Chap004 - Chapter 04 - Growth and Policy Chapter 04 Growth...

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Chapter 04 - Growth and Policy Chapter 04 Growth and Policy Multiple Choice Questions 1. Assume a production function with only two inputs, capital and labor. In this case, the concept of a diminishing marginal product of capital implies that a. As less capital is being used, more and more labor has to be employed to increase output b. As both labor and capital inputs are increased, output increases but at a decreasing rate C . As the amount of capital is increased and the amount of labor remains fixed, output increases but at a decreasing rate d. As the amount of capital increases and the amount of labor remains fixed, output cannot increase e. Labor inputs have a bigger impact on increasing output than capital inputs Difficulty: Medium 2. Which of the following countries had the HIGHEST cumulative growth rate of GDP per capita between 1950 and 1988? a. China b. India c. Mexico D . South Korea e. United States Difficulty: Easy 3. Which of the following countries had the LOWEST cumulative growth rate of GDP per capita between 1950 and 1988? a. Bangladesh b. Egypt C . Ghana d. Tanzania e. Thailand Difficulty: Easy 4-1
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Chapter 04 - Growth and Policy 4. Which of the following countries had a cumulative growth rate of GDP per capita between 1950 and 1988 that comes closest to that of the United States? a. China b. Indonesia C . Mexico d. Taiwan e. Thailand Difficulty: Easy 5. Which of the following economists did NOT significantly contribute to the debate on exogenous vs. endogenous growth? a. Robert Barro b. Gregory Mankiw c. Robert Lucas D . David Ricardo e. Paul Romer Difficulty: Easy 6. A production function that assumes a diminishing marginal product of capital a. Generates a straight savings line b. Ensures that the savings line is always above the investment requirement line C . Ensures that the savings line and the investment requirement line cross d. Is essential to the endogenous growth model e. Violates important microeconomic principles Difficulty: Medium 4-2
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Chapter 04 - Growth and Policy 7. The concept of diminishing marginal returns implies that a. Output cannot decrease as long as labor is substituted for capital b. Output decreases if either labor or capital is decreased C . Output increases but at a decreasing rate as the amount of labor is increased and the amount of capital remains fixed d. If the capital stock is kept constant, output cannot increase even if more labor is available e. Output increases but only if the amounts of both labor and capital increase Difficulty: Medium 8. The assumption of constant returns to capital alone implies that larger firms should be more efficient than smaller firms. The reason this doesn't necessarily imply a tendency toward monopolization is that a. Most industries are perfectly competitive in nature b. Firms have more inputs than just capital c. Constant returns to capital alone still implies decreasing returns to all factors of production taken together D . If one firms increases its use of capital, other firms can also capture some of the production
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This note was uploaded on 12/05/2011 for the course ECON 201 taught by Professor Dr.matin during the Spring '09 term at Charleston.

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Chap004 - Chapter 04 - Growth and Policy Chapter 04 Growth...

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