MACROECON EXAM 1 CLEMSON EXAM
QUESTIONS WITH VERIFIED SOLUTIONS .
Which of the definitions below best defines Gross Domestic Product? - Correct Answer -the
market value of all final goods and services produced within a country in a year
If a country has a 5% annual growth in Real GDP and the population of that country also
rises by 5% a year. What is the change in Real GDP per capita in a year? - Correct Answer -
None
What is the national spending identity? - Correct Answer -Y= C+I+G+X-M
Physical capital is the - Correct Answer -stock of tools including machines, structures, and
equipment.
What is human capital? - Correct Answer -productive knowledge and skills that workers
acquire through education, training, and experience
The reason economists focus on measuring GDP is because - Correct Answer -GDP is highly
correlated with other measures of well-being.
Which of the following is NOT an institution that leads to sustained long-term economic
growth? - Correct Answer -an equitable distribution of income
The Solow model relates the steady state level of output to the - Correct Answer -factors of
production
Increasing the amount of physical capital tends to _____ output per hour of workers and
_____ the value of workers. - Correct Answer -increase; increase
1
, In the Solow Model, better ideas will lead to - Correct Answer -Both an increase in
productivity and an increase in capital accumulation
What happens to output as additional units of physical capital are added? - Correct Answer -
Output increases at a decreasing rate
Why does South Korea have a higher level of Real GDP per capita, more physical and human
capital than North Korea?
I- South Korea has better natural resources than North Korea
II- Economic incentives for economic growth are better installed in South Korea
III- Historically South Korea adopted the same institutions as North Korea - Correct Answer -
Only II is correct
What is the key difference between catching up growth and cutting edge growth? - Correct
Answer -Cutting edge growth is based on innovation, new ideas. Catching up growth is based
on physical capital accumulation only
What of this goods and services is non-rivalrous? - Correct Answer -Pythagoras' Theorem
Increases in productivity cause - Correct Answer -production function to shift upward
Which of the following measures is the most effective in reducing "free-riding"? - Correct
Answer -Assigning property rights
The production function expresses a relationship between - Correct Answer -output and
factors of production
Suppose the initial depreciation is 0.02 and it increases to 0.03. You would expect the level of
steady state capital and output to - Correct Answer -drop
Individual savings contribute to: - Correct Answer -The supply of loanable funds
2
QUESTIONS WITH VERIFIED SOLUTIONS .
Which of the definitions below best defines Gross Domestic Product? - Correct Answer -the
market value of all final goods and services produced within a country in a year
If a country has a 5% annual growth in Real GDP and the population of that country also
rises by 5% a year. What is the change in Real GDP per capita in a year? - Correct Answer -
None
What is the national spending identity? - Correct Answer -Y= C+I+G+X-M
Physical capital is the - Correct Answer -stock of tools including machines, structures, and
equipment.
What is human capital? - Correct Answer -productive knowledge and skills that workers
acquire through education, training, and experience
The reason economists focus on measuring GDP is because - Correct Answer -GDP is highly
correlated with other measures of well-being.
Which of the following is NOT an institution that leads to sustained long-term economic
growth? - Correct Answer -an equitable distribution of income
The Solow model relates the steady state level of output to the - Correct Answer -factors of
production
Increasing the amount of physical capital tends to _____ output per hour of workers and
_____ the value of workers. - Correct Answer -increase; increase
1
, In the Solow Model, better ideas will lead to - Correct Answer -Both an increase in
productivity and an increase in capital accumulation
What happens to output as additional units of physical capital are added? - Correct Answer -
Output increases at a decreasing rate
Why does South Korea have a higher level of Real GDP per capita, more physical and human
capital than North Korea?
I- South Korea has better natural resources than North Korea
II- Economic incentives for economic growth are better installed in South Korea
III- Historically South Korea adopted the same institutions as North Korea - Correct Answer -
Only II is correct
What is the key difference between catching up growth and cutting edge growth? - Correct
Answer -Cutting edge growth is based on innovation, new ideas. Catching up growth is based
on physical capital accumulation only
What of this goods and services is non-rivalrous? - Correct Answer -Pythagoras' Theorem
Increases in productivity cause - Correct Answer -production function to shift upward
Which of the following measures is the most effective in reducing "free-riding"? - Correct
Answer -Assigning property rights
The production function expresses a relationship between - Correct Answer -output and
factors of production
Suppose the initial depreciation is 0.02 and it increases to 0.03. You would expect the level of
steady state capital and output to - Correct Answer -drop
Individual savings contribute to: - Correct Answer -The supply of loanable funds
2
