Chapter 25 /Production and Growth ? 1731
57. The opening of a new American-owned factory in Egypt would tend to increase Egypt's GDP more than it
increases Egypt's GNP because
a. some of the income from the factory accrues to people who do not live in Egypt.
b. gross domestic product is income earned within a country by both residents and nonresidents,
whereas gross national product is the income earned by residents of a country while producing both at home and abroad.
c. all of the income from the factory is included in Egypt's GDP. d. All of the above are correct.
ANS: NAT: TOP: MSC: D DIF: 2 REF: 25-3 Analytic LOC: International trade and finance Foreign investment | Gross domestic product | Gross national product Applicative
58. When Mexico experiences investment from abroad, it experiences, as a result,
a. an increase in productivity.
b. a decrease in Gross National Product (GNP). c. lower wages for Mexican workers. d. None of the above is correct.
ANS: A DIF: 2 REF: 25-3 NAT: Analytic LOC: International trade and finance TOP: Foreign investment | Productivity MSC: Applicative
59. Investment from abroad
a. is a way for poor countries to learn the state-of-the-art technologies developed and used in richer
countries.
b. is viewed by economists as a way to increase growth.
c. often requires removing restrictions that governments have imposed on foreign ownership of
domestic capital.
d. All of the above are correct.
ANS: D
NAT: Analytic MSC: Interpretive
DIF: 1 REF: 25-3 LOC: Productivity and growth TOP:
Foreign investment
60. An organization that tries to encourage the flow of investment to poor countries is the
a. World Bank.
b. Organization of Less Developed Countries. c. Alliance of Developing Countries. d. International Development Alliance.
ANS: A DIF: 1 REF: 25-3 NAT: Analytic LOC: Productivity and growth TOP: Foreign investment | World Bank MSC: Definitional
61. In the U.S., each additional year of schooling has historically raised a person's wage on average by about
a. 2 percent. b. 5 percent. c. 10 percent. d. 15 percent.
ANS: C
NAT: Analytic MSC: Definitional
DIF: 1 REF: 25-3 LOC: Productivity and growth TOP:
Wages
62. The term human capital can be used to describe
a. technology. b. unskilled labor.
c. expenditures that result in increased investment from abroad. d. health.
ANS: D
NAT: Analytic MSC: Definitional
DIF: 1 REF: 25-3 LOC: Productivity and growth TOP:
Human capital
1732 ? Chapter 25 /Production and Growth
63. In the U.S., each additional year of schooling has historically raised a person's wage on average by about
a. 5 percent. In less developed countries the gap between the wages of educated and uneducated
workers is smaller.
b. 10 percent. In less developed countries the gap between the wages of educated and uneducated
workers is smaller.
c. 5 percent. In less developed countries the gap between the wages of educated and uneducated
workers is larger.
d. 10 percent. In less developed countries the gap between the wages of educated and uneducated
workers is larger.
ANS: D
NAT: Analytic MSC: Definitional
DIF: 2 REF: 25-3 LOC: Productivity and growth TOP:
Wages
64. Which of the following is generally an opportunity cost of investment in human capital?
a. future job security b. forgone present wages c. increased earning potential d. All of the above are correct.
ANS: B
NAT: Analytic MSC: Interpretive
DIF: 1 REF: 25-3 LOC: Productivity and growth TOP:
Human capital
65. Educated people may generate ideas that increase production. These ideas
a. produce a return to society from education that is greater than the return to the individual. b. could justify government subsides for education. c. are external benefits of education. d. All of the above are correct.
ANS: D
NAT: Analytic MSC: Interpretive
DIF: 1 REF: 25-3 LOC: Productivity and growth TOP:
Economic growth
66. Which of the following is an example of the \
a. A country's most highly educated workers emigrate to rich countries.
b. A country has such a poor educational system that human capital falls over time. c. The population of a country grows so fast that the educational system can't keep up. d. A country steals patented technology from another country.
ANS: A
NAT: Analytic MSC: Interpretive
DIF: 1 REF: 25-3 LOC: Productivity and growth TOP:
Human capital
67. Economist Robert Fogel focused on which of the following factors as one determinant of long-run economic
growth?
a. education
b. research and development c. nutrition
d. trade restrictions
ANS: C
NAT: Analytic MSC: Definitional
DIF: 1 REF: 25-3 LOC: Productivity and growth TOP:
Economic growth
68. According to research by Robert Fogel, what proportion of the British population in 1780 was so
malnourished that they could not perform manual labor? a. 40 percent b. 20 percent c. 10 percent d. 5 percent
ANS: B
NAT: Analytic MSC: Definitional
DIF: 1 REF: 25-3 LOC: Productivity and growth TOP:
Economic growth
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