Question 1

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 2

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 in the United States are more likely to provide funding for new and risky technological projects, which can encourage progress and innovation. This is because these firms are willing to take on more risk than traditional banks, and are often focused on supporting startups and new businesses with high growth potential. In contrast, other countries may have more conservative financial systems that are less willing to invest in high-risk projects.

Question 3

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

Education and health care are important factors in developing human capital, which refers to the knowledge, skills, and capabilities of individuals. A lack of investment in these areas can lead to a deterioration of human capital, which in turn can lead to a decrease in productivity in the workforce. For example, individuals with poor health may be absent from work more often or may not be able to perform their duties as effectively as those in good health. Similarly, individuals with low levels of education may not be able to contribute as much to the production of goods and services as those with higher levels of education.

Question 4

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 involves a company from one country investing in a physical presence in another country, such as building a factory or establishing a subsidiary. Option B is the only choice where a company (WestJet) is directly investing in a physical presence in another country (China).

Question 5

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 6

________ 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 large proportion of their income. This increases capital in their economy and raises economic growth. High-income individuals and nations often have more disposable income to save and invest, which can lead to increased capital formation and, consequently, higher economic growth.

Question 7

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 8

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, as he is investing in the company without seeking to actively manage or control it. Foreign direct investment (A) would involve a more active involvement in the management of the company, while foreign public investment (B) is typically used to refer to investments made by governments or government-affiliated entities. Contractual globalization (D) refers to the process whereby firms outsource production to foreign firms, while domestic fixed capital formation (E) involves investment in fixed assets within a country, rather than investment in foreign assets.

Question 9

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

Accepted Answer

This is true, as many lower-income industrial countries, especially in Asia and Africa, have been experiencing rapid economic growth in recent years.

Question 10

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, as the increased benefits may reduce the urgency to find new employment quickly.

Question 11

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

The answer of There has been catch-up among the ________...

Question 12

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 13

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

Saving and investment are crucial drivers of economic growth, as they allow countries to invest in physical and human capital, which in turn can increase productivity and output. Low-income countries often struggle to save and invest due to a variety of factors such as low levels of income, inadequate financial institutions, and political instability. This lack of investment can cause a low-growth trap, where low levels of growth make it difficult for countries to increase their savings and investment levels.

Question 14

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 15

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

The answer of What is the difference between foreign direct...

Question 16

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 such as stocks, bonds, mutual funds, etc., issued by companies or governments of a foreign country by a foreign investor. Option B refers to the purchase of a Canadian government bond by a German citizen, which is an example of foreign portfolio investment. The other options either involve domestic investors or investments in real assets such as factories and vacation homes.

Question 17

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 economic growth, as it can lead to a more skilled workforce and increased innovation. The other options listed are all factors that can hinder economic growth in low-income countries.

Question 18

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, Niger experienced negative economic growth over this time period.

Question 19

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, allowing the poor countries to catch up over time. This is based on the assumption of diminishing returns to capital; poor countries have less capital per worker, so additional capital generates higher returns than in richer countries.

Question 20

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

A strong rule of law, which includes protection of property rights and the enforcement of contracts, provides a stable and predictable environment for businesses to operate in, which encourages investment and entrepreneurship. This ultimately leads to faster economic growth.

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

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.

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?

Lack of investment in strong education and health care systems

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

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

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

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

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

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

By offering more generous unemployment insurance programs,Canadians can expect

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

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.

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

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

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

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

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

The economic growth model predicts that

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