In a country, the labor-force participation rate is 75%, unemployment rate is 10%, and the average labor productivity is 100,000 units. In this…

1.In a country, the labor-force participation rate is 75%, unemployment rate is 10%, and the average labor productivity is 100,000 units. In this country the real GDP per capita equals _____ units.

2.In a country the capital-labor ratio in 2010 was 100. The attached graph shows this country’s per-worker production function. 

Suppose that from 2010 to 2015, the amount of capital in this country grows at a rate of 6% while the amount of labor at 5%. As a result, output per worker grows at a rate of ______ percent.

If the county was more careful about is population growth so that its labor grew at a rate of 2%, its output per worker from 2010 and 2015 would grow at a rate of __ percent.

3.The per-worker production function is drawn concave from blow. Why?

Scarcity of capital in the country.

Scarcity of labor in the country.

Lack of proper institutions in the country.

Diminishing returns to capital.

None of the above.

4.All else the same, which of the following could affect the amount of capital per worker, and hence GDP per capita, in the long run?

National saving


The quality of institutions

All of the above

5.Paul Romer defines the sum total of all the ideas that are generated from research and development activities


Technological progress

Exogenous growth

Endogenous growth

Knowledge capital

6.In the modern theory of economic growth, what is the main reason why there might not be

diminishing returns to knowledge capital at the national level?

Large size of the population

Effect of knowledge capital on culture

Positive externalities associated with knowledge capital

Negative externalities associated with knowledge capital

Abundance of natural resources

Abundance of public capital

7.According to such economists as Douglas North, comparing South Korea to North Korea, West Germany to East Germany (when the latter was a communist country), and Mainland China to Hong Kong, one can see the effect of which of the following on economic growth?

Quality of institutions

Size of the population

Endowment of natural resources

Amount of capital

8.We assume that a per-worker production function is concave from below. However, when we plot output per worker against capital per worker for most advanced capitalist countries, the result becomes a linear function. Why? 

Increases in physical capital causes the function to shift up over time.

Increases in the size of population causes the function to shift down over time.

9.If the natural growth rate in a country is too high, that country will find it hard to increase its

capital per worker

national saving

physical capital

real GDP

10.According to the new growth theory, what is the main engine of economic growth?

Increases in national savings.

Increases in physical capital.

Increases in government spending in infrastructure.

Advances in technology.

Increases in population.

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