capital expansion
ANS: A PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
28. Which of the following countries has the lowest level of average educational attainment?
a. Canada
b. Italy
c. India
d. Sudan
ANS: D PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
29. Which of the following countries has the highest level of average educational attainment?
279
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or posted to a publicly accessible website, in whole or in part.
a. Canada
b. Italy
c. India
d. Sudan
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
30. Which of the following countries would have the most difficulty raising its level of average educational
attainment?
a. Canada
b. Italy
c. India
d. Sudan
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
31. The lessons of the Japanese recovery were most successfully repeated by
a. the Soviet Union.
b. Argentina and Brazil.
c. Taiwan, Singapore, and Hong Kong.
d. Bulgaria and Romania.
ANS: C PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: The Three Pillars Of Productivity Growth
34. In 2009, which country had the highest level of GDP per hour of work?
a. Spain
b. the United Kingdom
c. France
280
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or posted to a publicly accessible website, in whole or in part.
d. Japan
ANS: C PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
35. From 1979, which country had the highest growth rate of GDP per hour of work?
a. Singapore
b. United Kingdom
c. France
d. Japan
ANS: A PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
36. From 1979, which country had the lowest growth rate of GDP per hour of work?
a. Singapore
b. United States
c. France
d. Japan
ANS: B PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
37. In general, countries with lower rates of growth of labor productivity have
a. lower levels of productivity.
b. higher levels of productivity.
c. lower levels of educational attainment.
d. higher levels of natural resource endowments.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Labor markets
TOP: Levels, Growth Rates, and The Convergence Hypothesis
39. Which of the following countries would find it easiest to achieve rapid growth in per capita GDP?
a. United States
b. United Kingdom
c. France
d. Mexico
281
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or posted to a publicly accessible website, in whole or in part.
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
40. In general, as productivity levels increase, the potential for productivity growth
a. decreases.
b. increases.
c. remains the same.
d. increases if GDP increases.
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
41. In general, as productivity levels decrease, the potential for productivity growth
a. decreases.
b. increases.
c. remains the same.
d. decreases if GDP decreases.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
43. The productivity growth rates of poorer countries tend to be ____ than those of richer countries.
a. higher
b. lower
c. increasing slower
d. decreasing faster
ANS: A PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
44. The productivity growth rates of richer countries tend to be ____ than those of poorer countries.
a. higher
b. lower
c. increasing faster
d. decreasing faster
282
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or posted to a publicly accessible website, in whole or in part.
ANS: B PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
45. The shrinking gap between the income levels of poor and rich countries is known as the
a. conservative hypothesis.
b. divergence hypothesis.
c. convergence hypothesis.
d. confluent hypothesis.
ANS: C PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
46. Identify the main reason to expect convergence in the long run.
a. Low-productivity countries learning from high-productivity countries
b. Rapid growth in the supply of capital in low-productivity countries
c. Educational attainment rising quickly in low-productivity countries
d. Economic complacency and mismanagement in high-productivity countries
ANS: A PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
47. One of the factors causing the shrinking gap between rich and poor countries is
a. learning by poor countries.
b. increasing resource discoveries.
c. increasing populations in poor countries.
d. transfers of income from rich countries.
ANS: A PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
49. Imitation as a strategy for acquiring new technology is based on the difference in effort between
a. creating it and thinking of it.
b. creating it and looking it up.
c. looking it up and writing it down.
d. discovering it and innovating it.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
283
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
50. On a graph with time on the horizontal axis and real GDP per capita on the vertical axis, the income
levels of poorer countries are
a. diverging more from the incomes of rich countries.
b. maintaining a constant gap with the incomes of richer countries.
c. crossing the line representing richer countries.
d. coming closer to the line representing richer countries.
ANS: D PTS: 1 DIF: Moderate NAT: Reflective
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
52. In order to improve living standards for future generations, the economy must
a. sacrifice consumer goods today.
b. reduce its investment goods.
c. increase government spending.
d. reduce growth in the population.
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
53. Given the economy's existing resources and technology, the only way to enjoy more consumer goods
today is to
a. devote more resources to investment goods today.
b. accumulate more capital today.
c. have a slower economic growth rate in the future.
d. devote more resources to consumer goods in the future.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: Levels, Growth Rates, and The Convergence Hypothesis
284
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or posted to a publicly accessible website, in whole or in part.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
56. Capital is a(n) ____ variable and investment is a(n) ____ variable.
a. physical, financial
b. stock, flow
c. asset, liability
d. flow, stock
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
59. Most of the investment decisions in the U.S. economy are made by
a. consumers.
b. businesses.
c. governmental institutions.
d. international financial agencies.
ANS: B PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
c. borrowing.
d. tax reductions.
ANS: C PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
62. Devoting more of a country's resources for producing consumer goods means
a. economy is using it resources for future production.
b. fewer resources to producing investment goods.
c. country will grow more rapidly in the future.
d. productivity of the invested capital is extremely high.
ANS: B PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
286
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or posted to a publicly accessible website, in whole or in part.
66. Because business firms often finance new investments with borrowed money, a key determinant of
investment spending is
a. tax rates.
b. the price level.
c. the rate of inflation.
d. the real interest rate.
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
67. The profit earned from selling an asset for more than you paid for it is called
a. capital gains.
b. the real interest rate.
c. depreciation.
d. appreciation.
ANS: A PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
68. Capital gains are profits that you earn on the sale of your
a. labor.
b. money.
c. financial asset.
d. economics textbook.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
72. During the mid to late 1990s, the incentives for investment spending were provided by rising
a. aggregate demand.
b. real interest rates.
c. levels of corporate taxes.
d. levels of capital gains taxes.
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
73. High levels of sales that spur high levels of investment spending is an example of a
a. vicious circle.
b. virtuous circle.
c. convergence circle.
d. divergence circle.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
74. Low levels of sales that cause low levels of investment spending is an example of a
a. vicious circle.
b. virtuous circle.
c. convergence circle.
d. divergence circle.
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
75. Laws that assign owners the rights to use assets as they see fit are called
a. human rights.
b. economic rights.
c. property rights.
d. government rights.
ANS: C PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
288
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or posted to a publicly accessible website, in whole or in part.
b. lower levels of real interest rates.
c. higher levels of investment spending.
d. higher levels of real interest rates.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Encouraging Capital Formation
78. Studies of data support the view that higher levels of education are associated with higher levels of real
a. interest rates.
b. per capita GDP.
c. price inflation.
d. income decline.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
80. Lower levels of education and training are often associated with low levels of
a. production.
b. productivity.
c. inflation.
d. both a and b.
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
81. In contrast to richer countries, most residents of poorer nations will have
a. only some primary education.
b. primary and secondary education.
c. higher education.
d. higher levels of productivity.
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
82. In contrast to poorer countries, most residents of middle-income countries will have
a. universal primary education.
b. universal secondary education.
c. universal higher education.
d. lower levels of productivity.
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
289
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or posted to a publicly accessible website, in whole or in part.
83. In the United States, the average level of educational attainment is approximately a
a. primary education.
b. secondary education.
c. higher education.
d. graduate-level education.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
85. In most countries, primary and secondary education is the responsibility of the
a. private business sector.
b. religious institutions.
c. government sector.
d. household.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
87. In the United States, the wage premium for college education has been
a. decreasing since 1980.
b. increasing since 1980.
c. higher for males.
d. decreasing since 1990.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
d. all of the above
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
90. The wage premium in the United States has risen consistently starting in
a. 1973.
b. 1975.
c. 1978.
d. 1983.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
91. If a larger percentage of Americans attended college, the wage premium would probably
a. continue rising.
b. continue falling.
c. rise.
d. fall.
ANS: D PTS: 1 DIF: Difficult NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
92. As the economy becomes more technologically sophisticated, the wage premium can be expected to
a. continue rising.
b. continue falling.
c. rise.
d. fall.
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
93. The expansion of information technology and the increasing complexity of the economy should make
the wage premium
a. continue rising.
b. continue falling.
c. rise.
d. fall.
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
291
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or posted to a publicly accessible website, in whole or in part.
94. The experience of the Soviet Union proves that higher education
a. always leads to productivity increases.
b. always raises per capita GDP growth.
c. has different effects.
d. has positive effects.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
95. The lack of a universal productivity effect of higher education was demonstrated by the experience of
a. the United Kingdom.
b. Ireland.
c. France.
d. the Soviet Union.
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
96. On-the-job training is the one area of education in the United States most influenced by the
a. business sector.
b. government sector.
c. household sector.
d. foreign sector.
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
97. The business sector in the United States has the most influence on
a. primary education.
b. on-the-job training.
c. teacher training.
d. higher education.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
98. Mandated on-the-job training is seen in the United States mainly as a(n)
a. useful spur to economic growth.
b. proper use of legislative power.
c. unwarranted governmental interference.
d. necessary requirement for increased productivity.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
99. The type of human capital formation that occurs in the business sector is called
a. vocational education.
b. business education.
c. on-the-job training.
d. productivity enhancement.
292
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Improving Education And Training
100. Getting more output from a given amount of inputs is usually the result of increases in
a. the labor force.
b. technology.
c. the capital stock.
d. investment.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
101. Increases in the supply of scientists and engineers can increase the level of
a. investment.
b. consumption.
c. government spending.
d. technology.
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
102. Technological change in modern societies is most likely the result of increases in
a. machine building.
b. more natural resource use.
c. education.
d. the labor force.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
103. The new growth theory emphasizes the critical role of ____ in modern economic growth.
a. new machinery
b. new knowledge
c. new natural resources
d. new government programs
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
104. The new growth theory would be most likely to lend support for increased government support for
a. land acquisition.
b. natural resource development.
c. stricter environmental standards.
d. higher education.
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
105. Which department in a modern university would most likely advertise itself as a promoter of modern
growth theory?
a. computer science
293
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
b. accounting
c. economics
d. history
ANS: A PTS: 1 DIF: Moderate NAT: Reflective
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
106. The school of engineering at a modern university would be a supporter of the new
a. consumption theory.
b. growth theory.
c. monetary theory.
d. construction theory.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
107. The new growth theory helps attract foreign students to study in
a. the former Soviet Union.
b. France.
c. the United States.
d. the Peoples Republic of China.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
108. To promote rapid economic growth, the new growth theory would argue for increased scholarships in
a. women's studies.
b. deconstructionist literature.
c. post-modern sociology.
d. biology.
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
109. Higher rates of productivity growth are most closely associated with higher rates of
a. consumer spending.
b. investment spending.
c. government spending.
d. import spending.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
294
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
111. The act of discovering a new production process would be called
a. invention.
b. innovation.
c. investment.
d. development.
ANS: A PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
112. The act of putting a new product on the market in order to make profits is called
a. invention.
b. innovation.
c. investment.
d. development.
ANS: B PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
116. The U.S. government attempts to spur research and development activities through
a. monetary policy.
b. interest rate policy.
c. export subsidy policy.
d. tax policy.
295
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
ANS: D PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
117. U.S. government policy to stimulate research and development activities would be most likely to
succeed if it involved
a. interest rate policy.
b. corporate tax policy.
c. personal income tax policy.
d. payroll tax policy.
ANS: B PTS: 1 DIF: Moderate NAT: Reflective
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
120. Nearly half of federal government research and development spending takes place in the
a. National Science Foundation.
b. National Aeronautics and Space Administration (NASA).
c. Department of Defense.
d. Federal Office of Technology Policy.
ANS: C PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: Growth Policy: Spurring Technological Change
121. Compared to the 1948 to 1973 period, the period from 1973 to 1995 can be characterized as a period of
a. faster real GDP growth.
b. faster labor productivity growth.
c. slower labor productivity growth.
d. lower labor force growth.
ANS: C PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
296
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
122. Long-term productivity growth trends have resulted in the
a. increased predominance of the British economy.
b. relative decline of the U.S. relative to the U.K.
c. relative decline of the Japanese economy.
d. relative growth of the Japanese economy.
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
123. From 1973 to 1995 the growth rate of labor productivity in the U.S. was approximately
a. −0.8%.
b. 1.4%.
c. 2.9%.
d. 5.1%.
ANS: B PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
125. Over long periods of time, labor productivity growth rates must differ by at least ____ percent to yield
significant differences in standards of living.
a. 1
b. 5
c. 10
d. 15
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
126. Which of the following was not a factor that contributed to improved productivity from 1995 to 2009?
a. surging investment
b. falling energy prices
c. advances in information technology
d. decreased costs for higher education
ANS: D PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
297
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
127. Which period of recent U.S. history shows the lowest rates of productivity growth?
a. 1948-1973
b. 1973-1995
c. 1995-2000
d. All periods had similar growth rates.
ANS: B PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
128. One reason given for the U.S. productivity slowdown in the period from 1973-1995 was
a. declining energy prices.
b. increasing energy prices.
c. increasing investment spending.
d. increasing government spending.
ANS: B PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
129. In contrast to the United States, countries like Japan and Germany have
a. higher rates of saving and investment.
b. higher rates of saving but lower rates of investment.
c. lower rates of saving but higher rates of investment.
d. lower rates of saving and investment.
ANS: A PTS: 1 DIF: Moderate NAT: Reflective
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
130. An explanation for the slowdown in U.S. productivity growth in the 1973-1995 period was higher oil
prices caused by
a. the CIA.
b. the WTO.
c. the IMF.
d. OPEC.
ANS: D PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
131. The argument that rising energy prices caused the decline in U.S. productivity in the 1970s is made less
believable due to the
a. falling level of saving in the 1970s.
b. falling level of energy prices in the 1980s.
c. rising level of energy prices in the 1980s.
d. rising level of energy prices in the 1990s.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
298
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
132. The productivity slowdown in the U.S. from 1973 to 1995
a. can be explained easily with economic theory.
b. continued into the third millennium.
c. still confuses economists.
d. was a continuation of the slowdown from 1948 to 1973.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
133. Higher energy prices can be used to explain the productivity slowdown in the period from
a. 1948 to 1973.
b. 1973 to 1995.
c. 1973 to 1980.
d. 1995 to 2000.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
134. Higher energy prices can be used to adequately explain the productivity slowdown in
a. the United States and the rest of the world.
b. the United States but not the rest of the world.
c. the rest of the world but not the United States.
d. neither the United States nor the rest of the world.
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
135. Workforce explanations of the productivity changes in the 1973-1995 period include
a. rising SAT scores.
b. declining SAT scores.
c. rising educational attainment.
d. falling levels of average educational attainment.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
136. From the late 1960s to the late 1980s, SAT scores in the United States
a. help explain the productivity increases.
b. rose consistently throughout the period.
c. declined throughout the period.
d. indicated improving workforce quality.
ANS: C PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
299
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
137. From the late 1960s to the late 1980s, in the United States SAT scores
a. and graduation rates increased.
b. and graduation rates decreased.
c. and school attendance rates decreased.
d. decreased and school attendance rates increased.
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
138. Workforce quality arguments are very difficult to prove for the period of 1970 to 1990 because during
that period SAT scores
a. and graduation rates increased.
b. increased and graduation rates decreased.
c. and school attendance rates decreased.
d. decreased and school attendance rates increased.
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
139. A major contributor to the slowdown in U.S. labor productivity during the 1973-1995 period was
a. capital spending.
b. technological change.
c. labor force growth.
d. investment spending.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
140. A constant contributor to labor productivity growth during the entire 1948-2000 period was
a. capital formation.
b. technological change.
c. labor force growth.
d. government spending.
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
141. Labor productivity growth in the United States during the 1973-1995 period could be explained by a
____ slowdown.
a. labor force
b. capital formation
c. technological
d. population growth
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
300
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
142. The information technology revolution seems to have had its greatest positive effect on labor
productivity growth in the ____ period.
a. 1948-1973
b. 1973-1995
c. 1995-2005
d. 1948-2005
ANS: C PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
143. The productivity speed-up of the 1950s and the 1960s could have been caused by
a. wartime innovations.
b. civilian innovations after World War II.
c. industrial innovations spurred by the Korean and Vietnam conflicts.
d. decreases in the rate of population growth.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
146. Falling energy prices could explain rising labor productivity in the 1990s
a. and the 1980s.
b. and the 1970s.
c. but not the 1980s.
d. but not the 1970s.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
301
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
147. All of the following are reasonable explanations of the labor productivity speed-up in the United States
except
a. labor force quality.
b. technological change.
c. investment spending.
d. research and development.
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
148. The labor productivity speed-up in the United States could be explained by a delayed
a. educational benefit.
b. technology benefit.
c. military spending benefit.
d. baby boom benefit.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
149. Two of the three pillars of labor productivity growth responsible for the changes in the United States
after 1995 are technological change and
a. labor force improvement.
b. labor force growth.
c. capital formation.
d. consumption growth.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
150. Compared to the price of long-distance telephone calls, college tuition in the United States has
a. fallen.
b. risen.
c. stayed the same.
d. risen at the same rate as the CPI.
ANS: B PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
151. Compared to college tuition, the prices of automobiles in the United States have
a. fallen.
b. risen.
c. stayed the same.
d. risen at the same rate as the CPI.
ANS: A PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
302
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
TOP: The Productivity Slowdown and Speed-Up in The United States
152. According to the cost disease of the personal services, service activities that require direct personal
contact
a. tend to fall in price relative to other goods and services.
b. tend to rise in price relative to other goods and services.
c. follow price patterns similar to other goods and services.
d. tend to move up and down in price ignoring the rest of the market.
ANS: B PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
153. Which price would you expect to rise the most in a high-income growing economy?
a. semiconductors for personal computers
b. tickets to a ballet performance
c. passenger automobiles
d. Blu-ray players
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
154. Real wages in the United States tend to rise at the same rate as
a. prices.
b. tax rates.
c. average productivity levels.
d. inflation.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth
TOP: The Productivity Slowdown and Speed-Up in The United States
156. Which of the following are problems that may limit economic growth in developing countries?
a. geography
b. health
c. governance
d. all of the above.
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth in Developing Countries
303
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
157. Which of the following is an explanation for why some poor countries suffer from lower productivity
growth?
a. Too much saving has lead to the accumulation of capital in poor countries.
b. The adoption of technology too quickly hurts the labor force in poor countries.
c. Primary education is universal in poor countries.
d. Poor countries have lower capital stocks.
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
LOC: Productivity and growth TOP: Growth in Developing Countries
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
d. development assistance inflows from developed countries.
ANS: B PTS: 1 DIF: Easy NAT: Analytic
LOC: Productivity and growth TOP: Growth in Developing Countries
163. When actual GDP does not rise as fast as potential GDP, the economy most likely will experience
a. inflation.
b. recession.
c. economic growth.
d. falling unemployment.
ANS: B PTS: 1 DIF: Moderate NAT: Reflective
LOC: Productivity and growth TOP: From The Long Run To The Short Run
164. A recession will occur if an economy's actual GDP ____ its potential GDP.
a. rises above
b. equals
c. falls below
d. grows faster than
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
LOC: Measuring the Economy TOP: From The Long Run To The Short Run
ESSAY
1. Draw a production function and illustrate the effects of capital investment and technological
improvement on labor productivity.
ANS:
A production function is drawn with the hours of labor input on the horizontal axis and the amount of
output on the vertical axis. The production function is an upward-sloping line from the origin. As capital
stock growth occurs or technological improvement takes place, the production function shifts upward.
Therefore, more output is obtained from the same amount of labor input. This is the definition of
increasing labor productivity: more output with the same quantity of labor input.
ANS:
305
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or posted to a publicly accessible website, in whole or in part.
The three pillars of productivity growth are capital formation, technology, and labor force quality. Each
of the three factors can contribute to increases in the amount of output a given labor force can produce.
Capital refers to physical means of production, such as equipment, factories, computers, and software.
These are the tools with which workers produce output. As the amount of capital available to each
worker increases, his or her ability to produce increases as well. Technology is the process whereby new
means of using equipment contribute to increasing labor output. Usually new technology is embedded in
new equipment, so technological improvement and capital formation are closely linked. Labor force
quality improvement, also known as increasing human capital, is a result of education and training.
Education usually occurs in schools and colleges, whereas training often takes place on the job at the
place of work. Workers with high levels of education usually are more productive and also reap greater
benefits from on-the-job training.
3. What is convergence hypothesis? Why should we expect convergence in the long run?
ANS:
The convergence hypothesis holds that nations with low levels of productivity tend to have high
productivity growth rates, so that international productivity differences shrink over time. In some poor
countries, the supply of capital may be growing very rapidly. In others, educational attainment may be
rising quickly, albeit from a low base. But the main reason to expect convergence in the long run is that
low-productivity countries should be able to learn from high-productivity countries as scientific and
managerial know-how spreads around the world.
ANS:
a. Human capital is the amount of skill embodied in the workforce. It is most commonly
measured by the amount of education and training.
b. Investment is the flow of resources into the production of new capital. It is the labor, steel,
and other inputs devoted to the construction of factories, warehouses, railroads, and other
pieces of capital during some period of time.
c. Capital formation is synonymous with investment. It refers to the process of building up the
capital stock.
d. Property rights are laws and/or conventions that assign owners the rights to use their
property as they see fit (within the law)⎯for example, to sell the property and to reap the
benefits (such as rents or dividends) while they own it.
5. What is the price of investment? How are they related? What has to be done to increase investment?
ANS:
306
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
The real interest rate is the price of investment. Interest rate and investment are negatively related.
Because businesses often borrow to finance their investments, and the real interest rate indicates how
much firm must pay for that privilege. The lower the real rate of interest, the more investment spending
there will be. An investment project that looks unattractive at an interest rate of 10 percent may look
highly profitable if the firm has to pay only 6 percent. The most obvious way to increase investment by
private businesses is to lower real interest rates.
6. Explain the ways in which the government can persuade private businesses to invest more in order to
speed up the process of capital formation?
ANS:
Real interest rates: The amount that businesses invest depends on the real interest rate they pay to borrow
funds. The lower the real rate of interest, the more investment there will be.
Tax provisions: The government also can influence investment spending by altering provisions of the
tax code.
Technical change: If the government can figure out how to spur technological progress, those same
policies will probably boost investment.
Growth of demand: Rapid growth itself can induce businesses to invest more. High levels of sales and
expectations of rapid economic growth create an atmosphere conducive to investment.
Political stability and property rights: Business executives contemplating a long-term investment want
assurances that their property will not be taken from them for capricious or political reasons.
7. Give some possible explanations of the productivity slowdown in the United States that occurred in the
1973-1995 period.
ANS:
Several possible explanations have been offered for the slowdown in labor productivity that hit the
United States in 1973. One of the most common explanations is the increasing price of energy caused by
the OPEC policies of the 1970s. However, this explanation has some flaws since energy prices fell in the
1980s, but productivity did not improve during that period. Another suggested explanation was the
decline in labor force quality. Proponents of this argument point to the declines in SAT scores that
occurred after the late 1960s. However, other indicators of labor force quality such as school attendance
and graduation rates increased during this same time period. The best explanation seems to be a
technology lag caused by the time period needed by businesses to realize the benefits of technological
innovations produced in the 1970s and the 1980s. Such innovations as the personal computer and the
Internet took some time to show a payoff in labor force productivity. An interesting analogy is the
development of electric power early in the twentieth century. It took at least two decades for business
leaders to realize the best ways to use electricity to increase their productivity. So it seems there might
have been a similar "lag" in productivity increases during the 1970s and 1980s while businesses were
figuring out the best ways to use all the advances in information technology and other innovations.
307
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or posted to a publicly accessible website, in whole or in part.
PTS: 1 DIF: Moderate NAT: Reflective LOC: Productivity and growth
8. Discuss that factors that help explain the rapid productivity growth in the United States after 1995.
ANS:
The following factors help explain the surge in productivity:
Surging Investment: New business opportunities in the IT sector and elsewhere, coupled with a strong
national economy, led to a surge in business investment spending in the 1990s.
Energy Prices: For part of this period, especially the years 1996-1998, energy prices were falling. Note
that productivity continued to surge in the early years of this decade, after energy prices had started to
rise.
Advances in Information Technology: Computers became faster and much, much cheaper⎯as did
telecommunications equipment and services. The Internet and corporate intranets became
commonplace. Some also point out that it probably took American businesses some time to learn how to
use the computer and telecommunications technologies that were invented and adopted between, say,
1980 and the early 1990s.
9. What is the "cost disease of personal services" phenomenon and why does it help explain why tuition
rates keep going up so fast?
ANS:
One of the curious developments in modern economies is that certain products and services get
relatively cheaper while others keep getting more expensive. College education is one of the services
that continues to get more and more expensive as time goes by. The "cost disease of personal services"
explanation sheds much light on the problem and provides a rational answer to the question. The
explanation is based on a few commonly accepted economic facts. First, real wages tend to grow at the
same rate as productivity grows. This is why productivity growth is so important. Productivity is the
main force behind increases in a nation's standard of living. Second, some sectors of the economy have
achieved rapid increases in productivity growth. For example, in the automobile industry, more and
more cars are produced with fewer and fewer workers. Capital formation and technological change
explain this development. In contrast, there has been very little technological change in college
education. A live (or almost live) professor stands in front of a classroom and reads his lecture notes to
semi-interested students. The third factor in the explanation is the rule that real wage rates grow at
roughly the same rate for all workers, the increasingly productive auto workers and the traditional
college professor. So the cost per auto declines as output increases per worker, and cost per professor
rises because the professor's productivity remains constant while his costs rise. The same explanation
holds true for medical services, sports, and entertainment services. It is a function of rising productivity
in some sectors and static productivity in others.
10. Several countries in the world have failed to "converge" with industrialized countries. What does this
mean about their economic growth rates? Explain why poorer countries have failed to "catch up", in
terms of the pillars of economic growth. Are there any special problems facing these countries?
308
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or posted to a publicly accessible website, in whole or in part.
ANS:
If a poor country fails to converge, this means that its economic growth is either equal to or less than that
of the industrialized nations. If a country grows at the same rate, then it will never "catch up". If it grows
at a slower rate, then the gap between poor country and the industrialized countries will widen over time.
Poor countries struggle in terms of capital formation, technological progress, and labor quality - limiting
growth in labor productivity. Capital formation is difficult because poorer countries tend to have
populations that live at subsistence level and are therefore unable to save. While foreign direct
investment from multinational corporations may encourage capital formation and technological
advancement, many poor countries may resent, or even block, the entry of these foreign businesses. In
addition, these multinational corporations may not be interested in investing in poorer countries because
these countries often lack skilled labor. Finally, educational attainment is significantly lower in poorer
countries - often with portions of the population (women and ethnic minorities) receiving little or no
education at all. With rudimentary skills, such as reading and writing, labor quality suffers.
Poorer countries may also suffer from special problems related to geography, health, and governance.
These issues cannot be resolved through making economic choices alone. For example, a country with
access to many different resources (such as the U.S.) is better able to encourage capital formation and
technological progress than one that is resource poor. Lack of health care and exposure to disease and
epidemic severely hinder labor quality. Finally, without political stability, it is difficult to encourage
businesses to invest in physical capital or innovations necessary to spur economic growth.
309
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or posted to a publicly accessible website, in whole or in part.
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hineingetragen worden ist, und dieser Wille ergreift den
Nachgeborenen und reißt ihn mit fort. Man fragt gar nicht nach
Schönheit oder nach einem Formenideal; es ist genug an der
starken inneren Bewegung und an dem Glück, das mit solcher
Bewegung verbunden ist. Dieses Glück müssen nun aber doch auch
die großen Männer gefühlt haben, denen wir die Lehre vom
griechischen Kunstideal verdanken. Auch sie haben vor diesen alten
Bauwerken gestanden; und daß sie nicht blind daran
vorübergegangen sind, davon zeugt wenigstens der Dithyrambus
des jungen Goethe vor dem Straßburger Münster. Warum hat
Goethe diese herrlichen Jugendinstinkte verleugnet, warum hat er
später auf alles Gotische ärgerlich gescholten und es barbarisch
genannt? Wären die Führer alle mit ihren Kunstgedanken naiv vom
Eindruck ausgegangen, hätten sie mehr dem Instinkt geglaubt, so
würden sie den Deutschen doch einen weiten Umweg erspart
haben. Daß sie sich um das Erlebnis der Anschauung nicht groß
gekümmert haben, ist ein Beweis dafür, wie sehr der Verstand das
Gefühl zu tyrannisieren vermag und welche Macht kritische
Tendenzen ausüben können. Viele hundert Jahre haben die
Wunderbauten der Gotik den Deutschen, den Europäern vor Augen
gestanden, und sind für die Kunst doch wie nicht vorhanden
gewesen; der Idealbegriff hat über sie hinweggesehen. Dann und
wann hat es wohl Zeiten der Reaktion nach einem allzu einseitigen
Klassizismus gegeben. Unter den Künstlern im Anfang des
neunzehnten Jahrhunderts ist sogar eine gewisse Schwärmerei für
das Gotische aufgekommen, und auch das Barock ist zeitweise
wieder nachgeahmt worden. Aber es blieb in allen Fällen bei einer
sentimentalischen, halb literarischen und epigonenhaften Romantik.
Erst in der letzten Zeit ist ein tieferes Verständnis für das Gotische
erwacht, in dem Maße, wie die Kenntnis des Anschauungsmaterials
zu dem Gefühl geführt hat, daß die gotischen Kunstwerke
keineswegs Gebilde mittelalterlicher Roheit oder Werke des
Unvermögens sind, sondern nur der Teil einer größeren, über die
ganze Erde verbreiteten Formenwelt, und daß die gotische Form
jener anderen Form, die im griechischen Stil die reinste Ausprägung
erfahren hat, gegenübersteht wie der Winter dem Sommer, wie der
Sturm der Ruhe, daß es sich um eine Formenwelt handelt, die man
schon darum nicht kritisch ablehnen kann, weil sie unter gewissen
Bedingungen überall ähnlich entstanden ist und immer wieder
entstehen wird. Diese Einsicht wird uns erleichtert, weil wir
inzwischen von einer lebendigen Kunst belehrt worden sind und weil
unmittelbar gewonnene Erfahrung ersetzt, was uns von dem
persönlichen Genie Lessings oder Goethes abgeht. Wir haben, mit
Zweifeln und Entzückungen, das Werden und Wachsen einer neuen
Malerei in Europa erlebt, die der Kunst der alten Holländer kongenial
ist. Wir haben gesehen, wie ein neuer Stil in der Kunst entsteht. Eine
solche Lehre aber wirkt zurück auf die Kunstauffassung überhaupt.
Nicht eine Theorie, sondern tausend Erfahrungen haben uns
bewiesen, daß Stilfragen nicht Qualitätsfragen sind, daß jeder Stil
aber eine Kraft ist, eine Kollektivkraft, und daß diese Kraft sich
notwendig auf einen der beiden Pole beziehen muß, in denen die
ganze Welt der Kunst hängt.
Bevor nun im folgenden von den beiden Formenwelten der
Kunst, von dem Gegensatz zweier ewig wiederkehrender
Stilbewegungen gesprochen wird, muß auf die Schwierigkeit
hingewiesen werden, die beiden Formenkomplexe mit kurzen
Worten treffend zu bezeichnen. Der Titel dieses Buches lautet „Der
Geist der Gotik“. Doch ziele ich weit über die Grenzen dessen
hinaus, was in der Kunstgeschichte der gotische Stil genannt wird.
Dem Begriffe der Gotik ist Prähistorisches und Ägyptisches,
Indisches und Barockes, Antikes und Modernes, Fernes und Nahes
eingeordnet worden. Ebenso schwierig ist es, das Gegenspiel des
gotischen Geistes, nämlich jene Formenwelt, die in der Kunst der
alten Griechen am reinsten verkörpert worden ist, mit einem Wort zu
umschreiben. Klassisch darf sie nicht heißen, weil wir uns gewöhnt
haben, alles Meisterhafte so zu nennen, weil ein Werturteil mit
diesem Wort verbunden ist; und klassizistisch darf man nicht sagen,
weil darin ein herabsetzender Nebensinn enthalten ist. Es ist
schlechterdings unmöglich, Bezeichnungen zu finden, die nicht
mißzuverstehen sind; es möge darum bei den Worten „gotisch“ und
„griechisch“ bleiben, um das ganz Allgemeine zu bezeichnen. Das,
worum es sich handelt, muß aus der Fülle der Vergleiche
anschaulich werden. Ist der Leser erst einmal im Besitz einer
sicheren, wenn auch wortlosen Vorstellung, so kann er der
Schlagworte entraten. Das Wesentliche liegt immer jenseits aller
Worte. Notwendig ist nur, daß der Leser sich bei der einmal
gewählten Terminologie beruhigt, daß er sich vom Wort und von dem
damit verbundenen konventionellen Begriff nicht irreführen läßt und
sich bei allen allgemeinen Bemerkungen konkrete Kunstwerke vor
Augen hält.
II. Die beiden Formenwelten der
Kunst