True/False Questions

True/False Questions

ANSWER: T

2. The three primary resources are land, labor, and capital.

ANSWER: T

3. The production possibilities curve shows the maximum combinations of goods and services that can be produced by an economy when unemployment is below the natural rate.

ANSWER: F

4. All points on or below the production possibilities curve are attainable.

ANSWER: T

5. The economic decisions that influence growth are those that increase capital and improve technology.

ANSWER: T

6. It pays to increase the production of capital goods if the marginal cost of the production decision exceeds the marginal benefit.

ANSWER: F

7. It is always better for the economy to experience economic growth.

ANSWER: F

8. As resources are transferred from production of trucks to the production of computers, marginal cost of computers decreases.

ANSWER: F

9. Technological improvement allows more output to be obtained from a given level of inputs, thereby shifting the production possibilities curve to the right.

ANSWER: T

10. The decline in the growth of capital intensity in the United States has been caused largely by a rapid increase in labor inputs in addition to slow growth in capital inputs.

ANSWER: T

11. The best combination of goods and services is being produced when marginal cost and marginal benefit are equal.

ANSWER: T

12. Increases in resources, technological improvement, and efficiency improvement are all potential sources of economic growth.

ANSWER: T

13. Growth based on capital accumulation can be more costly than growth based on efficiency improvement.

ANSWER: T

14. Compensation per hour has grown at about the same rate as productivity.

ANSWER: T

15. The growth of labor productivity is caused by the growth of capital relative to labor and by technological and efficiency improvements.

ANSWER: T

16. The use of information technology (IT) capital services grew at almost 20 percent per year from 1995 to 1999.

ANSWER: T

17. Productivity per hour in Japan is almost twice as large as productivity per hour in the United States.

ANSWER: F

18. Productivity growth rates in Japan and Europe are greater than the productivity growth rate in the United States.

ANSWER: T

19. Per capita GDP in Japan exceeds per capita GDP in Europe because Japanese employees work more hours.

ANSWER: T

20. According to Maddison, the structural effect, the technological diffusion effect, and the foreign trade effect all help to explain the rapid growth in productivity in Japan and Europe.

ANSWER: T

21. The technological diffusion effect refers to shifting resources from one sector to another in an economy.

ANSWER: F

22. The foreign trade effect refers to the increase in monopoly power that has occurred in small countries since World War II.

ANSWER: F

23. Technology catch up offers an advantage to today's developing countries.

ANSWER: T

24. The best technology for producing popcorn and tractors is the one that requires the most resources to produce a given combination of popcorn and tractors.

ANSWER: F

25. Correlations between high levels of economic freedom and high standards of living prove that economic freedom causes prosperity.

ANSWER: F

26. According to some economists, low taxes, free markets and price stability promote economic growth.

ANSWER: T

27. Adam Smiths view of the political economy in 1776 was in direct contrast to the view set forth by Thomas Jefferson in the Declaration of Independence.

ANSWER: F

28. The large investment in human capital by East Asian countries may be one reason they have experienced rapid income growth.

ANSWER: T