1) Of the following, which is the best measure of a country's standard of living? a) GDP per unit of capital. b) Total GDP.

c) GDP per capita. d) GDP per labour hour. 2) If GDP grew 3% in 1980, 2.2% in 1981 and 2.5% in 1982 then, what is the average annual growth rate over this period? a) 5% b) 4% c) 2.6% d) -2.2% 3) The rule of 70 states that a) the number of years it takes an economy to double is the growth rate times 70. b) the number of years it takes an economy to double is 70 divided by the growth rate. c) it takes an economy 70 years to double in size. d) the number of years it takes an economy to double is the growth rate divided by 70. 4) In the long run, ________ differences in economic growth rates result in ________ differences in GDP per capita. a) small; no b) small; large c) large; no d) large; small 5) Labour productivity is the quantity of a) output produced in one hour by one machine. b) labour produced in one hour in an economy. c) output that can be produced in one hour by several workers. d) output produced in one hour by one worker. 6) Which of the following will result in an increase in labour productivity? a) A decline in the capital stock per hour worked b) A decline in the amount of human capital per worker c) An increase in technology d) A decrease in the number of people attending institutions of higher education 7) Long-run economic growth a) depends more on increases in capital per hour worked than on technological change. b) does not usually occur due to the economic recessions that occur as part of the business cycle. c) is due to increases in capital productivity rather than labour productivity. d) depends more on technological change than on increases in capital per hour worked.

8) In a market economy, what is a fundamental thing the government must do to facilitate the operation of the market? a) Ensure an equal distribution of income to all citizens. b) Produce goods to provide for low income households. c) Set up and enforce private property rights. d) The government does not have to do any of these things. 9) A well established and legally enforced system of property rights a) encourages investment growth but reduces entrepreneurial activity. b) reduces economic efficiency which reduces the rate of economic growth. c) encourages economic growth by increasing the incentive to be innovative. d) discourages economic growth by discouraging innovation. 10) Which of the following is protected by private property rights? a) An arrested individual has a right to the protection of a lawyer. b) A resource can used in production or sold by the legal owner. c) Buyers are required to pay the market prices of goods and services. d) The government cannot put you in a prison without a trial by jury. 11) What is the ultimate purpose of patents and copyrights? a) To provide owners with large profit forever b) To encourage the expenditure of funds on research and development to create new products c) To protect firms from being taken advantage of by producing firms d) To do all of these things 12) Which of the following accurately describes the impact of the rule of law on a country's economic growth rate? a) Countries that enforce property rights through law suits have slower economic growth. b) Countries where favouritism and bribery are common have stronger rates of growth. c) Countries with a strong rule of law have faster economic growth. d) Countries with a weak rule of law have faster economic growth. 13) Endogenous growth theory a) states that the rate of technological change is caused by economic incentives. b) does not adequately explain the factors that determine productivity. c) states that the rate of technological change is unaffected by economic incentives. d) states that the rate of technological change is determined outside the working of the market system.

14) Which of the following is a reason why low income countries might experience economic growth? a) The country has endured extended periods of war. b) The country fails to enforce a rule of law. c) The country has a high rate of savings and investment. d) The country suffers from poor health infrastructures. 15) Lack of investment in strong education and health care systems a) causes a decline in physical capital and a decline in labour productivity. b) causes a deterioration in human capital and an increase in physical capital. c) increases human capital and cause a decline in labour productivity. d) causes a deterioration in human capital and a decline in labour productivity. 16) Corruption a) is eliminated by foreign direct investment. b) raises the rate of growth as bribes enhance income. c) acts as a magnet for foreign direct investment. d) undermines the rule of law and curtails growth. 17) If property rights are not enforced in a country, a) that country will grow more rapidly because of the reduction of law suits. b) entrepreneurs are unlikely to risk their own funds investing in such an economy. c) the market system will still work smoothly. d) that country's growth rate will not be affected. 18) Policies to promote growth by increasing savings and investment work through a) increasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital. b) increasing the supply of loanable funds, increasing the interest rate, raising the level of investment in physical capital. c) increasing the supply of loanable funds, lowering the interest rate, lowering the level of investment in physical capital. d) decreasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital. 19) Not enforcing property rights in an economy will a) lower the level of investment. b) raised the level of investment. c) not change the level of investment. d) cause the market system to work inefficiently.

20) All of the following are policies to promote savings in an economy EXCEPT a) establishing a program of investment tax credits. b) lowering a sales tax. c) making the interest on bonds tax free. d) deferring taxes on interest earned. 21) Foreign direct investment occurs when a Japanese company a) opens a new factory in Australia. b) purchases 1000 shares of stock issued by an American company. c) purchases shares issued in Japan. d) opens a new Japanese factory. 22) Foreign investment can give a low income country a) the means to slow down growth. b) no hope to break the vicious cycle of poverty. c) a path to dependency and low growth. d) access to funds for investment and access to technology. 23) Globalisation is defined as the process of countries becoming ________ open to foreign trade and ________ open to foreign investment. a) less; less b) more; less c) more; more d) less; more