Question 1

High-income countries have ________ and ________ as compared to developing countries.

Accepted Answer

High-income countries tend to have higher rates of savings and investment, which in turn leads to higher rates of economic growth. This is because savings and investment provide the necessary capital for businesses to expand, innovate, and create jobs, which ultimately drives economic growth. Developing countries, on the other hand, often struggle to save and invest due to lower levels of income and limited access to financial markets, which can hinder their ability to achieve sustained economic growth.

Question 2

The opportunity cost of being unemployed tends to be the highest in which of the following countries?

Accepted Answer

The opportunity cost of being unemployed is generally highest in the United States due to its limited social welfare benefits compared to countries like Canada, France, the United Kingdom, and Sweden, which have more comprehensive social safety nets and unemployment benefits. This means that the financial impact of unemployment is typically more severe in the U.S., making the opportunity cost of not working higher.

Question 3

The purchase or building by a corporation of a facility in a foreign country is called

Accepted Answer

Foreign direct investment refers to a corporation's purchase or establishment of a facility in a foreign country, typically with the intention of expanding its reach and increasing its profits. Foreign portfolio investment, on the other hand, involves investing in foreign stocks, bonds, or other financial instruments. Foreign capital depreciation and internationally-directed investment are not widely used terms in this context, and international capital acquisition is too broad to accurately describe the specific act of building or purchasing a facility.

Question 4

Productivity gains in Canada since 1990 have been ________ productivity gains in the United States.

Accepted Answer

According to the information given, productivity gains in Canada since 1990 have been lower than productivity gains in the United States.

Question 5

Relative to productivity growth in the United States, which of the following countries experienced the largest decline in productivity growth from 1990 to 2014?

Accepted Answer

According to the data provided by the question, Japan experienced a decline in productivity growth of 1.65% from 1990 to 2014, which is higher than the decline in productivity growth experienced by Canada (.54%), Germany (.35%), the United Kingdom (.98%), and Spain (.85%). Therefore, Japan experienced the largest decline in productivity growth among the given options.

Question 6

Globalization refers to

Accepted Answer

Globalization refers to the process of countries becoming more open to foreign trade and investment, which can lead to increased interdependence and integration between different economies. It involves the flow of goods, services, capital, and people across national borders, as well as the spread of technology and ideas. While it can bring many benefits, such as increased economic growth and job creation, it can also create challenges such as job displacement and increased inequality.

Question 7

Between 1960 and 2011, which of these leading industrial countries of the world had the highest average annual growth rate in GDP per capita?

Accepted Answer

According to the data from the World Bank, Taiwan had the highest average annual growth rate in GDP per capita between 1960 and 2011, with a rate of 6.25%. Japan had the second-highest growth rate with 4.38%, followed by Switzerland with 2.28%. Canada had a growth rate of 1.68% and Greece had a negative growth rate during this period, -0.24%. Therefore, the best choice is A) Taiwan.

Question 8

The purchase by an individual or firm of stock or bonds issued in another country is called

Accepted Answer

Foreign portfolio investment involves the purchase of stocks or bonds issued by foreign companies, whereas foreign direct investment involves the creation or acquisition of a foreign subsidiary. Foreign exchange arbitrage involves profiting from differences in exchange rates, and the other options are not relevant to this scenario.

Question 9

Table 7.4 
-Refer to Table 7.4.In the table above, which countries are consistent with the predictions of the economic growth model?

Accepted Answer

The economic growth model predicts that countries with high levels of physical and human capital investment, as well as efficient institutions and policies, will experience high levels of economic growth. Both Botswana and Thailand have experienced steady economic growth over the period shown in the table, with relatively high levels of investment and strong institutions and policies. Japan, on the other hand, has experienced a significant slowdown in economic growth since the 1990s, despite its high levels of physical and human capital investment. Guatemala has also experienced relatively low levels of economic growth, suggesting that it may not be consistent with the predictions of the economic growth model.

Question 10

Which of the following is not a reason why low-income countries do not experience rapid growth?

Accepted Answer

Globalization is actually one of the factors that can contribute to growth in low-income countries. The other choices, however, can hinder growth. Failure to enforce the rule of law can lead to corruption and instability, wars and revolutions disrupt economic activity, poor education and health can lead to a less productive workforce, and low rates of saving and investment mean there is less capital available for growth.

Question 11

Despite its close relationship with the richest country in the world, Mexico's economy has not grown faster than the American economy. Over the same period, the Chinese economy was able to grow much faster than both the US and Mexico. Which answer best explains Mexico's slower growth.

Accepted Answer

Mexico's corruption and weak financial sector make lending difficult and deter foreign investment, which slows down economic growth.

Question 12

Foreign direct investment in Canada increased 3.8 percent in 2011.This means that

Accepted Answer

Foreign direct investment refers to investments made by individuals or companies of one country in another country. In this case, the statement indicates that people or firms from other countries increased their investments in building or purchasing facilities in Canada. Therefore, option C is the correct answer. Option A refers to portfolio investment, not foreign direct investment. Option B and D are the opposite of what the statement says. Option E is unrelated to the statement.

Question 13

According to the World Bank, Albania does one of the worst jobs as a country enforcing the rule of law.The consequence of a weak rule of law is

Accepted Answer

The World Bank states that Albania's weak rule of law negatively impacts attracting investment and economic growth. This suggests that a strong rule of law is necessary for economic development and without it, countries may struggle to attract investment and experience slower economic growth.

Question 14

Which of the following does not contribute to the explanation why some countries have not experienced relatively high growth rates in real GDP per capita despite relatively low initial levels of real GDP per capita?

Accepted Answer

Higher savings may lead to less consumption and investment in the short term, which may result in lower growth rates in real GDP per capita despite low initial levels of real GDP per capita. However, in the long term, higher savings may lead to greater investment in physical and human capital, which may eventually result in higher growth rates. The other factors listed are all potential reasons why some countries have not experienced relatively high growth rates in real GDP per capita despite relatively low initial levels of real GDP per capita.

Question 15

Employees who are employed for longer periods tend to have greater skills, greater productivity and higher wages.American workers tend to retire later and have fewer spells of long unemployment.This is due to

Accepted Answer

The given factors (less generous payments for unemployment, fewer regulations around firms' abilities to fire workers, fewer restrictions around implementation of new technology and relatively little corruption) all contribute to American workers tending to retire later and have fewer spells of long unemployment. These factors encourage longer-term employment and skill development among employees, leading to greater productivity and higher wages.

Question 16

Countries that are more globalized tend to have

Accepted Answer

The statement suggests that countries that are more globalized have higher growth rates in real GDP per capita. This is because globalization allows for increased trade, investment, and technology transfer, leading to economic growth. Therefore, option C is the best choice.

Question 17

The industrialized group of countries has growth rates that are consistent with the findings of the economic growth model.That is, Taiwan, Korea, and Singapore had ________ incomes in 1960 than Canada, the United States and Switzerland; and Taiwan, Korea, and Singapore grew ________ than Canada, the United States and Switzerland between 1960 and 2009.

Accepted Answer

The economic growth model suggests that countries with lower initial incomes have the potential to grow more rapidly than those with higher initial incomes, due to catch-up growth or convergence. Taiwan, Korea, and Singapore had lower incomes in 1960 compared to Canada, the United States, and Switzerland, and they grew more rapidly between 1960 and 2009.

Question 18

Developing countries with low saving rates and poor levels of health and education are likely to experience

Accepted Answer

Low saving rates and poor levels of health and education indicate a lack of productive resources to support economic growth. Therefore, these countries are likely to experience low rates of real GDP per capita growth. A) High levels of foreign direct investment are unlikely if the conditions for investment, such as a skilled workforce and a stable political environment, are not present. B) Easy access to financial backing from banks is also unlikely for the same reasons as A. C) Rapid growth in household incomes is unlikely without sustained economic growth and increased productivity. E) Lower birth rates may occur as a result of increased education and access to healthcare, but this is not necessarily a direct consequence of low saving rates and poor levels of health and education.

Question 19

Which of the following best explains why productivity growth in the United States has been faster than in other leading industrialized nations?

Accepted Answer

The fact that there are fewer government regulations in the United States regarding the way firms can hire and fire workers is likely the main reason for faster productivity growth due to greater workforce flexibility.

Question 20

Consider two countries, Alpha and Beta.In Alpha, real GDP per capita is $6,000.In Beta, real GDP per capita is $9,000.Based on the economic growth model, what would you predict about the growth rates in real GDP per capita across these two countries?

Accepted Answer

According to the economic growth model, countries with lower initial levels of real GDP per capita will experience faster growth rates than countries with higher initial levels. Therefore, we would predict that Alpha, with a lower initial level of real GDP per capita, will experience a higher growth rate than Beta.

Quiz 7: Long-Run Economic Growth: Sources and Policies

High-income countries have and as compared to developing countries.