Question 1

If a country's growth rate is 1.25%, then it will take about 40 years for its output to double.

Accepted Answer

The rule of 70 states that to estimate the number of years it takes for a variable to double, you divide the number 70 by the variable's growth rate. Therefore, to estimate the number of years it would take for a country's output to double with a growth rate of 1.25%, you divide 70 by 1.25, which equals 56 years approximately.

Question 2

Antitrust laws foster economic growth.

Accepted Answer

Antitrust laws promote healthy competition, prevent monopolies and abuse of power by dominant firms, and encourage innovation. All of these factors can contribute to economic growth.

Question 3

Which is NOT a source of productivity growth?

Accepted Answer

Moving resources from production to pension benefits may provide social benefits, but it does not lead to productivity growth as it does not increase the amount or efficiency of production. Choices A, B, and D are all potential sources of productivity growth as they increase the efficiency and/or quantity of production.

Question 4

What is the primary explanation for the rapid growth of the U.S. economy over the past century?

Accepted Answer

Technological progress has been the primary explanation for the rapid growth of the U.S economy over the past century. This includes advancements in manufacturing, transportation, communication, healthcare, and other industries. These technological advancements have led to increased productivity, efficiency, and innovation, which have propelled the U.S. economy to become the largest in the world.

Question 5

To sustain growth beyond the small fluctuations common in the business cycle, an economy's ability to produce must increase.

Accepted Answer

In order to sustain long-term growth, an economy must be able to produce more goods and services over time, which requires an increase in productivity and efficiency. This is known as potential output, and it can be influenced by factors such as technological innovation, labor force skills, and investment in physical capital.

Question 6

An example of a natural resource is an untapped vein of platinum.

Accepted Answer

A natural resource is any material or substance that occurs naturally and is valuable to humans, such as minerals, forests, oil, and water. An untapped vein of platinum is an example of a natural resource because it is a valuable mineral that occurs naturally in the earth.

Question 7

Higher productivity leads to lower levels of economic growth.

Accepted Answer

Higher productivity can lead to higher levels of economic growth as it results in increased output and efficiency, leading to higher profits, wages, and overall economic activity.

Question 8

Investment in human capital is important because it

Accepted Answer

Investment in human capital, such as training and education for employees, can increase their skills and knowledge, leading to improved labor productivity. This can have a positive impact on a company's overall performance and profitability. While improving morale and meeting employee requirements are also important considerations, the primary benefit of investing in human capital is the potential increase in productivity. Lowering the total wage bill may result from increased efficiency, but it is not the main goal of investing in human capital.

Question 9

(Table) According to the table, which country will double its real GDP per capita most quickly?

Accepted Answer

The answer of (Table) According to the table, which country...

Question 10

There is a positive correlation between economic freedom and high per capita real GDP.

Accepted Answer

Economic freedom allows for greater competition, investment, and entrepreneurship, leading to increased productivity and economic growth, which ultimately results in higher per capita real GDP.

Question 11

Which of these would promote long-run economic growth?

Accepted Answer

Technological advancement promotes long-run economic growth by increasing productivity, improving efficiency, and fostering innovation, which can lead to the creation of new industries and enhance the competitiveness of an economy.

Question 12

In recent years, developed countries like the United States, Japan, and Germany have achieved the highest annual growth rates in the world.

Accepted Answer

This statement is false. While developed countries may have relatively strong economies, many developing countries such as China, India, and South Korea have achieved much higher annual growth rates in recent years.

Question 13

An example of physical capital is a communications network used to track shipments.

Accepted Answer

A communications network is a form of physical capital, as it is a tangible asset used in business operations.

Question 14

The catch-up effect is the idea that up to a certain point, developing countries can achieve greater productivity for each unit of capital invested because they have the advantage of using technologies already developed by other countries.

Accepted Answer

The catch-up effect is the idea that developing countries can achieve greater productivity up to a certain point by adopting already developed technologies. This is because they do not need to invest in research and development of new technologies, but can simply use those already developed by other countries.

Question 15

Which item is NOT an example of investment in human capital?

Accepted Answer

Acquisition of obsolete skills means investing in skills that are no longer in demand, which is not an example of investment in human capital. A policy of universal education, on-the-job training, and apprenticeship all involve investing in human capital by improving skills and knowledge.

Question 16

Infrastructure is

Accepted Answer

Infrastructure refers to the basic physical and organizational structures and facilities needed for the operation of a society or enterprise. These include transportation, communication, water supply, and power grids, among others, which are typically considered public goods that the government provides. Therefore, infrastructure is a country's public capital.

Question 17

Which resource is an example of infrastructure?

Accepted Answer

An elementary school is considered infrastructure as it is a public facility that supports the community's educational needs.

Question 18

Open immigration policies in the United States, along with other increases in the labor force, have led to economic growth.

Accepted Answer

Studies have shown that open immigration policies and increases in the labor force have led to economic growth in the United States. Immigrants contribute to the economy by starting businesses, paying taxes, and filling essential jobs. However, the impact of immigration on the overall economy is a complex issue with various factors to consider.

Question 19

Total factor productivity captures the factors that influence the overall effectiveness of inputs.

Accepted Answer

Total factor productivity measures the efficiency and productivity of all factors of production, including inputs such as labor and capital as well as technology, management practices, and other factors that can influence overall performance.

Question 20

According to Thomas Malthus, what part of the economy might increase at a rate such that the data would show an increase from 1,000 to 2,000 to 4,000 to 16,000?

Accepted Answer

Thomas Malthus proposed that population increases exponentially while food production increases arithmetically. Thus, if population is increasing at a rate of 2x each time period, it would go from 1,000 to 2,000 to 4,000 to 16,000.

Quiz 7: Economic Growth