Chapter 11The Big Questions of Economic Growth
1)The so-called "Four Tigers" do not include
A)Japan.
B)Hong Kong.
C)Taiwan.
D)Singapore.
2)For the past 30 years, labor's share of national income _____ while labor productivity ______.
A)fell dramatically, increased
B)remained roughly constant, dropped.
C)remained roughly constant, increased.
D)increased modestly, dropped.
3)The formula for the growth rate of multifactor productivity is
A)a = y + bk +(1-b)n
B)y = a + bk + bn
C)a = y-bk-(1-b)n
D)y = a-b/k(1-b)n
4)In the formula used to measure the growth rate of multifactor productivity, the contribution of labor is represented by
A)bn
B)bk - bn
C)y - bk
D)(1-b)n
5)In the formula for calculating the growth rate of multifactor productivity, the growth rate of labor productivity is represented by
A)y-n
B)b(k-n)
C)bk/n
D)b-n
6)What is the growth rate of multifactor productivity if b = .20, k = 3, n = 1, and y = 4?
A)1.0
B)0.4
C)2.4
D)2.8
7)If the growth rate of multifactor productivity is 2.5, and b = .25, k = 4, n = 2, and y = 5, then the growth rate of labor productivity is
A)3.0
B)8.0
C)2.0
D)2.5
8)If the growth rate of multifactor productivity is 1.775, b = 0.15, n = 1, and y = 3, then the growth rate of capital is
A)1.225
B)1.45
C)4.0
D)2.5
9)If W is the nominal wage rate, N is the quantity of labor, P is the price level, and Y is real income, then labor's share in national income is
A)WN - PY
B)WP/YN
C)WN/PY
D)PY-WN
10)If labor's share of national income is to remain constant, then ______.
A)the real wage must grow faster than labor productivity
B)the real wage must grow at the same rate as labor productivity
C)labor productivity must grow faster than the real wage
D)the combined growth rates of labor productivity and the real wage must equal the growth rate of national income
11)Labor's share of national income is equal to ______.
A)1 - b
B)WN/PY
C)(W/P)/(Y/N)
D)All of the above.
12)If w is the growth rate of the nominal wage rate, p is the inflation rate as measured by the price deflator for total GDP, y is the growth rate for total domestic product, and n is the growth rate of labor, then the growth of real wage is ______.
A)wp/n
B)y - p
C)w - p
D)wn/p
13)Which of the following are not examples of "convergence"?
A)Japan and Europe
B)Individual states within the United States
C)regions within western Europe
D)major nations in Latin America and Western Europe
14)A decrease in labor productivity and the real wage could be caused by
A)a decrease in demand for labor or an increase in the supply of labor.
B)a decrease in the demand for labor or a decrease in the supply of labor.
C)an increase in the demand for or supply of labor.
D)an increase in the demand for labor or a decrease in the supply of labor.
15)Which of the following is NOT the cause of an adverse productivity shock to the labor market?
A)a decline in the quantity of non-labor factors of production
B)a drop in multifactor productivity
C)a decrease in the labor force
D)none of the above
16)A feedback from low real wages to low productivity could be caused by
A)an increase in the labor force caused by more immigration.
B)a reduction in the power of labor unions.
C)a reduction in the real minimum wage.
D)increased worker anxiety about job security.
E)all of the above.
17)Some economists believe that the behavior of unemployment in Europe and in the United States during the 1980s and 1990s
A)was the same because both markets experienced adverse labor market shocks.
B)differed because the real wage in Europe was rigid.
C)was the same because the real wage in Europe and the United States moved together.
D)differed because the United States experienced adverse labor market shocks but Europe did not.
18)If the supply of labor increases while demand for labor is unchanged,
A)the real wage and labor productivity will increase.
B)the real wage will decrease and labor productivity will increase.
C)the real wage will increase and labor productivity will decrease.
D)the real wage and labor productivity will decrease.
19)Which of the following will cause slower growth in labor productivity?
A)decreased growth in physical capital
B)decreased growth in human capital such as education and training
C)decreased growth in government-financed infrastructure such as highways and airports
D)A and C
E)all of the above
20)Which of the following is not one of the potential sources of lower growth in productivity cited by Gordon?
A)falling productivity in the public utilities industry
B)wasted resources in the construction of unnecessary infrastructure
C)increases in energy prices
D)a decrease in growth of the capital stock
21)According to Gordon, which of the following is not a plausible explanation for a decrease in the measured growth of capital per worker in the U.S. after 1973?
A)higher inflation causes overtaxation and discourages saving
B)increased labor force participation by women
C)slower growth in the capital stock
D)lower real wages in response to supply shocks in the 1970s
22)William Nordhaus' depletion hypothesis
A)is an attempt to explain the drop in the multifactor productivity growth rate between 1913 and 1964.
B)suggests that depletion of natural resources may explain part of the drop in multifactor productivity growth.
C)suggests that a drop in the rate at which new inventions are made may explain part of the drop in multifactor productivity.
D)b and c
E)all of the above
23)According to Harvard economist Zvi Griliches, the measured productivity slowdown
A)is due to the depletion of resources and ideas after 1964.
B)is partly an illusion and productivity may still be growing at a healthy pace.
C)understates the real drop in productivity by a wide margin.
D)none of the above.
24)According to Harvard economist Zvi Griliches, the growth of output is relatively easy to measure in which of the following sectors?
A)mining
B)construction
C)finance
D)medical care
25)According to Harvard economist Zvi Griliches, the growth of output is relatively hard to measure in which of the following sectors?
A)manufacturing
B)agriculture
C)government
D)transportation
26)Zvi Griliches's hypothesis regarding the growth of productivity is based on the argument that
A)productivity became more difficult to measure after 1972.
B)computer investment has taken place primarily in sectors where productivity is hard to measure.
C)the service sector has increased in importance.
D)A and C.
E)all of the above.
27)The hypothesis advanced by Zvi Griliches to explain changes in productivity growth is referred to as the
A)depletion hypothesis.
B)multifactor productivity hypothesis.
C)hard-to-measure hypothesis.
D)adverse supply shock hypothesis.
28)Relative to the United States, Europe has
A)caught in output per capita.
B)caught up in growth of labor productivity.
C)faster job growth.
D)all of the above.
29)Relative to the United States, Europe has
A)higher unemployment.
B)slower job growth.
C)higher real wage growth.
D)A and B.
E)all of the above.
30)Relative growth rates of the standard of living in the U.S. and Europe indicate that workers in ______have chosen to "spend" ______of their higher productivity on leisure rather than on consumption of market goods and services.
A)Europe, a significant part
B)the U.S., a significant part
C)Europe, almost none
D)the U.S., almost all
31)Comparison of the European and U.S. labor markets suggests that
A)it is relatively cheap to hire workers in the United States.
B)the U.S. labor market is more "flexible" than the European labor market.
C)job security and income equality are greater in the European labor market.
D)A and B.
E)all of the above.
32)By comparison to U.S. labor market policies, European labor market policies promote
A)greater unemployment and job security.
B)slower real wage growth and greater income inequality.
C)greater job opportunities for low-skill workers and greater bargaining power for workers.
D)higher real minimum wages and slower real wage growth.
33)The labor supply shock hypothesis suggests that
A)the United States and Europe are following similar labor market policies.
B)there is a one-way causation from labor productivity to real wage growth.
C)slow real wage growth and slow productivity growth are simultaneously determined by the labor market system.
D)B and C.
E)none of the above.
34)The U.S. record is superior to that of Europe in ______.
A)growth in real productivity.
B)real wage growth
C)growth in employment
D)All of the above
35)The relative flexibility of the United States labor market explains why ______in the United States than in Europe.
A)income inequality is greater
B)real wages grow more slowly
C)unemployment is lower
D)all of the above
36)Which of the following policies have been suggested as ways to boost the growth of productivity?
A)tax cuts to boost saving and investment
B)reducing the budget deficit by raising taxes and cutting expenditures
C)increasing public investment in education
D)redesigning and scaling back the regulatory apparatus of the federal government
E)all of the above
37)Productivity growth slowed rapidly after 1973. Bruno and Sachs argue that the slowdown is partially explained by
A)reduced growth in capital per capita since increasing numbers of women entered the labor force.
B)the reduction in savings rates caused by inflation and the U.S. tax system.
C)the "residual" nature of technological change.
D)the rapid increase in the relative price of energy.
38)The simplest calculation of the growth rate of multifactor productivity starts with the growth rate of real GDP and then
A)subtracts the growth rate of labor.
B)subtracts the growth rate of capital.
C)subtracts the growth rate of labor and some fraction of the growth rate of the capital-labor ratio.
D)adds the growth rate of labor and then subtracts the depreciation and population growth rates.
39)In calculating multifactor productivity growth, the elasticity of output to changes in capital (given as "b" in the textbook) is assumed to be
A)one minus the population growth rate.
B)the depreciation rate.
C)the share of capital income in GDP.
40)The period between ______is commonly regarded by economists as a "golden age" of rapid productivity growth in the U.S.
A)1898 and 1929
B)1920 and 1940
C)1933 and 1965
D)1948 and 1973
41)After 1979 there was an upsurge in labor productivity growth in the U.S. _____ sector, mainly coming from the _____ industry.
A)manufacturing, computer
B)manufacturing, machine tool
C)nonmanufacturing, edible oil
D)nonmanufacturing, financial services
E)nonmanufacturing, book publishing
42)The slowdown in labor productivity growth from 1973 to 1995 _____ matched by a similar slowdown in MFP growth, suggesting that the growth rate of capital had _____ to do with the productivity problem.
A)was, much
B)was, little
C)was not, much
D)was not, little
43)Dating the start of falling labor productivity growth in 1973 is very suggestive of this explanation for it: _____ energy prices and ______use of energy per worker.
A)higher, decreased
B)higher, increased
C)lower, decreased
D)lower, increased
44)There is some evidence that demographic changes in the composition of the work force are _____ the growth rate of labor quality, and thus _____ the growth rate of output per labor hour.
A)raising, decreasing
B)raising, increasing
C)lowering, decreasing
D)lowering, increasing
45)What is the ratio that defines labor productivity?
A)(Y/N)
B)(Y/Q)
C)(Y/A)
D)(Y/K)
Answer: A
46)What ratio defines the standard of living?
A)(Y/N)
B)(Y/K)
C)(Y/A)
D)(Y/Q)
Answer: D
47)Which of the following is the growth rate of the standard of living?
A)y - q
B)y - n
C)y - a
D)y - b
Answer: A
48)The standard of living rises at a slower pace than labor productivity if
A)n = q
B)n < q
C)n > q
D)The standard of living is not affected by the relative size of n and q
Answer: B
49)The standard of living rises at a faster pace than labor productivity if
A)n = q
B)n < q
C)n > q
D)The standard of living is not affected by the relative size of n and q
Answer: C
50)Which of the following did not contribute to the European experience of the past few decades where the stand of living rose more slowly than labor productivity?
A)longer vacations
B)higher unemployment
C)higher participation rates
D)All of the above
Answer: C
51)The production function Y = AKbN1 – b written in terms of growth rates is
A)y = a - bk - (1-b)n
B)y = a + bk + (1-b)n
C)y = a - bk + (1-b)n
D)y = a + bk - (1+b)n
Answer: B
52)Which of the following is the formula for the growth rate of multifactor productivity written so that the first term in the equation represents the growth rate of labor productivity?
A)y + bk + (1-b)n
B)y = a + bk + (1-b)n
C)a = y – bk – (1-b)n
D)a = (y – n) – b(k – n)
Answer: D
53)What type of economic conditions are summarized by the variable a?
A) conditions other than changes in capital and labor that change productivity
B) urbanization
C) governmental regulations
D) All of the above
Answer: D
54)What type of economic conditions are summarized by the variable a?
A) changes in labor productivity
B) changes in capital productivity
C) technological change
D)All of the above
Answer: C
55)MFP growth represented by a will be lower than the growth of labor productivity if
A)k > n
B)k < n
C)k = n
D)None of the above. The relative size of k and n do not affect MFP growth.
Answer: A
56)MFP growth represented by a will be higher than the growth of labor productivity if
A)k > n
B)k < n
C)k = n
D)None of the above. The relative size of k and n do not affect MFP growth.
Answer: B
57)If 1 - b = WN/PY where W is the nominal wage rate, N is the quantity of labor input, and PY is total income in nominal terms, then labor’s share of national income grows if
A)(w - p) > (y - n)
B)(w - p) < (y - n)
C)(w - n) > (y - p)
D)(w - n) < (y - p)
Answer: A
58)If 1 - b = WN/PY where W is the nominal wage rate, N is the quantity of labor input, and PY is total income in nominal terms, then labor’s share of national income shrinks if
A)(w - p) > (y - n)
B)(w - p) < (y - n)
C)(w - n) > (y - p)
D)(w - n) < (y - p)
Answer: B
59)Which of the following would cause labor's share of national income to increase?
A)labor productivity increases less rapidly than the real wage rate.
B)labor productivity increases more rapidly than the real wage rate.
C)labor productivity has increased at the same rate as the real wage rate.
D)labor’s share of national income is not affected by the relative growth rates of labor productivity and the real wage rate.
Answer: B
60)Which of the following would cause labor's share of national income to decrease?
A)labor productivity increases less rapidly than the real wage rate.
B)labor productivity increases more rapidly than the real wage rate.
C)labor productivity has increased at the same rate as the real wage rate.
D)labor’s share of national income is not affected by the relative growth rates of labor productivity and the real wage rate.
Answer: A
61)The Solow model predicts that the standard of living in poorer nations will converge on that of richer nations through rapid capital formation that raises output per person. The introduction of technological change to the model ______change this prediction because technology ______assumed to be freely available to all countries.
A)does, is
B)does, is not
C)does not, is not
D)does not, is
Answer: D
62)The key prediction of the Solow model adapted to include technological change______been born out, i.e., with a few exceptions convergence ______a reality.
A)has not, is not
B)has not, is
C)has, is not
D)has, is
Answer: A
63)One of the shortcomings of the Solow model is that it
A)treats technological change as freely available to all countries
B)does not treat technological change as freely available to all countries
C)treats technological change as an endogenous variable
D)treats technological change as the only source of economic growth
Answer: A
64)Which of the following is a method by which a poor country might import technological change without having to incur the heavy expense of research and development (not to mention human and physical capital formation) out of its own saving?
A)Copy modern products made in rich countries
B)Purchase imported machinery that embodies the latest technology
C)Obtain investment by foreign firms
D)All of the above.
Answer: D
65)Which of the following methods of importing technological change is available to a poor country which Gordon describes as being caught in the “poverty trap”?
A)Copy modern products made in rich countries
B)Purchase imported machinery that embodies the latest technology
C)Obtain investment by foreign firms
D)None of the above.
Answer: D
66)Which of the following is not an exogenous factor affecting economic growth that countries caught in a “poverty trap” might utilize to encourage economic growth?
A)Human capital
B)Political capital
C)Infrastructure
D)Geographical location
Answer: A
Answer: B
67)How does Gordon integrate the exogenous factors affecting economic growth into the production function for an economy?
A)Y = A(G,R,H) F(K,P,T,N)
B)Y = A(G,P,T) F(K,R,H,N)
C)Y = A(G,P,T,R) F(K,H,N)
D)Y = A(P,T,K) F(G,R,H,N)
Answer: B
68)In the production function Y = A(G,P,T) F(K,R,H,N), the exogenous factors are
A)G,R,H
B)G,P,T
C)P,T,K
D)P,R,G
Answer: C
69) In the production function Y = A(G,P,T) F(K,R,H,N), the factors that affect the entire production process are
A)G,R,H
B)G,P,T
C)P,T,K
D)KRHN
Answer: B
70)Gordon notes the substantial slowdown in the growth of labor productivity in the U.S. from an annual rate of ______for the period 1948-1973 to ______for the period 1973-1995.
A)2.8 %, 1.57%
B)4.8%, 2.33%
C)1.8%, 1.25%
D)3.7%, 2.39%
Answer: A
71)Gordon notes that along with slow labor productivity growth in the period 1973-1995, real wages also grew slowly. What sort of productivity shocks are consistent with this explanation of the link between real wage growth and the growth of labor productivity?
A)Productivity shocks which decrease supply of labor given the demand for labor.
B)Productivity shocks which increase supply of labor given the demand for labor.
C)Productivity shocks which increase demand for labor given the supply of labor
D)Productivity shocks which decrease demand for labor given the supply of labor
72)What sort of productivity shocks would cause lower real wage growth and result in lower growth in labor productivity?
A)Productivity shocks which decrease supply of labor given the demand for labor.
B)Productivity shocks which increase supply of labor given the demand for labor.
C)Productivity shocks which increase demand for labor given the supply of labor
D)Productivity shocks which decrease demand for labor given the supply of labor
73)Between 1973 and 1995, what changes occurred in the labor force and the capital stock that caused a productivity slowdown?
A)the growth of the capital stock and the growth of labor hours increased.
B)the growth of the capital stock and the growth of labor hours slowed.
C)the growth of the capital increased slowed and the growth of labor hours slowed
D)the growth of the capital stock slowed and the growth of labor hours increased
Answer: D
74)Gordon notes the increased growth of labor productivity in the U.S. from an annual rate of ______for the period 1948-1973 to ______for the period 1995-2002.
A)1.69 %, 2.67%
B)2.12%, 2.3%
C)1.57%, 2.46%
D)1.99%, 2.78%
Answer: C
75)To what phenomenon does “Solow’s Paradox” refer?
A)The failure of the Solow growth model to incorporate endogenous growth variables