Question 1

A policy that offers parents a tax reduction based on how much they are saving for their children's college education should ________ the equilibrium level of loanable funds and ________ the rate of long-term growth.
A)decrease; increase
B)increase; decrease
C)decrease; decrease
D)increase; increase

Accepted Answer

This policy encourages savings for education, which increases the supply of loanable funds, lowering interest rates and facilitating more investments, including in human capital, thus potentially increasing the rate of long-term growth.

Question 2

Robert Lucas argues that there are ________ returns to human capital,and these productivity increases are not completely captured by individuals as they decide how much education to purchase.As a result,the market produces ________ education and training.
A)increasing; too much
B)decreasing; too much
C)increasing; too little
D)decreasing; too little

Accepted Answer

According to Robert Lucas, there are increasing returns to human capital, which means that the more education and training a person has, the more productive they will be. However, individuals may not capture all of the productivity gains from education, meaning that the market may not produce enough education and training. This suggests that there is a market failure and that the optimal level of education and training is likely higher than the market outcome. Therefore, choice C, increasing returns to human capital and too little education and training, is the best answer.

Question 3

Table 11-7
 
-Refer to Table 11-7.Consider the statistics in the table above in describing the following industrialized and developing countries.Are these consistent with the economic growth model? Briefly explain.

Accepted Answer

The answer of Table 11-7
 
-Refer to Table 11-7.Consider the...

Question 4

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 5

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 6

Robert Lucas,a Nobel laureate in economics,argues that there are ________ returns to human capital.
A)increasing
B)decreasing
C)constant
D)negative

Accepted Answer

Robert Lucas argued that there are increasing returns to human capital, meaning that the more you invest in education and skill development, the higher the return or payoff in terms of earnings and productivity. This is because as individuals acquire more skills and knowledge, they become more productive, which results in higher wages and better job opportunities.

Question 7

You are an economic advisor to the president.You are asked to recommend a policy to promote long-term economic growth in the economy.Which of the following policies would you choose?
A)a reduction in sales taxes
B)an investment tax credit
C)a reduction in taxes on luxury yachts
D)all of the above

Accepted Answer

An investment tax credit would be the best choice as it encourages businesses to invest in capital goods and equipment, which can lead to increased productivity and long-term economic growth. Reduction in sales taxes and taxes on luxury yachts may have a short-term impact on consumer spending but do not necessarily promote long-term economic growth.

Question 8

Enforcing property rights in an economy will
A)cause the market system to work less efficiently.
B)decrease the level of foreign portfolio investment.
C)encourage corruption and expand the underground economy.
D)raise the level of investment.

Accepted Answer

Enforcing property rights gives individuals and businesses greater assurance that they will be able to keep the fruits of their investment and hard work. As a result, they are more likely to engage in productive activities that require significant investments, such as building factories or developing new technologies. This, in turn, leads to higher levels of investment, economic growth, and overall efficiency in the market system.

Question 9

Corruption
A)curtails economic growth.
B)raises the rate of growth as bribes enhance income.
C)is eliminated by foreign direct investment.
D)acts as a magnet for foreign direct investment.

Accepted Answer

Corruption curtails economic growth by diverting resources away from productive uses, reducing public investment, and increasing transaction costs for businesses. It leads to a lack of trust in public institutions, undermining investor confidence and hindering economic development.

Question 10

All of the following policies are ways for a country to promote long-run economic growth except
A)increasing vaccinations against infectious diseases.
B)undergoing political reform to decrease corruption.
C)enacting stronger laws to protect property rights.
D)imposing stricter regulations to limit foreign direct investment.

Accepted Answer

Imposing stricter regulations to limit foreign direct investment is not a policy that promotes long-run economic growth. In fact, foreign direct investment can bring in new technologies, capital, and expertise that can boost the productivity and competitiveness of domestic firms. Thus, policies that encourage foreign direct investment and minimize regulatory barriers to investment can enhance long-run economic growth. The other options listed are policies that can promote long-run economic growth, as they aim to improve public health, reduce corruption, and enhance property rights, all of which can enhance human capital, investment, and innovation.

Question 11

All of the following are reasons why China is unlikely to maintain high enough rates of productivity growth to catch-up with the standard of living in the United States except
A)the United States invests more in research and development.than does China.
B)much of China's growth is likely due to the transition from a centrally-planned economy to a market economy.
C)because of the low birth rate in China,the labor force will soon decline.
D)the Chinese migration of rural workers to more productive urban jobs.

Accepted Answer

The migration of rural workers to more productive urban jobs in China is actually a factor that can contribute to productivity growth, not a reason why China might not catch up with the U.S. in terms of standard of living. This migration can lead to a more efficient allocation of labor and potentially higher overall productivity.

Question 12

Which of the following policies would not help promote economic growth?
A)a law requiring that the funds in an individual retirement account be taxed
B)a law restricting elected officials from accepting expensive gifts and trips from private individuals
C)a law that funds prenatal care for all expectant mothers
D)a law that subsidizes research in nanotechnology

Accepted Answer

Taxing the funds in an individual retirement account would likely discourage people from saving for retirement, which could hinder economic growth.

Question 13

The term "brain drain" refers to
A)highly educated individuals who leave developing countries for high-income countries.
B)the diminishing returns to studying for an exam.
C)the negative impact on brain function of an individual's overinvestment in human capital.
D)the decreased quality of the college-educated workforce.

Accepted Answer

Brain drain refers to the emigration of highly educated individuals from developing or low-income countries to high-income countries in search of better opportunities, higher salaries, and better living conditions. This results in a loss of skilled workforce and a hindrance to the economic development of the country left behind.

Question 14

Disease,poor nutrition,and substandard health care in developing nations can reduce growth in an economy by
A)reducing physical capital.
B)reducing human capital.
C)increasing labor productivity.
D)increasing technological change.

Accepted Answer

Disease, poor nutrition, and substandard healthcare can lead to a decrease in human capital, which is a key driver of economic growth. Human capital refers to the knowledge, skills, and health of individuals that contribute to their productivity in the workforce. When individuals are sick or malnourished, they are less able to work and less productive when they do work, which hinders economic growth. Additionally, poor health can lead to higher healthcare costs and lower life expectancies, which can also have negative economic implications.

Question 15

Robert Lucas,a Nobel laureate in economics,argues that there are increasing returns to
A)knowledge capital.
B)physical capital.
C)financial capital.
D)human capital.

Accepted Answer

The answer of Robert Lucas,a Nobel laureate in economics,argues that...

Question 16

The United States
A)currently is one of the most corrupt countries.
B)has never had a significant problem with corruption.
C)had a significant problem with corruption in the 1930s.
D)currently ranks among the least corrupt countries.

Accepted Answer

According to the Corruption Perceptions Index 2020 by Transparency International, the United States ranks 25th out of 180 countries, indicating a relatively low level of corruption compared to other countries. Therefore, the best choice is D, which states that the United States currently ranks among the least corrupt countries.

Question 17

Table 11-6
 
-Refer to Table 11-6.Consider the statistics in the table above in describing the developing countries.Are these consistent with the economic growth model? Briefly explain.

Accepted Answer

The answer of Table 11-6
 
-Refer to Table 11-6.Consider the...

Question 18

If property rights are not enforced in a country,then
A)the market system will still work smoothly.
B)entrepreneurs are unlikely to risk their own funds investing in such an economy.
C)that country's growth rate will not be affected.
D)that country will grow more rapidly because of the reduction of law suits.

Accepted Answer

Entrepreneurs are less likely to invest in an economy where property rights are not enforced because they will have less assurance that their investments will be protected. This can lead to a decrease in economic growth and development in the long run.

Question 19

Which of the following policies is designed specifically to directly promote technological change in an economy?
A)government subsidization of research and development
B)tax incentives to promote investment in 401K plans
C)laws to strengthen property rights
D)a vaccination program to combat infectious diseases

Accepted Answer

Government subsidization of research and development can directly promote technological change by providing resources and funding for the development of new technologies. Tax incentives, laws to strengthen property rights, and vaccination programs can indirectly affect technological change, but they are not designed specifically for this purpose.

Question 20

In 1973,the Club of Rome published a book titled The Limits to Growth,which predicted that economic growth would likely end in high-income countries because of
A)declining populations.
B)rapid increases in government debt.
C)increases in outsourcing of the production of goods and services to low-income countries.
D)increasing pollution and the depletion of natural resources.

Accepted Answer

The Club of Rome's book The Limits to Growth predicted that economic growth would likely end in high-income countries due to increasing pollution and the depletion of natural resources. The book argued that the finite nature of these resources would eventually lead to a collapse in economic growth, unless sustainability measures were taken.

Quiz 11: Long-Run Economic Growth: Sources and Policies

A policy that offers parents a tax reduction based on how much they are saving for their children's college education should the equilibrium level of loanable funds and the rate of long-term growth.

Robert Lucas argues that there are returns to human capital,and these productivity increases are not completely captured by individuals as they decide how much education to purchase.As a result,the market produces education and training.

Table 11-7 -Refer to Table 11-7.Consider the statistics in the table above in describing the following industrialized and developing 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.

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.

Robert Lucas,a Nobel laureate in economics,argues that there are ________ returns to human capital.

You are an economic advisor to the president.You are asked to recommend a policy to promote long-term economic growth in the economy.Which of the following policies would you choose?

Enforcing property rights in an economy will

Corruption

All of the following policies are ways for a country to promote long-run economic growth except

All of the following are reasons why China is unlikely to maintain high enough rates of productivity growth to catch-up with the standard of living in the United States except

Which of the following policies would not help promote economic growth?

The term "brain drain" refers to

Disease,poor nutrition,and substandard health care in developing nations can reduce growth in an economy by

Robert Lucas,a Nobel laureate in economics,argues that there are increasing returns to

The United States

Table 11-6 -Refer to Table 11-6.Consider the statistics in the table above in describing the developing countries.Are these consistent with the economic growth model? Briefly explain.

If property rights are not enforced in a country,then

Which of the following policies is designed specifically to directly promote technological change in an economy?

In 1973,the Club of Rome published a book titled The Limits to Growth,which predicted that economic growth would likely end in high-income countries because of