Question 1

Which of the following is an example of the way the financial markets in the United States can encourage technological progress more efficiently than other countries?
A)Even when entrepreneurs cannot secure sufficient funding for projects from banks, venture capital firms may be willing to lend money.
B)The level of legal protection for investors in the United States is relatively low.
C)Because the financial market in the United States is so large, the quantity of trading in corporate stocks and bonds makes those investments less liquid.
D)Banks in the United States are more willing to take on risk because the government guarantees each bank cannot lose more than $100,000 on any given loan that defaults.
E)The low American savings rates increases the number of people willing to lend to new businesses.

Accepted Answer

Venture capital firms provide funding to startups and other small businesses that are too risky for traditional banks. This encourages technological progress as entrepreneurs with innovative ideas have access to capital to fund their projects. Other countries with less developed financial markets may not have as many venture capital firms, making it more difficult for startups to get funding.

Question 2

Draw a graph of "catch-up" that shows where you would expect to see a country with low saving rates and low levels of health and education.How would you expect real GDP per capita to grow in a country like this? Explain.

Accepted Answer

The answer of Draw a graph of "catch-up" that shows...

Question 3

Which of the following accurately describes the impact of the rule of law on a country's economic growth rate?
A)Countries with a strong rule of law have faster economic growth.
B)Countries with a weak rule of law have faster economic growth.
C)Countries that enforce property rights through lawsuits have slower economic growth.
D)Countries where favouritism and bribery are common have stronger rates of growth.
E)Countries in which the government regularly takes control of industries have faster economic growth.

Accepted Answer

The rule of law ensures that contracts and property rights are enforced, which gives businesses and investors a sense of security and reduces uncertainty. This promotes investment, innovation, and growth, leading to higher economic growth rates in countries with a strong rule of law.

Question 4

By offering more generous unemployment insurance programs, Canadians can expect
A)to pay less in taxes than in the United States.
B)workers to gain new skills quickly in response to fluctuations in the labour market.
C)shorter periods of unemployment for their workers.
D)longer periods of unemployment for their workers.
E)more frequent periods of high unemployment.

Accepted Answer

More generous unemployment insurance programs can lead to longer periods of unemployment for workers because they may reduce the urgency for unemployed individuals to find new work, as they receive financial support during their period of unemployment.

Question 5

The developing countries have been catching up to the lower-income industrial countries in terms of economic growth.

Accepted Answer

The answer of The developing countries have been catching up...

Question 6

Which of the following countries actually experienced negative economic growth from 1960 to 2011?
A)Israel
B)Singapore
C)Niger
D)Malaysia
E)Argentina

Accepted Answer

According to World Bank data, the only country in the given list that experienced negative economic growth from 1960 to 2011 is Niger.

Question 7

Which of the following is an example of foreign portfolio investment?
A)the purchase of a Canadian stock by a Canadian citizen
B)the purchase of a Canadian government bond by a German citizen
C)the purchase of a Canadian mutual fund by a Canadian citizen
D)the purchase of a Japanese factory by a Korean citizen
E)the purchase of a Canadian vacation home by a Chinese citizen

Accepted Answer

Foreign portfolio investment refers to the purchase of securities (e.g. stocks, bonds, mutual funds) issued by foreign entities by investors from another country. Option B is an example of this, as a German citizen is purchasing a Canadian government bond. The other choices involve either a domestic investor or the purchase of non-security assets.

Question 8

The economic growth model predicts that
A)GDP per capita of rich countries will grow more rapidly than in poor countries.
B)GDP per capita of poor countries will grow more rapidly than in rich countries.
C)Governments must centrally direct the economy for growth to occur.
D)GDP per capita of poor countries will never change.
E)GDP per capita in rich countries grow at an accelerating rate.

Accepted Answer

The economic growth model, particularly the neoclassical growth model, predicts convergence, meaning that GDP per capita in poor countries will grow more rapidly than in rich countries as they catch up. This is based on the assumption of diminishing returns to capital; poorer countries can adopt existing technologies and practices from richer countries, allowing for faster growth.

Question 9

What is the difference between foreign direct investment and foreign portfolio investment?
A)Foreign direct investment involves purchases of foreign stock or bonds by individuals or firms, while foreign portfolio investment involves a firm purchasing or building a facility in a foreign country.
B)Individuals engage in foreign portfolio investment, but only firms can engage in foreign direct investment.
C)Foreign direct investment only takes place when governments make official purchases or foreign investments, while foreign portfolio investment takes place when firms, individuals, or the government purchase foreign investments.
D)Foreign direct investment cannot give a low-income country access to funds and technology it would not otherwise have, but foreign portfolio investment does expand that access.
E)Foreign direct investment guarantees a future return, but foreign portfolio investment involve a high degree of risk.

Accepted Answer

Foreign direct investment (FDI) involves a firm investing directly in facilities to produce or market a product in a foreign country, while foreign portfolio investment (FPI) involves individuals or firms investing in financial assets such as stocks or bonds in a foreign country.

Question 10

Table 7.5 
-Refer to Table 7.5.Consider the statistics in the table above in describing the industrialized countries.Are these consistent with the economic growth model? Briefly explain.

Accepted Answer

The answer of Table 7.5 
-Refer to Table 7.5.Consider the...

Question 11

Would you expect to see higher or lower growth rates for countries that start out with a relatively low level of real GDP per capita? Explain using the concept of "catch-up" and support your answer with a graph.

Accepted Answer

The answer of Would you expect to see higher or...

Question 12

Georg, a German citizen, just purchased 10 shares of stock in Suncor, a Canadian company.This purchase is an example of
A)foreign direct investment.
B)foreign public investment.
C)foreign portfolio investment.
D)contractual globalization.
E)domestic fixed capital formation.

Accepted Answer

Georg's purchase of 10 shares of stock in Suncor is an example of foreign portfolio investment, which involves investing in securities such as stocks and bonds in foreign markets without any significant management control. Foreign direct investment involves the ownership and control of physical assets such as factories or real estate in a foreign country. Foreign public investment refers to government investments in foreign companies or securities. Contractual globalization involves the transfer of technology, management expertise, and other specialized skills through contractual agreements. Domestic fixed capital formation refers to investments made by firms and governments within a country to increase their productive capacity.

Question 13

________ save a ________ of their income.This ________ capital in their economy and raises economic growth.
A)Developing countries; large proportion; decreases
B)Developing countries; small proportion; increases
C)High-income countries; large proportion; increases
D)High-income countries; small proportion; increases
E)High-income countries; large proportion; decreases

Accepted Answer

C) High-income countries typically save a larger proportion of their income compared to developing countries. This saving increases capital in their economy, which in turn, raises economic growth by providing more funds for investment.

Question 14

Empirical evidence from 1960 to 2011 shows that convergence in economic growth is occurring in which of the following cases?
A)Low-income industrial countries are catching up to high-income industrial countries.
B)Low-income developing countries are catching up to high-income industrial countries.
C)Low-income agricultural countries are catching up to high-income developing countries.
D)All low-income countries are catching up to all high-income countries.
E)Low-income developing countries are catching up to low-income industrial countries.

Accepted Answer

The answer of Empirical evidence from 1960 to 2011 shows...

Question 15

Lack of investment in strong education and health care systems
A)causes a deterioration in human capital and a decline in labour productivity.
B)causes a decline in physical capital and a decline in labour productivity.
C)increases human capital and causes a decline in labour productivity.
D)causes a deterioration in human capital and an increase in physical capital.
E)cause better enforcement of the rule of law.

Accepted Answer

Investing in education and health care systems helps improve human capital, resulting in a more skilled and healthy workforce. A lack of such investments leads to a deterioration in human capital, which then lowers labour productivity as individuals are less able to contribute effectively to the economy. It doesn't necessarily have an impact on physical capital or the enforcement of the rule of law.

Question 16

Which of the following is not a reason why low-income countries might experience low economic growth?
A)The country has endured extended periods of war.
B)The country fails to enforce a rule of law.
C)The country has a good education system.
D)The country has a low rate of saving and investment.
E)The country has poor public education.

Accepted Answer

A good education system is actually a factor that can contribute to higher economic growth. The other options (A, B, D, and E) are all reasons why low-income countries might experience low economic growth.

Question 17

There has been catch-up among the ________ countries, but there has not been catch-up among ________.
A)developing countries such as Niger; industrialized countries such as Japan
B)industrialized countries such as Japan; all countries of the world
C)developing countries such as Niger; all countries of the world
D)all countries of the world together; industrialized countries such as Japan
E)industrialized countries such as Canada; industrialized countries of Asia

Accepted Answer

There has been economic catch-up among industrialized countries like Japan, but not among all countries globally, as disparities between developed and developing nations persist.

Question 18

Which of the following is an example of foreign direct investment?
A)You purchase a plane ticket to China on WestJet.
B)WestJet builds a hub in China.
C)You buy a plane that was made in China.
D)A stock broker from China sells you a Chinese government savings bond.
E)A chinese person buys shares in Bombardier.

Accepted Answer

Foreign direct investment refers to when a company establishes a subsidiary or invests in a foreign firm with the intention of controlling the management of the operations. Therefore, WestJet building a hub in China is an example of foreign direct investment.

Question 19

One reason why many low-income countries experience low rates of growth is because of low rates of saving and investment in those countries.

Accepted Answer

Low savings and investment rates can limit a country's ability to build infrastructure, purchase capital goods, and develop human capital, all of which are necessary for sustained economic growth. Without these investments, productivity and efficiency may remain low, hindering economic expansion.

Question 20

The lower-income industrial countries are catching up to the higher-income industrial countries in terms of economic growth.

Accepted Answer

This is generally true, as lower-income industrial countries are experiencing more rapid economic growth rates than higher-income industrial countries. However, it is important to note that there may still be significant disparities in terms of overall levels of economic development and standards of living between different countries.

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

Which of the following is an example of the way the financial markets in the United States can encourage technological progress more efficiently than other countries?

Draw a graph of "catch-up" that shows where you would expect to see a country with low saving rates and low levels of health and education.How would you expect real GDP per capita to grow in a country like this? Explain.

Which of the following accurately describes the impact of the rule of law on a country's economic growth rate?

By offering more generous unemployment insurance programs, Canadians can expect

The developing countries have been catching up to the lower-income industrial countries in terms of economic growth.

Which of the following countries actually experienced negative economic growth from 1960 to 2011?

Which of the following is an example of foreign portfolio investment?

The economic growth model predicts that

What is the difference between foreign direct investment and foreign portfolio investment?

Table 7.5 -Refer to Table 7.5.Consider the statistics in the table above in describing the industrialized countries.Are these consistent with the economic growth model? Briefly explain.

Would you expect to see higher or lower growth rates for countries that start out with a relatively low level of real GDP per capita? Explain using the concept of "catch-up" and support your answer with a graph.

Georg, a German citizen, just purchased 10 shares of stock in Suncor, a Canadian company.This purchase is an example of

save a of their income.This capital in their economy and raises economic growth.

Empirical evidence from 1960 to 2011 shows that convergence in economic growth is occurring in which of the following cases?

Lack of investment in strong education and health care systems

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

There has been catch-up among the countries, but there has not been catch-up among .

Which of the following is an example of foreign direct investment?

One reason why many low-income countries experience low rates of growth is because of low rates of saving and investment in those countries.

The lower-income industrial countries are catching up to the higher-income industrial countries in terms of economic growth.