Question 1

In what way did Henry Ford's use of the assembly line method of production represent an advance in technology in automobile manufacturing?

Accepted Answer

Henry Ford's use of the assembly line method of production allowed workers to specialize in specific tasks, making them more productive. This resulted in a significant increase in the speed of production and enabled Ford to produce cars at a lower cost. This approach was a revolutionary advancement in automobile manufacturing and allowed Ford to dominate the market in the early 20th century.

Question 2

Is having abundant resources an absolute guarantee of economic growth and prosperity?

Accepted Answer

While having abundant resources can contribute to economic growth and prosperity, it is not an absolute guarantee. Other factors such as institutions and technological advances also play a crucial role in a country's economic success. It is possible for countries without abundant resources to thrive under collective ownership of property, as in the case of some successful cooperatives. Similarly, having an aggressive military is not necessary for economic growth and prosperity.

Question 3

Beginning in the late 1970s,economic reform in China allowed farmers,for the first time,to keep a portion of their crops and to sell them to others.Previously,all food was collectively farmed and shared.How did this basic reform improve China's economic growth?

Accepted Answer

Giving farmers the ability to keep a portion of their crops and sell them created a profit motive, which encouraged farmers to be more productive in order to make more money. This increase in productivity led to an increase in the overall output of food, which in turn contributed to China's economic growth.

Question 4

As they relate to economic growth,institutions are:

Accepted Answer

Institutions are significant practices, relationships, or organizations in society that shape the way society operates and thus impact economic growth. Examples of institutions include the legal system, financial markets, education system, and political system. These institutions provide the framework within which businesses operate and facilitate economic growth.

Question 5

Today,not all regions of the world enjoy the same level of annual real per capita gross domestic product (GDP).The regions that have higher levels of real per capita GDP probably also have:

Accepted Answer

The statement indicates that regions with higher levels of real per capita GDP probably have growth-promoting institutions like property rights. This suggests that these regions have a conducive environment for businesses to thrive and individuals to invest, thereby facilitating economic growth, which contributes to higher levels of real per capita GDP.

Question 6

Krista owns a hair salon.She wants to increase the number of clients she serves each month,and she wants to use a technological advance to do so.________ would represent a technological advance at her hair salon.

Accepted Answer

Installing a new hair dryer that can dry hair in half the time, with less damage to the hair would represent a technological advance that can potentially increase efficiency and attract more clients to Krista's salon.

Question 7

Why do institutions such as private-property rights promote economic growth?

Accepted Answer

Private-property rights create an incentive for individuals to invest in and improve their property in order to maximize its value, which encourages economic growth. When property is collectively owned, there is less of a motivation for individuals to make improvements as they do not directly benefit from the increased value.

Question 8

One of the most basic reasons why Taiwan is so much wealthier than Liberia is that Taiwan has:

Accepted Answer

Taiwan has developed institutions that promote economic growth, such as a strong legal system, protection of property rights, and support for entrepreneurship. Liberia, on the other hand, faces difficulties with corruption, lack of infrastructure, and weak institutions that hinder economic development. The size, resources, relationship with the United States, climate, and common language shared by residents are not the primary reasons for the difference in wealth between the two countries.

Question 9

You are an economics consultant and have been contacted by an official from a developing country.She tells you that her country's economy is currently growing at 2% per year.She asks you how long it will take for her country's economy to double in size; you tell her it will take 35 years.She then asks you what the government can do to shorten the time necessary to double the size of the country's economy.What should you tell her?

Accepted Answer

Encouraging the development of growth-positive institutions such as property rights protection, free and fair competition, and efficient government service delivery can create a better environment for businesses to invest and grow. This can lead to an increase in productivity and economic growth, which can help to shorten the time necessary to double the size of the country's economy. Cutting taxes and government spending can also be helpful in stimulating economic growth, but this should be done in a responsible and sustainable manner. Increasing barriers to international trade, halting immigration, and suspending the rule of law can have negative consequences for economic growth and should be avoided.

Question 10

Which of the following factors is NEGATIVELY correlated with economic growth?

Accepted Answer

Collectively owned resources often lead to inefficiency and lack of innovation, which can harm economic growth.

Question 11

Between 2006 and 2010,per capita real gross domestic product (GDP)in India grew at an average rate of 7.11% per year.Which of the following factors would have contributed most to this rapid escalation in growth?

Accepted Answer

Advances in technology would have led to increased productivity, efficiency and innovation, which in turn would have boosted economic growth. This would have contributed significantly to the rapid increase in per capita real GDP in India between 2006 and 2010. Increases in government regulations, a decrease in education standards, a significant increase in taxes or restrictions on immigration, on the other hand, are likely to have a negative impact on economic growth.

Question 12

When an economy has a more stable and well-developed financial system,it is reasonable to expect ________ the long-run aggregate supply curve.

Accepted Answer

A more stable and well-developed financial system allows for more efficient allocation of resources, investment, and capital accumulation, which can lead to increases in productivity and potential output in the long run. This results in a rightward shift of the long-run aggregate supply curve.

Question 13

Which of the following is an example of an institution that promotes economic growth?

Accepted Answer

Private-property rights promote economic growth by providing individuals with the incentives to invest in and improve their property. This leads to greater efficiency and productivity, which stimulates economic growth. Bartering as a means of trade, high barriers to international trade, constant war and conflict, and collective property ownership typically hinder economic growth.

Question 14

Between 2006 and 2010,per capita real gross domestic product (GDP)in China grew at an average rate of 10.62% per year.In contrast,its economy only grew by an average rate of 0.25% from 1961 to 1965.Which of the following factors would have contributed most to this rapid escalation in growth?

Accepted Answer

The establishment of pro-growth institutions, such as opening up to foreign investment, implementing market-oriented reforms and privatizations, and allowing more private enterprise, would contribute most to rapid economic growth. Factors such as rapid population growth (A), large increases in average prices (C), and restrictions on imports and exports (E) could potentially lead to short-term growth but may not be sustainable in the long run. Dramatic reductions in tax rates (D) could potentially stimulate growth, but it would depend on the specific tax policies implemented.

Question 15

Nathan owns a coffee shop.He wants to increase the weekly number of coffee drinks he sells,and he wants to use a technological advance to do so.________ would represent a technological advance at his coffee shop.

Accepted Answer

Acquiring a new espresso machine that can prepare coffee drinks faster than his current model represents a technological advance that can increase the speed and efficiency of the coffee-making process, therefore allowing for more coffee drinks to be sold per week. The other options may have some impact on the business, but do not necessarily represent a technological advance.

Question 16

The island of Hispaniola,located in the Caribbean,is divided roughly in half by the two countries that occupy it.The western half is the country of Haiti,and the eastern half is the country of the Dominican Republic.In 2011,per capita real gross domestic product (GDP)in Haiti was roughly $740.In the Dominican Republic,it was almost $9,300.What most likely explains this difference?

Accepted Answer

The difference in per capita real gross domestic product (GDP) between Haiti and the Dominican Republic can be attributed to the fact that the Dominican Republic has better growth-positive institutions than Haiti. These institutions include things like political stability, well-functioning markets, and effective governance, all of which encourage economic growth. Haiti has struggled with political instability, weak institutions, and poor governance, which have hindered its ability to grow economically.

Question 17

Steve owns a bike shop.He wants to increase the number of bikes he sells each week,and he wants to use a technological advance to do so.________ would represent a technological advance at his bike shop.

Accepted Answer

By utilizing an online ordering system, Steve would be able to expand his customer base beyond his local area and sell bikes to customers across the country, potentially increasing his sales significantly. The other options may improve his business in other ways, but they wouldn't necessarily lead to an increase in bike sales.

Question 18

All countries have some resources and technology available to them.The ones that grow fastest are the ones that:

Accepted Answer

The countries that grow fastest are the ones that have the institutional framework in place to efficiently utilize their resources and technology. This means that they have a stable political and legal system, well-functioning markets, and infrastructure that allows for easy transportation and communication. This enables them to attract investment and create an environment that fosters innovation and growth. Hoarding resources or allowing them to be extracted by others without proper oversight and regulation can lead to inefficiencies and corruption. Invading other countries for resources is not a sustainable or ethical solution. Collective ownership of resources can result in lack of incentives for individuals and businesses to invest and innovate.

Question 19

Liberia,a very poor nation in West Africa,is relatively abundant in resources such as mahogany and rubber tree forests,iron-ore deposits,and diamonds.If Liberia is so rich in valuable resources,why is it still so impoverished?

Accepted Answer

The fact that Liberia is still impoverished despite its abundance of resources suggests that there are other underlying issues preventing the country from effectively utilizing those resources. One of the key factors is the lack of institutions necessary to make productive use of those resources, such as a stable government, reliable infrastructure, and skilled labor force. Without these institutions, the potential benefits of natural resources cannot be fully realized, leading to continued poverty and underdevelopment.

Question 20

In 1950,residents in Liberia were wealthier than those in Taiwan.Today,per capita gross domestic product (GDP)in Taiwan is more than 20 times that of Liberia.Which of the following best explains why Taiwan is now so much wealthier than Liberia?

Accepted Answer

Institutions such as stable governance, rule of law, property rights, and access to finance play a crucial role in promoting economic growth, and Taiwan has better institutional frameworks than Liberia. This is supported by empirical evidence from various studies. The other options are not supported by evidence or are simply incorrect.

Quiz 13: Economic Growth and the Wealth of Nations