Question 1

A superior level of technology is an important reason the productivity of workers in rich countries is high.

Accepted Answer

Advanced technology such as automation and efficient communication systems can increase productivity by reducing manual labor and streamlining processes. Rich countries tend to have more resources to invest in such technology, contributing to higher levels of productivity among their workers.

Question 2

The poorest countries in Africa have some of the highest growth rates,thus proving the convergence hypothesis.

Accepted Answer

False

Question 3

As the level of real interest rates rise,the amount of new investment will rise also.

Accepted Answer

As the level of real interest rates rise, the cost of borrowing increases, which reduces investment. Therefore, the amount of new investment will not rise as real interest rates rise.

Question 4

Productivity levels are higher in rich countries compared to poor countries.

Accepted Answer

Rich countries generally have better education, infrastructure, technology, and access to resources, which can contribute to higher productivity levels compared to poor countries with limited access to these factors.

Question 5

College tuition costs have risen faster than prices in general from 1979 to 2009.

Accepted Answer

According to the College Board, the average cost of tuition and fees for a four-year public institution has increased by 213% from 1979 to 2009, compared to a 123% increase in overall prices during the same period.

Question 6

The convergence hypothesis suggests that poor countries may close the income gap with rich countries.

Accepted Answer

The convergence hypothesis suggests that as poor countries grow and develop, they may eventually catch up with and even surpass the income levels of rich countries. This is based on the idea that poorer countries have more potential for growth and development, and that as they adopt modern technologies and ideas, they can increase their productivity and reduce the income gap with richer countries. However, the convergence hypothesis is still a topic of debate and some argue that other factors, such as political instability or institutional quality, may prevent underdeveloped countries from converging with rich nations.

Question 7

Capital investment becomes more profitable for a business firm as the real interest rate decreases.

Accepted Answer

When the real interest rate decreases, the cost of borrowing money decreases, which means that businesses can access cheaper funds to invest in capital projects. This makes capital investment more profitable as the return on investment (ROI) may be higher than the cost of borrowing. Therefore, a decrease in real interest rates increases the profitability of capital investment for a business firm.

Question 8

Improvements in the level of technology will generally shift the production function downward.

Accepted Answer

Improvements in technology typically shift the production function upwards, as efficiency and output increase with the adoption of more advanced technology.

Question 9

Some politicians argue that reducing the corporate income tax will increase business investment spending.

Accepted Answer

The argument is that a lower corporate income tax rate will leave businesses with more profits, which they can then reinvest into the company through spending on equipment, research and development, or hiring more employees. This increase in investment spending can lead to long-term economic growth and job creation. However, there is debate over the effectiveness of this approach and whether it primarily benefits larger corporations rather than small businesses.

Question 10

For a given technology,a higher capital stock will decrease labor productivity.

Accepted Answer

A higher capital stock typically leads to an increase in labor productivity, as workers have access to better tools and equipment that make their job easier and more efficient.

Question 11

Service sector outputs could be expected to increase in price less than industrial sector outputs as an economy grows.

Accepted Answer

As an economy grows, the service sector often experiences higher price increases compared to the industrial sector due to the Baumol's cost disease, which states that industries with lower productivity growth, like many services, tend to have faster wage and price increases.

Question 12

Productivity growth rates are usually higher in rich countries than in poor countries.

Accepted Answer

The answer of Productivity growth rates are usually higher in...

Question 13

A nation's capital consists mainly of stocks,bonds,and other financial assets.

Accepted Answer

A nation's capital typically includes physical assets such as buildings, infrastructure, and natural resources, in addition to financial assets.

Question 14

Labor productivity rises as the amount of capital available to workers increases.

Accepted Answer

This is known as the capital-labor substitution effect, where increasing capital investment leads to more efficient and productive use of labor.

Question 15

All increases in the level of human capital take place in schools.

Accepted Answer

Although schools are a primary source for acquiring human capital, it is not the only source. Human capital can also be gained through work experience, apprenticeships, mentoring, self-directed learning, and other forms of training outside of traditional schools.

Question 16

When the economy devotes more of its resources to investment goods,it must devote fewer resources to consumer goods.

Accepted Answer

Investment goods are resources used for creating new capital goods, which are used to produce more goods and services in the future. When more resources are used for investment goods, fewer resources are available for producing consumer goods which are meant for immediate consumption.

Question 17

Imitation is not only the highest form of flattery but also an easier way for poorer countries to develop new technology.

Accepted Answer

By imitating already existing technology, poorer countries can save resources and time that would have been spent on research and development. This can allow them to catch up with more developed countries in terms of technological advancement. Additionally, imitation can lead to further innovation and improvements as countries adapt and customize the technology to suit their specific needs and resources. However, it is important to note that intellectual property laws and ethical considerations should be respected in the process of imitation.

Question 18

Human capital includes the tools and equipment that human beings work with.

Accepted Answer

Human capital refers to the knowledge, skills, and abilities possessed by individuals, as well as their capacity to perform labor that creates value in the economy. It does not include the tools and equipment they use.

Question 19

The term "capital formation" actually implies adding new equipment to a nation's factories.

Accepted Answer

The answer of The term "capital formation" actually implies adding...

Question 20

The production function shifts upward as the capital stock increases.

Accepted Answer

This is because capital is one of the factors of production, and increasing the amount of capital in the production process will lead to an increase in output, shifting the production function upward.

Quiz 7: Economic Growth Theory And Policy