Question 1

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 2

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 3

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 would limit the amount of investment and potentially reduce economic growth, whereas the other policies listed would promote long-run economic growth. Increasing vaccinations against infectious diseases would improve overall health and productivity, political reform to decrease corruption would create a more stable and trustworthy government, and stronger laws to protect property rights would incentivize investment and innovation.

Question 4

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 specifically refers to the loss of highly educated and skilled individuals from developing countries to high-income countries. These skilled individuals are needed in their home countries to contribute to development and growth, but instead, they migrate to places with better opportunities and resources.

Question 5

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 Limits to Growth predicted that economic growth would likely end in high-income countries because of increasing pollution and the depletion of natural resources. The book argued that continued economic growth was not sustainable in the long run due to the finite nature of resources and the impact on the environment, leading to eventual collapse or stagnation in economic development.

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 argues that there are increasing returns to human capital, which means that as individuals invest more in their education and skills, their productivity and earning potential increase at a greater rate. This is because as individuals become more skilled and knowledgeable, they are better equipped to innovate and solve problems, leading to higher economic growth and more opportunities for themselves and others.

Question 7

Table 22-6
 $$\begin{array} { | l | c | c | } 
\hline { \text { Country } } & \begin{array} { c } 
\text { Real GDP per Capita } \
\text { in 1960(1996 dollars) }
\end{array} & \begin{array} { c } 
\text { Average Annual Growth in } \
\text { Real GDP per Capita between } \
\mathbf { 1 9 6 0 } \text { and 2000 }
\end{array} \
\hline \text { India } & \$ 847 & 4.70 \% \
\hline \text { Bangladesh } & 1,057 & 1.45 \% \
\hline \text { Honduras } & 1,700 & 0.50 \% \
\hline \text { Bolivia } & 2,354 & 0.38 \% \
\hline
\end{array}$$
-Refer to Table 22-6.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 22-6
 \[\begin{array} { | l |...

Question 8

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 9

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 provides investors with greater confidence that their investments will be protected, leading to an increase in investment. This creates a more stable environment for economic growth and development.

Question 10

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 funds in an individual retirement account would not directly promote economic growth. It may have a negative impact on individuals' ability and willingness to save and invest, which could potentially harm the economy. The other options, such as promoting ethical behavior among elected officials, providing healthcare for expectant mothers, and investing in emerging technologies, could all have positive effects on the economy.

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

Table 22-5
 $$\begin{array} { | l | c | c | } 
\hline { \text { Country } } & \begin{array} { c } 
\text { Real GDP per Capita } \
\text { in } \mathbf { 1 9 6 0 } ( \mathbf { 1 9 9 6 } \text { dollars) }
\end{array} & \begin{array} { c } 
\text { Growth in Real GDP per } \
\text { Capita 1960-2000 }
\end{array} \
\hline \text { Belgium } & \$ 7,778 & 5.02 \% \
\hline \text { France } & 7,824 & 4.53 \% \
\hline \text { Canada } & 10,383 & 3.88 \% \
\hline \text { Denmark } & 10,988 & 3.47 \% \
\hline
\end{array}$$
-Refer to Table 22-5.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 22-5
 \[\begin{array} { | l |...

Question 13

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 14

Table 22-7
 $$\begin{array} { | l | c | c | } 
\hline { \text { Country } } & \begin{array} { c } 
\text { Real GDP per Capita } \
\text { in 1960(1996 dollars) }
\end{array} & \begin{array} { c } 
\text { Growth in Real GDP per } \
\text { Capita 1960-2000 }
\end{array} \
\hline \text { India } & \$ 847 & 4.70 \% \
\hline \text { Bangladesh } & 1,057 & 1.45 \% \
\hline \text { Honduras } & 1,700 & 0.50 \% \
\hline \text { Bolivia } & 2,353 & 0.38 \% \
\hline \text { Belgium } & 7,778 & 5.02 \% \
\hline \text { France } & 7,824 & 4.53 \% \
\hline \text { Canada } & 10,383 & 3.88 \% \
\hline \text { Denmark } & 10,988 & 3.47 \% \
\hline
\end{array}$$
-Refer to Table 22-7.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 22-7
 \[\begin{array} { | l |...

Question 15

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 incentivize businesses to invest in capital goods and equipment, leading to increased productivity and potential long-term economic growth. A reduction in sales taxes may provide some short-term stimulus to consumer spending, but it is not necessarily tied to long-term economic growth. A reduction in taxes on luxury yachts may benefit only a specific industry and does not necessarily contribute to overall economic growth. Therefore, the best choice is an investment tax credit.

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 Transparency International's 2019 Corruption Perceptions Index, the United States ranks 23rd among 180 countries in terms of perceived levels of public sector corruption. This indicates that the US is considered to be one of the least corrupt countries in the world. Choice A and B are incorrect, as they are directly contradicted by this information. Although there was corruption in the US during the 1930s (Choice C), this is not the most accurate or relevant answer to the question as it refers to a specific time period in the country's history.

Question 17

If property rights are not enforced in a country
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

Property rights are essential for entrepreneurs to invest their funds in an economy with confidence. Without the assurance of property rights, entrepreneurs may hesitate to invest as they cannot ensure their investments' safety. Therefore, the absence of enforced property rights can deter investment, leading to slower economic growth.

Question 18

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

Robert Lucas argues that there are increasing returns to human capital, meaning that the more education a person has, the greater their productivity. However, he also argues that individuals do not fully capture these productivity increases when they decide how much education to purchase. This results in the market producing too little education and training, as individuals do not take into account the positive externalities of their education on society. Therefore, the best choice is C, increasing productivity returns to human capital and too little education and training being produced in the market.

Question 19

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 increasing the cost of doing business, discouraging foreign investment, and reducing government revenue. It undermines public trust and confidence in institutions, leading to political instability and economic slowdown. While bribery may provide temporary income gains for those involved, in the long run, it erodes trust, damages institutions, and undermines sustainable economic growth. Foreign direct investment can help promote economic growth, but it does not eliminate corruption.

Question 20

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 health care can reduce the health of the population, which in turn can lead to a reduction in the productivity and skills of the workforce, decreasing the human capital. This can have a negative impact on the economic growth of a country.

Quiz 22: Long-Run Economic Growth: Sources and Policies

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

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.

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

The term "brain drain" refers to

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

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

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.

Enforcing property rights in an economy will

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

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

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.

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?

The United States

If property rights are not enforced in a country

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.

Corruption

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