Archive for November 2017

What can low-income countries do in order to increase the amount of loanable funds available to firms for investment projects such as new factories or improved technology?

Naim 08:12

What can low-income countries do in order to increase the amount of loanable funds available to firms for investment projects such as new factories or improved technology?



A. provide savings incentives
B. print more money
C. increase the interest rate on borrowing
D. all of the above





Answer: A

Which of the following is a way in which governments can directly promote savings and investment?

Naim 08:12

Which of the following is a way in which governments can directly promote savings and investment?




A. Governments can limit foreign competition by imposing tariffs and quotas on trade
B. Governments can expand primary and secondary schools
C. Governments can create tax incentives for both businesses and individuals
D. Governments can promote vaccinations for children and improve access to clean water



Answer: C

Does economics answer the question: "Is economic growth good?"

Naim 08:11

Does economics answer the question:
"Is economic growth good?"



A. No. This is a normative question.
B. Yes. We have seen that economic growth is always good
C. No. This is a positive question
D. Yes. We have seen that economic growth is seldom good



Answer: A

Which of the following is a way in which governments can increase productivity through health and education?

Naim 08:11

Which of the following is a way in which governments can increase productivity through health and education?



A. Governments can strengthen property rights and enforce laws
B. Governments can create tax incentives for both businesses and individuals
C. Governments can promote vaccinations for children and improve access to clean water
D. Governments can limit foreign competition by imposing tariffs and quotas on trade



Answer: C

Healthier, more educated workers tend to be more productive. Greater overall productivity per hour worked is a fundamental component of long-term economic growth. However, many very successful individuals often find few opportunities in their own developing countries, and leave them for industrial countries.

Naim 08:11

Healthier, more educated workers tend to be more productive. Greater overall productivity per hour worked is a fundamental component of long-term economic growth. However, many very successful individuals often find few opportunities in their own developing countries, and leave them for industrial countries.

By improving health and education, developing countries can generate economic growth, and increase incomes. This will help combat the prevalence of educated people leaving their home countries for opportunities elsewhere. That is, it will combat

A. the brain drain
B. communism
C. political reform
D. corruption





Answer: A

A free press could help reduce corruption, which would then promote growth, by all of the following except:

Naim 08:11

A free press could help reduce corruption, which would then promote growth, by all of the following except:



A. publishing stories about health issues
B. investigative reporting about corruption among government officials
C. publishing gossip columns about a politician's personal matter
D. strengthening the rule of law and property rights


Answer: C

Economist George Ayittey, in an interview on PBS about economic development in Africa, states that of the 54 African countries, only eight have a free press. For Africa's economic development, Ayittey argues strongly for the establishment of a free press.

Naim 08:10

Economist George Ayittey, in an interview on PBS about economic development in Africa, states that of the 54 African countries, only eight have a free press. For Africa's economic development, Ayittey argues strongly for the establishment of a free press.



A free press will be vital for enhancing
A. health and education
B. technological progress
C. property rights and the rule of law and controlling corruption
D. saving and investment



Answer: C

The government policy that does not increase economic growth is

Naim 08:10

The government policy that does not increase economic growth is




A. incentives to firms in the form of investment tax credits that can take the economy out of a low saving-investment trap
B. foreign trade policy that favors imposing a high tariff on imported high-tech goods
C. better health and education policies that provide free childhood vaccination, water purification, and K-12 public education
D. policy concerning property rights and rules of law that can free the country from corruption and political instability




Answer: B

After attending a December 2008 conference on global poverty, New York Times columnist Nicholas Kristof wrote the following in his column:

Naim 08:10

After attending a December 2008 conference on global poverty, New York Times columnist Nicholas Kristof wrote the following in his column:

I'm also a believer in aid, particularly health and education interventions. But I also believe that business can raise living standards on a scale that aid never can, and that we need to focus more on building manufacturing in poor countries.
How can business raise living standards in poor countries?



A. Increased business activity can increase savings by individuals and investment by firms
B. Rising incomes increase access to education and health
C. Economic growth increases incomes
D. All of the above




Answer: D

In a speech in 2009, President Barack Obama made the following observations:

Naim 08:09

In a speech in 2009, President Barack Obama made the following observations:

"I know that for many, the face of globalization is contradictory...Trade can bring new wealth and opportunities, but also huge disruptions and change in communities."
How does trade bring "new wealth and opportunities"?



A. Countries that are more open to foreign trade and investment are more likely to receive foreign direct investment (FDI)
B. Countries that are more open to foreign trade and investment are more likely to receive foreign portfolio investment
C. Countries that are more open to foreign trade and investment experience wars and revolutions, which increase military contracts and military spending
D. Countries that are more open to foreign trade and investment experience low rates of saving and investment
E. A and B only




Answer: E

The relationship that Raymond Fisman and Edward Miguel found between the extent of corruption in a country and the number of parking violations committed by the country's United Nations delegates in New York isn't perfect. For example, "Ecuador and Colombia both have perfectly clean parking slates, despite the experts' view of them as fairly corrupt places."

Naim 08:09

The relationship that Raymond Fisman and Edward Miguel found between the extent of corruption in a country and the number of parking violations committed by the country's United Nations delegates in New York isn't perfect. For example, "Ecuador and Colombia both have perfectly clean parking slates, despite the experts' view of them as fairly corrupt places."

Does this observation invalidate Fisman and Miguel's conclusions about whether the parking violations data provide evidence in favor of there being a culture of corruption in some countries?


A. yes, because they may have had other results if they included Ecuador and Colombia in their research.
B. no, because their conclusions are generalized and ma not apply to every country
C. no, because delegates from Ecuador and Colombia do not travel by car
D. no, because delegates from Ecuador and Colombia probably paid someone not to ticket them




Answer: B

Developing countries have benefited from globalization, because globalization can do all of the following except

Naim 08:09

Developing countries have benefited from globalization, because globalization can do all of the following except



A. help spread new and advanced technology and aid in capital accumulation int he developing world
B. impose trad barriers and tariffs on imported goods so as to protect domestic industries
C. open the developing countries' market to foreign trade and thus help create a more robust economy
D. take poor countries out of a low saving-investment trap by providing foreign direct investment and foreign portfolio investment




Answer: B

Globalization entails all of the following except:

Naim 08:08

Globalization entails all of the following except:




A. foreign direct investment
B. open trade and technology transfers between countries
C. foreign portfolio investment
D. cultural exchange between nations



Answer: D

Have poor countries been catching up to rich countries?

Naim 08:07

Have poor countries been catching up to rich countries?




A. the rich countries are getting poorer and going down to the level or poor countries
B. there has been no catch-up by andy of the poor countries
C. there has been catch-up among all poor countries
D. there has been catch-up by some poor but industrialized countries




Answer: D

The economic growth model predicts that the

Naim 08:07

The economic growth model predicts that the




A. level of per capita GDP in poor countries will decrease over time and the poor nations will not be able to catch up with the rich nations.
B. rich countries will have stagnant growth and will catch up with the poor countries, so that there will be a convergence toward a "poverty trap"
C. level of per capita GDP in rich countries will increase so fast that it will be difficult for poor countries with low income per capita to ever catch up with the rich countries
D. level of per capita GDP in poor countries will increase faster than rich countries and the poor nations will catch up with the rich nations




Answer: D

Which of the following is a true statement about factors relating to productivity growth in the last decade?

Naim 08:06

Which of the following is a true statement about factors relating to productivity growth in the last decade?



A. Information technology changes have had little measurable impact on U.S GDP growth
B. Average world productivity growth has exceeded U.S. productivity growth
C. United States productivity growth has exceeded average productivity growth in the rest of the world
D. European labor markets are more flexible than U.S labor markets




Answer: C

An Article in the Wall Street Journal observes:

Naim 08:06

An Article in the Wall Street Journal observes:

"For 2008, productivity grew and astounding 2.8% from 2007 even as the economy suffered through its worst recession in decades."
How is it possible for labor productivity - output per hour worked-to increase if output-real GDP-is falling?



A. The "new economy" is based on information technology
B. Faster and less expensive computers have made communication and data processing faster and easier
C. Laptop computers and wireless Internet allow people to work while they are away from their jobs
D. Business record-keeping is now faster and more accurate due to computer technology.
E. All of the above





Answer: E

All of the following contributed to an increase in productivity growth from 1995 to the present except an

Naim 08:06

All of the following contributed to an increase in productivity growth from 1995 to the present except an



A. adoption of a computerized inventory control system by almost every major business
B. enhanced information technology, such as the web and faster data processing via new Microsoft Windows
C improved communication technology, such as cell phones and wireless Internet
D. improvement in workers' skills due to better education and training




Answer: D

Which one of the following does not explain the slowdown in productivity growth from the mid-1970s to the mid-1990s?

Naim 08:05

Which one of the following does not explain the slowdown in productivity growth from the mid-1970s to the mid-1990s?



A. Workers lacked incentives to work hard as their job security was at its lowest
B. There was a decline in labor quality that led to lower labor productivity
C. The method of productivity measurement lacked accuracy
D. An increase in world oil prices contributed to a decline in productivity





Answer: D

Consider the choices below. All of these except one truly represent the record of productivity growth in the United States from 1800 to the present. Find the one that does not belong.

Naim 08:05

Consider the choices below. All of these except one truly represent the record of productivity growth in the United States from 1800 to the present. Find the one that does not belong.



A. Growth of per capital real GDP slowed down considerably between 1973 and 1994
B. The best period for GDP growth was the production boom between 1995 and 2005
C. There was a rapid rise in the growth rate of per capita GDP between 1950 and 1972
D. GDP per capita fell rapidly between 1900 and 1950




Answer: D

New growth theory suggests that the accumulation of knowledge capital can be slowed because knowledge is both nonrival and nonexcludable. How does the federal government intervene in the market to increase the amount of knowledge capital?

Naim 08:05

New growth theory suggests that the accumulation of knowledge capital can be slowed because knowledge is both nonrival and nonexcludable. How does the federal government intervene in the market to increase the amount of knowledge capital?



A. Public education
B. Patents
C. Subsidies
D. All of the above
E. A and B only



Answer: D

The economic growth model explains growth in real GDP per capita in the long run. Because of the importance of labor productivity in explaining economic growth, the economic growth model focuses on the causes of increases in long-run labor productivity. What are the key factors that determine labor productivity?

Naim 08:04

The economic growth model explains growth in real GDP per capita in the long run. Because of the importance of labor productivity in explaining economic growth, the economic growth model focuses on the causes of increases in long-run labor productivity. What are the key factors that determine labor productivity?



A. Efficiency wages
B. Technological change
C. Quantity of capital per hour worked
D. Trade
B. Technological change




Answer: C

This Marketing the Connection argues that a key difference between market economies and centrally planned economies, like the former Soviet Union, is that

Naim 08:04

This Marketing the Connection argues that a key difference between market economies and centrally planned economies, like the former Soviet Union, is that 

"In market economies, decisions about which investments to make and which technologies to adopt are made by entrepreneurs and managers with their own money on the line. In the Soviet system, these decisions were usually made by salaried bureaucrats trying to fulfill a plan formulated in Moscow."
But in large corporations, investment decisions are often made by salaried managers who do not, in fact, have their own money on the line. These managers are spending the money of the firm's shareholders rather than their own money.
The investment decisions of salaried managers int he United States tend to be better for the long-term growth of the economy than were the decisions of salaried bureaucrats in the Soviet Union because:



A. Soviet managers feared losing their jobs if they adopted new technologies
B. U.S. managers are driven by incentives of higher profits, leading them to adopt new technologies
C. U.S. managers face no competition from domestic and foreign firms
D. Soviet bureaucrats concentrated on cutting costs as they faced intense competition from home and abroad




Answer: B

The role of the entrepreneur becomes much more important in the new growth theory - the endogenous growth model-than in the traditional economic growth mode because

Naim 08:03

The role of the entrepreneur becomes much more important in the new growth theory - the endogenous growth model-than in the traditional economic growth mode because




A. Entrepreneurs supply the funds for capital accumulation int he new growth theory.
B. In the traditional growth model, economic growth is caused by an increase in the labor force growth rate.
C. The traditional growth theory focuses on capital accumulation but the new growth theory does not
D. In the new growth theory, entrepreneurs play a key role in the development and adoption of new and sometimes untried technologies


Answer: D

Firms are likely to underinvest in research and development, which slows knowledge capital, slowing economic growth, because

Naim 08:03

Firms are likely to underinvest in research and development, which slows knowledge capital, slowing economic growth, because




A. knowledge capital is both rival and excludable, and no other firms can freely access the research and development of one particular firm
B. they can save that money and invest in capital accumulation, which is much better for growth
C. research and development are expensive and at the firm level, it is subject to increasing returns
D. knowledge capital is both nonrival and nonexcludable; other firms can freely access the research and development of one particular firm





Answer: D

Some economists in the 1950s predicted that the Soviet Union would continue to grow faster than the United States for decades to come because

Naim 08:03

Some economists in the 1950s predicted that the Soviet Union would continue to grow faster than the United States for decades to come because


Part A.

A. in the 1950s, the Soviet Union was investing a very large amount in capital accumulation
B. in the 1950s, the Soviet Union was investing a very large amount in training its labor force
C. in the 1950s, the Soviet Union was investing a very large amount in acquiring knowledge capital
D. in the 1950s, the Soviet Union was investing a very large amount in acquiring new technologies

Part B.

This prediction turned out to be wrong because

A. there was a big workers' strike and the factories were closed for a long time
B. the government increased taxes imposed on businesses, which proved to be a major drawback for economic growth
C. the Soviet Union was engaged in a war with Afghanistan, so most of government spending was on the war
D. there were diminishing returns to capital, so after some time growth slowed down



Answer: Part A
A. in the 1950s, the Soviet Union was investing a very large amount in capital accumulation

Answer: Part B
D. there were diminishing returns to capital, so after some time growth slowed down

Imagine you own a business and that during the next recession you lay off 20 percent of your workforce. Once economic activity picks up and your sales begin to increase, why might you not immediately start rehiring workers?

Naim 08:02

Imagine you own a business and that during the next recession you lay off 20 percent of your workforce. Once economic activity picks up and your sales begin to increase, why might you not immediately start rehiring workers?



A. Before rehiring you would like to make sure that this economic expansion lasts.
B. Due to inflation that occurs during an economic recovery, you will have to pay higher wages to new workers
C. To better protect your self from a future recession, you would like to use more capital intensive technology
D. You would like to recover your profit that you lost during the recession and would not like to increase labor cost.


Answer: A

The Making the Connection gives examples of firms that prospered by expanding during recessions. As we have seen, some firms prosper by expanding during recession.

Naim 08:01

The Making the Connection gives examples of firms that prospered by expanding during recessions. As we have seen, some firms prosper by expanding during recession.


Part A: When firms expand during recessions, they

A. will lose money
B. have to borrow extra funds to finance operation until the economy recovers
C. cannot be certain when recovery will occur and know they could experience prolonged losses
D. can recover any losses when the economy recovers

Part B: A more cautious approach might be advisable in particular industries where
A. wages are high
B. sales are particularly cyclical
C. sales are particularly noncyclical
D. prices fluctuate



Answer: Part A.
C. cannot be certain when recovery will occur and know they could experience prolonged losses

Answer: Part B
B. sales are particularly cyclical

The National Bureau of Economic Research (NBER), a private group, is responsible or declaring when recessions begin and end. The Bureau of Economic Analysis (BEA), part of the federal government, might now want to take on this responsibility. Which one of the following is the most appropriate reason for the BEA's refusal?

Naim 08:00

The National Bureau of Economic Research (NBER), a private group, is responsible or declaring when recessions begin and end.
The Bureau of Economic Analysis (BEA), part of the federal government, might now want to take on this responsibility. Which one of the following is the most appropriate reason for the BEA's refusal?





A. Congress has established that its committees should be responsible for dating recessions.
B. More economists work for the NBER than do for the BEA
C. Because it is part of the government, the BEA could be pulled into politics with the dating of recessions
D. The BEA does not have as much data s the NBER




Answer: C

Many economists agree that this difference is due to all of the following reasons except:

Naim 08:00

Many economists agree that this difference is due to all of the following reasons except:



A. Since the 1950s, the economy has become more service oriented and less dependent on the production of goods.
B. Since the 1950s, the federal government has stabilized the economy by using active fiscal and monetary policies
C. Since the 1950s, people have become more rational and control their spending behavior countercyclically.
D. Since the 1950s, the unemployment insurance program and other government transfer programs have aided the economy.



Answer: C

Consider the following choices. Which of the following choices is correct?

Naim 07:59

Consider the following choices. Which of the following choices is correct?



A. Expansions have become shorter in the second half of the twentieth century compared to the first half
B. Recessions were more severe and lasted longer int he first half of the twentieth century and became shorter and milder in the second half
C. Recessions lasted for a shorter period of time in the first half of the twentieth century than in the second half.
D. Both expansions and recessions last for about the same period of time in the second half of the twentieth century




Answer: B

The following shows the effect of the business cycle on the inflation rate and the unemployment rate:

Naim 07:59

The following shows the effect of the business cycle on the inflation rate and the unemployment rate:



A. The unemployment rate increases and the inflation rate increases during expansion
B. The unemployment rate increases and the inflation rate falls during expansions
C. The unemployment rate increases and the inflation rate falls during recessions
D. The unemployment rate falls and the inflation rate falls during recessions




Answer: C

Potential GDP

Naim 07:57

Potential GDP



A. measures the maximum that a firm is capable of production
B. increases ove time as the labor force grows
C. increases over time as technological change occurs
D. All of the above
E. B and C only



Answer: E

The keys to Botswana's rate of economic growth are not shared by the other countries in the region. The most important contributing factor to Botswana's recent growth is

Naim 07:57

The keys to Botswana's rate of economic growth are not shared by the other countries in the region.
The most important contributing factor to Botswana's recent growth is



A. discovery of oil reserves
B. massive government investment in heavy industries and infrastructure of the country
C. government policies that protect private property rights, freedom of press and democracy, and avoid political instability and corruption
D. government policies that promote export to the developed countries


Answer: C

A study conducted by the Moscow-based management consulting firm Strategy Partners found that average labor productivity in Russia is only 17 percent of labor productivity in the United States. What factors would cause U.S. labor productivity to be nearly size times higher than Russian labor productivity?

Naim 07:57

A study conducted by the Moscow-based management consulting firm Strategy Partners found that average labor productivity in Russia is only 17 percent of labor productivity in the United States.
What factors would cause U.S. labor productivity to be nearly size times higher than Russian labor productivity?



A. The size of the civilian labor force is larger in the U.S.
B. The size of the civilian labor force is larger in Russia, causing diminishing returns to set in
C. The U.S. has more capital available per worker and higher levels of technology
D. Russia overall has a smaller capital stock




Answer: C

Potential real GDP is

Naim 07:56

Potential real GDP is



A. the level of GDP attained when only some films have excess capacity
B. the level of GDP attained when all firms are producing at capacity
C. the level of GDP attained when most firms are producing at capacity and unemployment is low
D. the level of GDP attained when all firms have excess capacity


Answer: B

The two key factors that cause labor productivity to increase over time are:

Naim 07:56

The two key factors that cause labor productivity to increase over time are:



A. the quality of labor per hour worked the level of technology
B. the quantity of capital per hour worked and the level of technology
C. better environmental standards and stricter labor laws
D. the decline in unionization and slacking of labor laws


Answer: B
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