Question 1

Which of the following statements correctly differentiates catching-up growth from cutting-edge growth?

Accepted Answer

Catching-up growth refers to the process of a developing country catching up with the levels of output and productivity of advanced economies through increased investment in physical capital, while cutting-edge growth refers to the development of new and advanced technologies that create new markets and increase productivity. Therefore, option B correctly differentiates between the two types of growth, stating that catching-up growth comes primarily from capital accumulation while cutting-edge growth comes from technological development. The other options are incorrect - option A is the opposite of the correct statement, option C is too generalizing as rich countries can also experience catching-up growth, and option D is inaccurate as both types of growth can go on indefinitely.

Question 2

Research by Solow indicated that about _____ of the increases in U.S. GDP per capita are due to better ideas.

Accepted Answer

Research by Robert Solow indicated that about 75% of the increases in U.S. GDP per capita are attributed to technological innovation or better ideas, highlighting the significant role of technological progress in economic growth.

Question 3

Which of the following can drive long-run economic growth in the Solow model?

Accepted Answer

According to the Solow model, technological knowledge is the only factor that can sustain long-run economic growth, as physical and real capital eventually experience diminishing returns. Human capital can augment technological progress, but it is not sufficient on its own to drive long-run economic growth.

Question 4

According to the Solow model, a country will grow faster when its capital stock is:

Accepted Answer

According to the Solow model, a country will grow faster when its capital stock is far below the steady-state value. This is because in this case, the marginal product of capital is high, which means that investing in additional capital will yield a high return. As the country continues to invest in capital, it will eventually reach the steady-state level, where the marginal product of capital is equal to the rate of depreciation, and at this point, the growth rate will slow down. Therefore, to achieve faster growth, it is best for the country to start with a low capital stock and invest in additional capital until it reaches the steady-state level.

Question 5

The growth that results from better ideas or technological knowledge is:

Accepted Answer

Cutting-edge growth refers to the growth that results from new and better ideas or technological knowledge. It is often associated with innovation and research and development (R&D). Catching-up growth refers to a process where a country with a lower level of productivity catches up with more advanced economies through factors such as education, institutional changes, and investment. Capital growth refers to the increase in physical capital such as machinery, equipment, and buildings. Short-run growth refers to the growth that occurs within a short time period, usually a year.

Question 6

Better ideas or technological knowledge causes:

Accepted Answer

The answer of Better ideas or technological knowledge causes:
...

Question 7

The key to keeping the economy growing in the long run is:

Accepted Answer

The answer of The key to keeping the economy growing...

Question 8

Which statement is consistent with the predictions of the simple Solow model with no technological advancement?

Accepted Answer

In the simple Solow model without technological advancement, economies approach a steady state where economic growth stabilizes at zero because investments in capital reach a point where they only cover depreciation. This model suggests that without technological progress, economies cannot sustain long-term per capita growth.

Question 9

Provided they have the same steady state, the tendency for poorer countries to grow faster than richer countries and thus to converge in income is called:

Accepted Answer

Conditional convergence is the tendency for poorer countries to grow faster than richer countries and converge in income provided they have the same steady state. This phenomenon is conditional because it depends on certain factors, such as investments in human and physical capital, technological progress, and institutional quality.

Question 10

Better ideas or technological knowledge causes:

Accepted Answer

Better ideas or technological knowledge can increase productivity and efficiency, leading to a higher output for the same level of inputs. This causes the production function to shift upward.

Question 11

Solow estimated that better ideas are responsible for about _____ of the U.S. standard of living.

Accepted Answer

The answer of Solow estimated that better ideas are responsible...

Question 12

In the long run, catching-up growth:

Accepted Answer

Catching-up growth refers to the process by which poorer countries or regions catch up with richer ones in terms of economic growth. This kind of growth is driven by investment in physical and human capital, as well as technological progress. However, catching-up growth cannot continue indefinitely, as there will eventually be diminishing returns to investment. When an economy reaches its steady state, its capital stock and output will no longer grow at the same rate, which means that catching-up growth has stopped.

Question 13

The key to keeping the economy growing in the long run is:

Accepted Answer

The answer of The key to keeping the economy growing...

Question 14

The production function can shift upward because of:

Accepted Answer

The answer of The production function can shift upward because...

Question 15

Which of the following statements correctly differentiates catching-up growth from cutting-edge growth?

Accepted Answer

Cutting-edge growth refers to advancements at the forefront of technology and productivity, which theoretically can continue as long as innovation occurs. Catching-up growth, on the other hand, occurs when countries with lower levels of productivity grow faster than those at the frontier, by adopting existing technologies or practices, but this process has a natural limit once a country has caught up to the technological frontier.

Question 16

The source of "cutting-edge" growth is:

Accepted Answer

Cutting-edge growth is driven by advances in technological knowledge, which enable businesses to innovate and create new products and services, leading to economic growth. Investment in physical capital and education and training are important for economic growth as well, but they are not the primary sources of cutting-edge growth. Foreign investment can also contribute to economic growth, but it is not necessarily linked to the specific type of growth represented by "cutting-edge" growth.

Question 17

Increases in productivity cause the:

Accepted Answer

An increase in productivity implies that the output per unit of inputs has increased, which means that the production function has shifted upward. This is because more output can be produced with the same level of inputs. Therefore, choice C is correct. None of the other choices are affected by changes in productivity.

Question 18

Better ideas cause the:

Accepted Answer

Better ideas lead to technological advancements, which increase productivity and efficiency, thus shifting the production function upward.

Question 19

The key to escaping the "iron logic" of diminishing returns in the Solow model is:

Accepted Answer

The "iron logic" of diminishing returns in the Solow model suggests that increasing physical capital leads to diminishing marginal returns. However, investment in new ideas, such as technological advances or innovative production methods, can lead to sustained economic growth without hitting the ceiling of diminishing returns. Therefore, the key to escaping this trap is through investing in new ideas, rather than physical capital alone.

Question 20

In the Solow production function, an increase in the term "A" refers to an increase in:

Accepted Answer

An increase in the term "A" refers to an increase in productivity, which is typically associated with technological advances or improvements in skills and education. It is a factor that accounts for the residual output not explained by physical capital and labor inputs.

Quiz 8: Growth, Capital Accumulation and the Economics of Ideas: Catching up Vs the Cutting Edge

Which of the following statements correctly differentiates catching-up growth from cutting-edge growth?

Research by Solow indicated that about _____ of the increases in U.S. GDP per capita are due to better ideas.

Which of the following can drive long-run economic growth in the Solow model?

According to the Solow model, a country will grow faster when its capital stock is:

The growth that results from better ideas or technological knowledge is:

Better ideas or technological knowledge causes:

The key to keeping the economy growing in the long run is:

Which statement is consistent with the predictions of the simple Solow model with no technological advancement?

Provided they have the same steady state, the tendency for poorer countries to grow faster than richer countries and thus to converge in income is called:

Better ideas or technological knowledge causes:

Solow estimated that better ideas are responsible for about _____ of the U.S. standard of living.

In the long run, catching-up growth:

The key to keeping the economy growing in the long run is:

The production function can shift upward because of:

Which of the following statements correctly differentiates catching-up growth from cutting-edge growth?

The source of "cutting-edge" growth is:

Increases in productivity cause the:

Better ideas cause the:

The key to escaping the "iron logic" of diminishing returns in the Solow model is:

In the Solow production function, an increase in the term "A" refers to an increase in: