Deck 6: Growth and the World Economy

Question 1

The convergence hypothesis of the Solow growth model states that all of the following will occur except that

A) over time, gaps in per-capita income among countries will narrow.
B) the growth rate of GDP per capita should be negatively related to the initial level of GDP per capita.
C) steady-state growth rates of GDP per capita will be equal among countries.
D) countries with low levels of income per capita should have higher growth rates.
E) none of the above.

Answer 1

none of the above.

Question 2

One prediction of the Solow growth model is constant steady-state growth. Using extrapolation techniques for growth rates from prewar data for the United States, the United Kingdom, and Japan, which country best supports the Solow model's steady-state growth predictions? Which provides the least support?

A) United States, United Kingdom
B) United States, Japan
C) United Kingdom, United States
D) United Kingdom, Japan
E) Japan, United Kingdom

Answer 2

United States, Japan

Question 3

One prediction of the Solow growth model is constant steady-state growth. Using extrapolation techniques for growth rates from prewar data for the United States, the United Kingdom, and Japan, which countryies) least supports) the Solow model's steady-state growth predictions?

A) United States
B) Japan
C) United Kingdom
D) Both the United States and the United Kingdom
E) Both the United States and the Japan

Answer 3

Japan

Question 4

One way of testing the constant steady-state growth hypothesis of the Solow growth model is to compare growth rates before and after a "break date" and the corresponding postwar transition period. Which countryies) provides) the least support for this hypothesis?

A) United Kingdom
B) United States
C) Japan
D) Both the United Kingdom and Japan
E) Both the United States and Japan

Question 5

Which of the following statements about income divergence during the last two centuries is invalid?

A) The poorest countries today have levels of income per capita that are just about subsistence.
B) Two hundred years ago, the poorest nations income levels must also have been above subsistence.
C) Affluent African nations have experienced significant per-capita GDP loss as a consequence of extractive colonization by European nations.
D) Today's rich countries have experienced substantial growth in per-capita GDP.
E) Evidence for divergence is based on data for very few nonindustrialized countries.

Question 6

Convergence in the Solow growth model requires that all countries have

A) the same production function.
B) low levels of capital stock per worker.
C) access to technology.
D) high levels of income per worker.
E) only a and c.

Question 7

In the analysis of income distribution, of the following areas thought to play a role in understanding the wealth and poverty of nations, which does not belong?

A) Geography
B) Fertility
C) Capital formation
D) Monetary policy
E) Social infrastructure

Question 8

^{In the regression equation Y/N)/Y/N) = a + cY/N)}1960^{, where Y/N)/Y/N)} stands for the average annual growth rate of per-capita income, the parameter c is___________when the data across countries are analyzed and __________ is found.

A) positive, convergence
B) negative, divergence
C) neither positive or negative, convergence
D) negative, convergence
E) positive, divergence

Question 9

The neoclassical growth revival argues that the gap between rich and poor nations

A) is increasing despite the attempts by world governments to stimulate growth in poor nations.
B) is growing at a slower rate due to increased emphasis on capital formation in underdeveloped countries.
C) has remained unchanged for the past four decades since 1960).
D) has actually narrowed once differences in saving and population growth rates are accounted for.
E) is best explained by accounting for differences in human capital.

Question 10

Income inequality across the nations of the world during the last century has

A) increased.
B) decreased.
C) remained the same.
D) ceased to be an issue if international concern.
E) become an issue of concern only for developing nations.

Question 11

One prediction of the Solow growth model is constant steady-state growth. Using extrapolation techniques for growth rates from prewar data for the United States, the United Kingdom, and Japan, which countryies) best supports) the Solow model's steady-state growth predictions?

A) United States
B) Japan
C) United Kingdom
D) Both the United Kingdom and Japan
E) Both the United States and the Japan

Question 12

For the production function Y/N = K/N)^0.7 and a capital stock per worker ratio of $3,000,000 in country A, what is the approximate level of capital ^{stock per worker ratio in country B if Y/N)}A ^{= 15Y/B)}B^?

A) $23,000
B) $35,000
C) $200,000
D) $63,000
E) $342,000

Question 13

For the production function Y/N = K/N)^0.7 and a capital stock per worker ratio of $3,000,000 in country A, what is the approximate difference in capital stock per worker ratios between countries A and B if, in country B, ^Y/N)A ^{= 15Y/B)}B^?

A) 900
B) 225
C) 50
D) 30
E) 20

Question 14

Endogenous growth theory attempts to explain the continuing and increasing gaps between rich and poor nations by appealing to

A) the changing nature of global trade patterns.
B) the political realities of an increasingly global community.
C) endogenous technological change.
D) all of the above.
E) only a and b.

Question 15

One way of testing the constant steady-state growth hypothesis of the Solow growth model is to compare growth rates before and after a "break date" and the corresponding postwar transition period. Which countryies) provides) the most support for this hypothesis?

A) United Kingdom
B) United States
C) Japan
D) Both the United Kingdom and Japan
E) Both the United States and Japan

Question 16

In growth theory analysis, "convergence" occurs when

A) all countries begin to think similarly about the distribution of income.
B) growth rates for all countries in the same geographical region move to the same level.
C) per-capita income levels between nations become equal.
D) political parties in a nation work out their differences and merge into one party.
E) none of the above.

Question 17

One prediction of the Solow growth model is constant steady-state growth. Extrapolating growth rates from 1870 through 1929 using U.S. data generates predictions of per-capita GDP that are only away from actual performance.

A) 10 percent
B) 7.5 percent
C) 5 percent
D) 2.5 percent
E) 1 percent

Question 18

Suppose nations A and B begin with the same production functions and the same access to technology, but nation A has only a portion of the capital stock per worker that nation B has. Which of the following statements is false?

A) Additional capital stock investment will yield a higher return in nation A.
B) Capital stock per worker will increase in nation A relative to nation B.
C) The level of capital stock in both nations eventually will be equal.
D) Income per capita in both nations eventually will be equal.
E) Capital stock per worker in nation A eventually will equal that of nation B.

Question 19

The convergence hypothesis of the Solow growth model does not state that

A) over time, gaps in per-capita income will narrow.
B) growth rates will be equal once steady states are achieved.
C) poorer countries eventually will catch up to richer countries.
D) before reaching their steady states, countries will grow at different rates.
E) most differences in growth rates are attributable to political misbehavior.

Question 20

One way of testing the constant steady-state growth hypothesis of the Solow growth model is to compare growth rates before and after a "break date" and the corresponding postwar transition period. Which country provides the least support for this hypothesis? Which provides the most?

A) United Kingdom, United States
B) United Kingdom, Japan
C) Japan, United Kingdom
D) Japan, United States
E) United States, Japan

Question 21

Through the use of an augmented Solow growth model, researchers can raise the explanatory power of their conditional convergence models from 59 percent to percent.

A) 63
B) 72
C) 78
D) 84
E) 87

Question 22

Even though economists find different conclusions, depending on the models they use, for the explanation of cross-country growth since 1960, several variable consistently help explain differences in per-capita GDP growth. Which of the following is not one of them?

A) Absolute latitude
B) Measures of human capital
C) Openness to trade
D) Absolute longitude
E) Fraction of GDP in mining

Question 23

Each of the following is a type of human capital development except

A) attending school.
B) on-the-job training.
C) accumulated experience.
D) plastic surgery.
E) none of the above.

Question 24

Which of the following statements about conditional convergence is not true?

A) The evidence of convergence for the world as a whole is for conditional convergence.
B) The gap between rich and poor countries is not narrowing.
C) Countries are moving toward a common steady state.
D) The augmented Solow model better explains cross-country variation in income per capita than the original Solow model.
E) Variables that affect growth include saving and population growth rates, schooling, openness to trade, and political and geographic variables.

Question 25

Which of the following countries provide the most support for the Solow growth model's steady-state growth hypothesis?

A) Finland and Sweden
B) Japan and France
C) The United Kingdom and the United States
D) Canada and the United States
E) Germany and Canada

Question 26

Even though economists find different conclusions, depending on the models they use, for the explanation of cross-country growth since 1960, several variable consistently help explain differences in per-capita GDP growth. Which of the following is not one of them?

A) Saving rates
B) Population growth rates
C) Openness to trade
D) Monetary policy
E) Fraction of GDP in mining

Question 27

In terms of social infrastructure, which of the following does not belong?

A) Bureaucratic quality
B) Productivity
C) Trade barriers
D) Corruption
E) Risk of expropriation

Question 28

All of the following statements are true except

A) the gap in GDP per capita in advanced countries has narrowed over the past two centuries.
B) the long-term gap between rich and poor countries has widened.
C) the constant steady-state growth support provided by Canada and the United States does not generalize to other advanced countries.
D) Convergence among advanced countries is primarily a recent phenomenon.
E) As a whole, the world picture is one of divergence rather than convergence of GDP per capita.

Question 29

In the search for "conditional convergence," each of the following is true except

A) that individual countries can converge to their own individual steady states.
B) that researchers can control for differential saving and population growth rates.
C) that the initial level of income per capita can be positively related to the growth rate of income per capita.
D) that two countries with different savings rates can have the same steady- state growth rate of income per capita.
E) that the growth rate of income per capita is negatively related to the initial level of income per capita after controlling for saving and population growth rates.

Question 30

When controlling for saving rates, population growth rates, and human capital accumulation in conditional convergence models, the coefficient c

A) becomes more elusive.
B) becomes more positive.
C) becomes more negative.
D) remains virtually unchanged.
E) loses significance.

Question 31

In terms of their research interests in cross-country per-capita GDP growth, from the following list of economists, who does not belong?

A) N. Gregory Mankiw
B) Robert Solow
C) David Romer
D) William Easterly
E) John Taylor

Question 32

Which of the following statements about conditional convergence is not true?

A) The evidence of convergence for the world as a whole is for conditional convergence.
B) The gap between rich and poor countries is now narrowing.
C) Countries are moving toward their own steady states.
D) The augmented Solow model better explains cross-country variation in income per capita than the original Solow model.
E) The augmented Solow model better explains differences in capital per worker ratios than the original Solow model.

Question 33

Which of the following does not help explain the connection between social infrastructure and the distance from the equator?

A) Western Europe was the first region to develop social infrastructure favorable to production.
B) Countries sparsely settled in the 1500s were highly influenced by Western European institutions and thus developed social infrastructures more favorable to production.
C) Tropical countries, more densely populated in the 1500s, were conquered by European countries for resource and commodity extraction and have not developed social infrastructures favorable to production.
D) There is no discernable relationship between distance from the equator and social infrastructure favorable to production.
E) None of the above.

Question 34

Even though economists find different conclusions, depending on the models they use, for the explanation of cross-country growth since 1960, several variable consistently help explain differences in per-capita GDP growth. Which of the following is not one of them?

A) Saving rates
B) Political variables
C) Openness to trade
D) Market distortions
E) Natural resources

Question 35

Which of the following statements about conditional convergence is not true?

A) The evidence of convergence for the world as a whole is for conditional convergence.
B) The gap between rich and poor countries is not narrowing.
C) Countries are moving toward their own steady states.
D) Cross-country growth regressions are unable to contribute much beyond the contributions of the augmented Solow growth model.
E) Variables that affect growth include saving and population growth rates, schooling, openness to trade, and political and geographic variables.

Question 36

Even though economists find different conclusions, depending on the models they use, for the explanation of cross-country growth since 1960, several variable consistently help explain differences in per-capita GDP growth. Which of the following is not one of them?

A) Absolute latitude
B) Measures of human capital
C) Openness to trade
D) Population growth
E) None of the above

Question 37

Economists who support the geography hypothesis believe that most of the cross-country differences can be explained by all of the following except

A) Ecology
B) Climate
C) Geography
D) Sunspots
E) Latitude

Question 38

Which of the following does not play a role in the explanations of growth rates for those adhering to the geography hypothesis?

A) Soil formation and erosion
B) Oceanic proximity
C) Infectious diseases
D) Pests and parasites
E) Energy resources

Question 39

In terms of social infrastructure, which of the following does not belong?

A) Bureaucratic quality
B) Police force
C) Trade barriers
D) Human capital
E) Risk of expropriation

Question 40

In its comparison of average per-capita GDP growth rates to initial level of per capita GDP, conditional convergence usually controls for any or all of the following variables except

A) saving rates.
B) population growth rates.
C) fiscal policy.
D) human capital development.
E) capital stock increments.

Question 41

Proponents of the institutions hypothesis maintain that institutional
Differences explain approximately _______percent of the differences in
Per-capita income among former colonies.

A) 25
B) 40
C) 60
D) 75
E) 85

Question 42

William Easterly, in The Elusive Quest for Growth, made each of the following arguments except

A) growth-promoting strategies inspired by the Solow model have not succeeded in practice.
B) skilled workers in poor countries should earn more than skilled workers in rich countries.
C) lowering the cost of contraception in high-fertility countries slows birth rates and raises income per capita.
D) Debt forgiveness transfers aid resources from responsible to irresponsible governments.
E) Governments distort markets and create incentives that destroy growth.

Question 43

The primary differences between the institutions of the neo-Europe and the extractive colonies established by Western Europe in their influence on economic growth rates were

A) the protection of private property.
B) precautions against government expropriation.
C) the transfer of resources back to the colonizer.
D) all of the above.
E) only a and b.

Question 44

Economists adhering to the institutions hypothesis as an explanation for geographical growth rate differences make all of the following explanations except

A) societal organization.
B) geographical influence on institutions.
C) distance from the equator.
D) Western European influence.
E) energy resources.

Question 45

Which of the following does not play a role in the explanations of low tropical zone growth rates for those adhering to the geography hypothesis?

A) Poor food production
B) Poor public health
C) High fertility rates
D) Low child mortality rates
E) Low urban population densities

Question 46

One of the following statements is false. Which is it?

A) Regions sparsely populated in the 1500s, such as the United States, were poorer then than Africa.
B) Regions densely populated and relatively rich prior to colonization were prime locations for neo-Europe-style colonization.
C) Extractive states evolved with institutions unfavorable to productive economic activity.
D) Colonization that became known as Neo-Europe was relatively poor and sparsely populated prior to colonization.
E) The spread of nineteenth century industrial technology favored societies with production-friendly institutions.

Question 47

According to the geography hypothesis, differences in income per capita should

A) fluctuate according to climatic variation.
B) persist since geographic conditions are stable.
C) fluctuate according to geographic variations.
D) all of the above.
E) none of the above.

Question 48

Which of the following does not play a role in the explanations of low tropical zone growth rates for those adhering to the geography hypothesis?

A) Poor food production
B) Poor public health
C) High fertility rates
D) High child mortality rates
E) High urban population densities

Question 49

One of the following statements is false. Which is it?

A) The geography hypothesis argues in favor of geographic, climatic, and ecological characteristics to explain most of the differences in income per capita across countries.
B) The institutions hypothesis maintains that social infrastructure and institutions determine the main differences in per-capita income across countries.
C) Distance from the equator is negatively related to income per capita.
D) Social infrastructure explains much of the per-capita differences across countries once physical and human capital differences are accounted for.
E) All of these statements are true.

Question 50

Economists adhering to the institutions hypothesis as an explanation for geographical growth rate differences argue that institutional effects on income per capita are

A) small, but persistent.
B) large, but short lived.
C) small and short lived.
D) large and persistent.
E) rarely observed.