Question 1

Empirical studies indicate that the maximum amount of air pollution occurs ________ levels of real GDP per person.
A)at the highest
B)at the lowest
C)at "middle-income"
D)equally at all

Accepted Answer

Middle-income countries, like Mexico, are between the rich industrialized countries and the abject poor countries. Middle-income countries tend to have pollution problems because they are developed enough for industry but not rich enough to afford clean air and waterways.

Question 2

Government support of basic research by funding scientists through the National Science Foundation is an example of a government policy to promote economic growth by:
A)increasing human capital.
B)increasing physical capital.
C)improving technology.
D)increasing the availability of natural resources.

Accepted Answer

Government policy supporting basic advances technology, promotes economic growth.

Question 3

Which of the following is consistent with a political and legal framework that discourages economic growth?
A)The allocation of bank credit by the government rather than by markets
B)A speedy approval process for new businesses
C)Agricultural prices that are allowed to vary according to market conditions
D)Taxation and regulation that are not very burdensome

Accepted Answer

Bank credit is allocated well by private markets, based on the risk-reward trade-off, whereas credit allocated by governments tends to be faulty because of corruption and strong political influence.

Question 4

A government policy of providing job training for unskilled youths is an example of a policy to promote economic growth by:
A)increasing human capital.
B)increasing physical capital.
C)improving technology.
D)increasing the availability of natural resources.

Accepted Answer

Government provision of on-the-job training gives the work force essential skills that increase human capital.

Question 5

A government policy to build bridges and dams is an example of a policy to promote economic growth by:
A)increasing human capital.
B)increasing physical capital.
C)improving technology.
D)improving the social and legal environment

Accepted Answer

Government policy of building infrastructure, like bridges and dams, promotes physical capital that is essential to economic growth.

Question 6

Research confirms that government provision of infrastructure:
A)hinders economic growth.
B)promotes economic growth.
C)increases human capital.
D)leads to reduced spending on research and development.

Accepted Answer

Government policy of building infrastructure, like interstate highways, promotes physical capital, which is essential to economic growth.

Question 7

Empirical studies suggest that as real GDP per person increases the level of pollution:
A)increases.
B)decreases.
C)remains constant.
D)first increases then decreases.

Accepted Answer

When countries first industrialize there is often considerable pollution. However when countries get richer, they value quality of life more than before and tend to reduce pollution.

Question 8

Arguing that economic growth will eventually stop because we will run out of natural resources:
A)must be correct because scarcity exists.
B)will only be correct if growth takes the form of newer, more efficient goods and services.
C)ignores the power of markets to recognize shortages and induce changes in behavior.
D)is supported today by the fact that richer countries have fewer natural resources.

Accepted Answer

Those who believe there are limits to economic growth tend to worry that the world is running out of natural resources. However, past experiences seem to suggest that markets will adjust to shortages as the recent shale oil boom in the United States show.

Question 9

The construction of the interstate highway system in the United States is an example of a government policy to promote economic growth by:
A)increasing human capital.
B)increasing physical capital.
C)improving technology.
D)improving the social and legal environment.

Accepted Answer

Government policy of building infrastructure, like interstate highways, promotes physical capital that is essential to economic growth.

Question 10

High rates of saving and investing in the private sector promote economic growth by:
A)increasing human capital.
B)improving the social and legal environment.
C)increasing physical capital.
D)improving technology.

Accepted Answer

High rates of savings, which result from well-functioning financial markets, provide the funds needed for investment into physical capital.

Question 11

A government policy that allows retirement savings to accumulate tax-free is an example of a policy to promote economic growth by:
A)increasing human capital.
B)increasing physical capital.
C)improving technology.
D)increasing the availability of natural resources.

Accepted Answer

Government tax policy that promotes savings gives savers incentives to accumulate wealth. Savings, in turn, increases investment in physical capital.

Question 12

Defenders of limits on economic growth are concerned that continued economic growth will eventually:
A)raise interest rates.
B)reduce the rate of technological progress.
C)exhaust natural resources.
D)make plant and equipment obsolete.

Accepted Answer

Those who believe there are limits to economic growth tend to worry that the world is running out of natural resources.

Question 13

In order to promote growth through increased quantities of physical capital, governments must promote:
A)a better educational system.
B)job training programs.
C)high rates of saving and investing.
D)funding for basic science.

Accepted Answer

Government policies that promotes savings gives savers incentives to accumulate wealth. Savings, in turn, increases investment in physical capital.

Question 14

The biggest barrier to growth for many of the poorest countries in the world is the need for:
A)larger populations.
B)more human capital.
C)more physical capital.
D)improved legal and political frameworks.

Accepted Answer

Foreign and domestic saving is nearly absent in the poorest countries of the world because savers worry their money cannot be protected by contract law. With low saving there is little investment into new capital or technology.

Question 15

Economic growth may face environmental limits because:
A)economic growth can take the form of new, different, and "cleaner" goods and services.
B)economic growth may lead to less, not more, pollution.
C)the market mechanism mobilizes resources to deal with shortages.
D)global environmental problems are not handled by markets or national governments.

Accepted Answer

Global environmental problems, like climate change, are not handled well by markets because externalities exist. There is no global body today that can efficiently control externalities such as pollution.

Question 16

Sharing the results of applied research conducted under government sponsorship with the private sector, such as the development of the Global Positioning System (GPS), is an example of a government policy to promote economic growth by:
A)increasing human capital.
B)increasing physical capital.
C)improving technology.
D)increasing the availability of natural resources.

Accepted Answer

Government policy supporting applied research advances technology, which promotes economic growth.

Question 17

A government policy of providing free public education is an example of a policy to promote economic growth by:
A)increasing human capital.
B)increasing physical capital.
C)improving technology.
D)increasing the availability of natural resources.

Accepted Answer

Government investment to provide free public education provides the work force with essential skills that increase human capital.

Question 18

Arguments that economic growth must be constrained by environmental problems and limits of natural resources ignore the fact that economic growth can:
A)be measured in both nominal and real terms.
B)increase both average labor productivity and the share of population employed.
C)take the form of improved quality as well as increased quantity.
D)occur with only benefits and no economic costs.

Accepted Answer

Making more fuel-efficient cars that cause less pollution counts as economic growth even if the number of goods is the same. Economic growth can be reflected in quality improvements as well as quantity increases.

Quiz 19: Economic Growth, Productivity, and Living Standards

Empirical studies indicate that the maximum amount of air pollution occurs ________ levels of real GDP per person.

Government support of basic research by funding scientists through the National Science Foundation is an example of a government policy to promote economic growth by:

Which of the following is consistent with a political and legal framework that discourages economic growth?

A government policy of providing job training for unskilled youths is an example of a policy to promote economic growth by:

A government policy to build bridges and dams is an example of a policy to promote economic growth by:

Research confirms that government provision of infrastructure:

Empirical studies suggest that as real GDP per person increases the level of pollution:

Arguing that economic growth will eventually stop because we will run out of natural resources:

The construction of the interstate highway system in the United States is an example of a government policy to promote economic growth by:

High rates of saving and investing in the private sector promote economic growth by:

A government policy that allows retirement savings to accumulate tax-free is an example of a policy to promote economic growth by:

Defenders of limits on economic growth are concerned that continued economic growth will eventually:

In order to promote growth through increased quantities of physical capital, governments must promote:

The biggest barrier to growth for many of the poorest countries in the world is the need for:

Economic growth may face environmental limits because:

Sharing the results of applied research conducted under government sponsorship with the private sector, such as the development of the Global Positioning System (GPS) , is an example of a government policy to promote economic growth by:

A government policy of providing free public education is an example of a policy to promote economic growth by:

Arguments that economic growth must be constrained by environmental problems and limits of natural resources ignore the fact that economic growth can: