Economics USA: 21st Century Edition

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1. Suppose that per capita net national product (NNP) begins an annual decline this year by 1%. What impact, if any, is this decline likely to have upon our living standards 20 years from now?

   	None.
   	It is likely to improve the living standards by conserving resources.
   	It will improve the standards by checking population growth.
   	It will substantially diminish the quality of living standards by slowing economic growth.

   It will substantially diminish the quality of living standards by slowing economic growth.

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2. Thomas Malthus believed that the world’s population would be controlled MAINLY by...

   	the natural limitations of finite resources.
   	war and famine.
   	deliberate choice.
   	lack of capital investment.

   The natural limitations of finite resources. Malthus believed that other factors, such as war and disease, would also curb population; however, he believed the main factor would be the effect of limited resources on the standard of living.

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3. Economist David Ricardo tended to favor the concept of specialization MAINLY because he saw it as a way to...

   	raise the standard of living above subsistence levels.
   	shift economic domination from the landholding aristocracy to the more deserving industrial class.
   	increase the efficient use of resources.
   	encourage capital formation—and thus, economic growth.

   Increase the efficient use of resources. Ricardo believed in efficiency, but did not really believe there was a way to raise the standard of living above subsistence levels because he subscribed to the theories of Malthus. Ricardo did not favor domination by any class.

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4. Other inputs being held constant, the curve for the marginal product of capital will tend to...

   	slope downward to the right.
   	slope downward to the left.
   	be vertical.
   	be horizontal.

   slope downward to the right.

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5. Current evidence suggests strongly that industrial nations with relatively high investment rates also tend to have...

   	better educational opportunities.
   	a higher perceived level of economic welfare.
   	higher rates of economic growth.
   	more rapid population growth.

   higher rates of economic growth.

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6. Which of the following would Henry Ford probably have agreed with most strongly?

   	Standardization is the first step toward a decline in product quality.
   	The best way to hold down production costs is to trim labor costs.
   	The capital-labor ratio has a major impact on efficiency.
   	Cutting prices will not significantly expand a healthy market.

   The capital-labor ratio has a major impact on efficiency.

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