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| 1.
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Increasing the capital available to the workforce, holding other factors constant, tends to _____ total output and to _____ average labor productivity. |
| | A) | Increase; decrease |
| | B) | Increase; increase |
| | C) | Increase; keep unchanged |
| | D) | Decrease; increase |
| | E) | Decrease; decrease |
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| 2.
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Each of the following statements describes how the political and legal environment encourages productivity EXCEPT: |
| | A) | Well-defined property rights encourage production and saving. |
| | B) | Political stability promotes economic growth. |
| | C) | The free and open exchange of ideas spreads the development of new technologies. |
| | D) | Price changes in markets provide suppliers incentives to supply goods to markets. |
| | E) | Pay rates determined by a governmental planning agency provide workers with the incentive to work hard. |
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| 3.
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Compared to the 1950s and 1960s average productivity growth in France and Germany _____ in the 1970s and _____ in the 1980s and 1990s. |
| | A) | Slowed; improved somewhat |
| | B) | Slowed; remained at low rates |
| | C) | Slowed; slowed even more |
| | D) | Speeded up; slowed |
| | E) | Speeded up; increased even more |
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| 4.
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The principle economic cost of growth is: |
| | A) | Higher interest rates |
| | B) | Higher inflation rates |
| | C) | Higher unemployment rates |
| | D) | Consumption sacrificed for capital formation |
| | E) | Investment in stocks and bonds |
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| 5.
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A government policy that allows firms to claim depreciation costs against tax liability is an example of a policy intended to promote economic growth by: |
| | A) | Increasing human capital |
| | B) | Increasing physical capital |
| | C) | Improving technology |
| | D) | Improving the social and legal environment |
| | E) | Increasing the availability of natural resources |
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| 6.
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Arguments that economic growth is limited by environmental problems and limited natural resources ignore all of the following EXCEPT that: |
| | A) | Economic growth can take the form of new, different, and "cleaner" goods and services |
| | B) | Economic growth may lead to less, not more, pollution |
| | C) | The market mechanism mobilizes resources to deal with shortages |
| | D) | Public policy can supplement market adjustments in the face of resource shortages |
| | E) | Global environmental problems are not handled by markets or national governments |
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| 7.
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Real GDP per person in Westland is €15,000, while real GDP in Eastland is €20,000. However, Westland's real GDP per person is growing at 2.5 % per year and Eastland's is growing at 1.5% per year. If these growth rates persist indefinitely, then: |
| | A) | Westland's real GDP per person will increase until it equals, but because of diminishing returns will not exceed, Eastland's. |
| | B) | Westland's real GDP per person will eventually be greater than Eastland's. |
| | C) | Eastland's real GDP per person will always be greater than Westland's. |
| | D) | Eastland's real GDP per person will decline until it equals Westland's. |
| | E) | Because of diminishing returns Eastland's real GDP per person will decline, but never be less than Westland's. |
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| 8.
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In Euroland 400,000 of the 1 million people in the country are employed. Average labor productivity in Euroland is €30,000 per worker. Real GDP per person in Euroland totals: |
| | A) | €1,000 |
| | B) | €12,000 |
| | C) | €15,000 |
| | D) | €30,000 |
| | E) | €42,000 |
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| 9.
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The main source of growth in real GDP per person has been growth in: |
| | A) | Average labor productivity |
| | B) | The rate of discoveries of land and natural resource |
| | C) | The price level |
| | D) | Proportion of the population employed |
| | E) | Population |
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| 10.
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Cohesion funds are primarily a means by which the European Union hopes to: |
| | A) | Reduce income inequality in all member states |
| | B) | Promote economic growth in all member states. |
| | C) | Protect human rights |
| | D) | Promote economic growth in its poorest member states |
| | E) | Reduce pollution |
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