Economic Growth And Productivity - Practice Quiz

1. GDP per capita is

GDP per person.

GDP in real terms.

The same as the GNP.

GDP nominal terms.

GDP adjusted for inflation.

The correct answer is GDP per person. GDP per capita refers to the measure of a country's economic output per person. It calculates the average income or wealth of each individual in a country by dividing the total GDP by the population. This metric provides a better understanding of the economic well-being and standard of living of the population, as it takes into account the size of the population. It is different from GDP in real terms, GDP nominal terms, and GDP adjusted for inflation, as these measures focus on the overall economic output without considering the population size. It is also different from GNP, which includes income generated by a country's residents abroad.

Explanation

The correct answer is GDP per person. GDP per capita refers to the measure of a country's economic output per person. It calculates the average income or wealth of each individual in a country by dividing the total GDP by the population. This metric provides a better understanding of the economic well-being and standard of living of the population, as it takes into account the size of the population. It is different from GDP in real terms, GDP nominal terms, and GDP adjusted for inflation, as these measures focus on the overall economic output without considering the population size. It is also different from GNP, which includes income generated by a country's residents abroad.

2. Human capital consists of

Machines that require workers in order to produce most efficiently.

Any production technique developed by humans.

Workers' education and skills.

Workers in factories.

Workers who can be used instead of machines.

Human capital refers to the knowledge, skills, and abilities that individuals possess, which contribute to their productivity and value in the labor market. It includes the education and skills of workers, indicating that workers' knowledge and expertise are vital components of human capital. This answer correctly identifies that human capital is not limited to machines or production techniques, but rather focuses on the capabilities and qualifications of the workforce.

Explanation

Human capital refers to the knowledge, skills, and abilities that individuals possess, which contribute to their productivity and value in the labor market. It includes the education and skills of workers, indicating that workers' knowledge and expertise are vital components of human capital. This answer correctly identifies that human capital is not limited to machines or production techniques, but rather focuses on the capabilities and qualifications of the workforce.

3. One way that a government can encourage economic growth is by encouraging

Population growth.

Consumption.

Saving and investment.

Imports.

Accumulation of wealth.

Saving and investment are key drivers of economic growth. When individuals and businesses save money, it can be used for investment in productive activities such as building infrastructure, expanding businesses, and developing new technologies. This leads to increased productivity, job creation, and overall economic growth. By encouraging saving and investment, the government can provide incentives such as tax breaks or subsidies, which can further stimulate economic growth. Population growth, consumption, imports, and accumulation of wealth can also have positive effects on the economy, but saving and investment are specifically mentioned as a way for the government to encourage economic growth.

Explanation

Saving and investment are key drivers of economic growth. When individuals and businesses save money, it can be used for investment in productive activities such as building infrastructure, expanding businesses, and developing new technologies. This leads to increased productivity, job creation, and overall economic growth. By encouraging saving and investment, the government can provide incentives such as tax breaks or subsidies, which can further stimulate economic growth. Population growth, consumption, imports, and accumulation of wealth can also have positive effects on the economy, but saving and investment are specifically mentioned as a way for the government to encourage economic growth.

4. Increases in the capital stock will lead to

Decreases in wages and GDP.

Increases in wages and decreases in GDP.

Decreases in wages and increases in GDP.

Increases in wages and GDP.

No change in wages or the GDP.

Increases in the capital stock, such as investments in machinery, technology, and infrastructure, can lead to increases in productivity and efficiency. This, in turn, can lead to higher wages for workers as they become more productive and contribute to higher levels of output. Additionally, the increased capital stock can also lead to an increase in GDP as it allows for higher levels of production and economic growth. Therefore, the correct answer is that increases in the capital stock will lead to increases in wages and GDP.

Explanation

Increases in the capital stock, such as investments in machinery, technology, and infrastructure, can lead to increases in productivity and efficiency. This, in turn, can lead to higher wages for workers as they become more productive and contribute to higher levels of output. Additionally, the increased capital stock can also lead to an increase in GDP as it allows for higher levels of production and economic growth. Therefore, the correct answer is that increases in the capital stock will lead to increases in wages and GDP.

5. Economists compare how rich or poor different nations are by measuring their

GDP.

Debt-to-GDP ratio.

GNP.

GDP per unit of capital.

Per capita GDP.

Economists compare how rich or poor different nations are by measuring their per capita GDP. Per capita GDP refers to the GDP per person in a country, which provides an indication of the average income and standard of living. It allows for a more accurate comparison between nations as it takes into account the population size. Comparing per capita GDP helps economists understand the distribution of wealth and economic well-being among individuals within a country.

Explanation

Economists compare how rich or poor different nations are by measuring their per capita GDP. Per capita GDP refers to the GDP per person in a country, which provides an indication of the average income and standard of living. It allows for a more accurate comparison between nations as it takes into account the population size. Comparing per capita GDP helps economists understand the distribution of wealth and economic well-being among individuals within a country.

6. To determine the change in the capital stock, the level of gross investment must be adjusted for depreciation because some new investment

Is not used immediately.

Replaces existing, but worn out, capital.

Replaces existing workers.

Is more efficient than existing capital.

Is usually unproductive.

The correct answer is "replaces existing, but worn out, capital." When determining the change in capital stock, it is important to adjust for depreciation because some new investment is needed to replace existing capital that has become worn out or obsolete. This means that the level of gross investment must be adjusted to account for the replacement of existing, but no longer functional, capital.

Explanation

The correct answer is "replaces existing, but worn out, capital." When determining the change in capital stock, it is important to adjust for depreciation because some new investment is needed to replace existing capital that has become worn out or obsolete. This means that the level of gross investment must be adjusted to account for the replacement of existing, but no longer functional, capital.

7. A rapid increase in population will result in

An increase in real GDP and per capita GDP.

An increase in real GDP but a decrease in per capita GDP.

A decrease in real GDP but an increase in per capita GDP.

A decrease in both real GDP and per capita GDP.

No change in per capita GDP but a decrease in real GDP.

When there is a rapid increase in population, it leads to an increase in the total output of goods and services in an economy, which is measured by real GDP. However, since the population is growing at a faster rate than the increase in real GDP, the per capita GDP (which is the GDP per person) will decrease. This means that although the overall economic output is increasing, the average income and standard of living for each individual will decline.

Explanation

When there is a rapid increase in population, it leads to an increase in the total output of goods and services in an economy, which is measured by real GDP. However, since the population is growing at a faster rate than the increase in real GDP, the per capita GDP (which is the GDP per person) will decrease. This means that although the overall economic output is increasing, the average income and standard of living for each individual will decline.

8. Technological progress occurs when the economy gets more output

Without using any more capital or labor.

By using more capital per worker.

By using more capital but not more workers.

By using more labor but not more capital.

By using more capital but not more labor.

Technological progress occurs when the economy is able to produce more output without requiring any additional capital or labor inputs. This means that advancements in technology and innovation allow for increased productivity and efficiency, resulting in higher output levels without the need for additional resources. This can lead to economic growth and improved living standards as more can be produced with the same amount of resources.

Explanation

Technological progress occurs when the economy is able to produce more output without requiring any additional capital or labor inputs. This means that advancements in technology and innovation allow for increased productivity and efficiency, resulting in higher output levels without the need for additional resources. This can lead to economic growth and improved living standards as more can be produced with the same amount of resources.