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1 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) GDP per head may be an imperfect measure of economic welfare because it excludes _________ |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | the value of leisure |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | externalities |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | untraded goods |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | changes in the distribution of income |
| ![](/olcweb/styles/shared/spacer.gif) | E)![](/olcweb/styles/shared/spacer.gif) | all of the above |
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2 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Potential output can be increased by _____________ or by ______________ |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | increasing the use of labour, increasing the use of land |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | increasing the use of capital, increasing the use of labour |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | increasing the use of land, increasing the use of capital |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | increasing the use of all inputs, technical advances |
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3 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) If a production input is in fixed supply, growth is impossible in the long run |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | TRUE |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | FALSE |
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4 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The neoclassical theory of growth identifies the steady state rate of growth as the _________ just sufficient to keep ____________ constant while labour grows |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | saving, investment |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | capital per person, productivity |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | labour growth, output |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | investment, capital per person |
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5 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) In the neoclassical theory of growth, a higher saving rate leads to __________ |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | a higher growth rate |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | a fluctuating growth rate |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | a lower growth rate |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | no change in the growth rate* |
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6 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The convergence hypothesis states that poor countries grow more slowly than average, but rich countries grow more quickly than average |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | TRUE |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | FALSE |
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7 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Economic growth may depend upon ___________ and ________ |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | Population size, x-efficiency |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | Population age distribution, education |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | Population growth, technical progress |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | Population growth, education |
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8 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The zero-growth proposal argues that it is best to aim for zero-growth in measured GNP to avoid environmental costs |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | TRUE |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | FALSE |
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9 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The growth rates of economies tend to converge because __________ is easier when capital per worker is low and because of ______________ |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | capital-widening, technical innovation |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | capital-widening, catch-up in technology |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | capital-deepening, technical innovation |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | capital-deepening, catch-up in technology |
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10 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The business cycle describes fluctuations in output around the ___________ |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | trend path of output |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | boom |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | recession |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | short-run fluctuations in output |
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11 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) All of the following are parts of the business cycle except __________ |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | boom |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | slump |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | recovery |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | acceleration |
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12 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The political business cycle arises because politicians interfere with the economy for political advantage |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | TRUE |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | FALSE |
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13 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The theory that explains business cycles by the dynamic interaction of consumption and investment demand is the __________ |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | sun spot theory |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | multiplier-accelerator model |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | Solow theory |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | New classical theory |
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14 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The multiplier-accelerator model assumes _________ depends on ___________ |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | consumption, expected future profits |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | investment, interest rates |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | investment, expected future profits |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | stockbuilding, interest rates |
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15 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Real business cycle theory suggests that _________ not important in explaining short-term fluctuations around actual output |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | aggregate supply is |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | aggregate demand is |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | potential output is |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | real variables are |
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16 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The impossibility of negative gross investment provides a _________ to fluctuations in _______ |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | ceiling, stockbuilding |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | ceiling, capital prices |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | floor, output |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | floor, the capital-output ratio |
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17 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Output can exceed demand during the recovery phase as firms restore stocks to their target levels |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | TRUE |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | FALSE |
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18 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Real business cycles are cycles in ____________ |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | potential output |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | actual output |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | real output |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | international trade |
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19 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Real business cycle theories suggest that ____________ to correct departures from the desired growth path |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | there is a role for fiscal policy |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | there is a role for monetary policy |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | there is a role for supply-side policies |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | there is no case for stabilizing output over the business cycle |
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20 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The business cycle is not transmitted from one country to another through __________ |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | private sector imports and exports |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | economic policy |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | the duration of compulsory education |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | labour supply changes |
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21 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Real business cycle theorists argue that ____________ can explain short and long term fluctuations in output |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | imperfect labour markets |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | rational expectations |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | intertemporal decisions of households, firms and government |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | sun spot cycles |
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22 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Keynesian unemployment causes a fall in the real wage |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | TRUE |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | FALSE |
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