Question 1

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 hinder economic growth as it would limit the inflow of capital and access to new technologies and markets. The other choices promote economic growth by improving health, reducing corruption, and creating a stable and predictable environment for businesses to operate in.

Question 2

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 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

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 is known to curtail economic growth as it leads to misallocation of resources, reduces competition, and discourages foreign investments. It creates an unfavorable business environment that hurts the economy in the long run. Choices B, C, and D are incorrect as they do not align with the negative impact of corruption on economic growth.

Question 5

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 6

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 individuals and businesses with the assurance that their assets and investments are protected, which incentivizes them to invest more in the economy. This, in turn, leads to increased economic growth and development.

Question 7

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 8

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

Entrepreneurs are unlikely to risk their own funds investing in an economy where property rights are not enforced. The lack of secure property rights raises the risks of theft or confiscation of assets, leading to a higher cost of capital and discouraging investment. This can lead to a lower level of economic growth and development.

Question 9

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 10

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's theory of human capital suggests that there are increasing returns to education and training. As individuals gain more knowledge and skills, their productivity and earning potential increase at an increasing rate, leading to a positive feedback loop of investment and rewards. This idea has been influential in shaping policies aimed at promoting education and skill development as a driver of economic growth.

Question 11

Table 11-5
 
-Refer to Table 11-5.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 11-5
 
-Refer to Table 11-5.Consider the...

Question 12

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 the end of economic growth in high-income countries because of increasing pollution and the depletion of natural resources. The book argued that without significant changes in consumption patterns and technology, the world's resources would be rapidly depleted, leading to a collapse in economic growth. This prediction has been criticized for oversimplifying the complex forces that drive economic growth, but it remains an important contribution to the debate about sustainability and the limitations of natural resources.

Question 13

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 individual retirement accounts would likely discourage saving and investment, which are important drivers of economic growth. The other three options would have positive effects on the economy, by promoting transparency and accountability among elected officials (B), promoting public health and reducing healthcare costs (C), and supporting innovation and technological advancement (D).

Question 14

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 to promote long-term economic growth as it would incentivize businesses to invest in new capital and technology, leading to increased productivity and economic growth. Reduction in sales taxes and taxes on luxury yachts would not have as significant of an impact on long-term economic growth.

Question 15

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 released by Transparency International, the United States ranks as the 25th least corrupt country out of 180 countries assessed in 2019. Therefore, one can conclude that the U.S. currently ranks among the least corrupt countries.

Question 16

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 is likely to increase productivity in China. The other options listed suggest factors that may impede productivity growth, such as lower investment in research and development, demographic trends, and past reliance on centrally-planned economic policies.

Question 17

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 more education and training leads to higher productivity. However, individuals do not capture all of these productivity increases when deciding how much education to purchase, leading to the market producing too little education and training. Therefore, the best choice is C, which represents increasing returns to human capital and too little education and training being produced by the market.

Question 18

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 skilled or educated individuals from developing countries to high-income countries in search of better opportunities and higher salaries. This can result in a loss of talent and human capital for the developing country.

Question 19

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 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

Poor nutrition and substandard healthcare can lead to illness and disease, which can decrease the overall health of a population. This can reduce the workforce and limit the potential for educational attainment and skill development, which are important components of human capital. As a result, the economic growth of a country may suffer due to a lack of an educated and healthy workforce. A reduction in physical capital would refer to a decrease in machinery, equipment, infrastructure, etc. which would not be directly affected by poor nutrition, disease, or healthcare. Labor productivity can be affected by poor health, but a decrease in overall economic growth would not result from this alone. Technological change is not directly related to the impact of poor health and nutrition on the workforce.

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

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

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.

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.

Corruption

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

Enforcing property rights in an economy will

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.

If property rights are not enforced in a country,

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

Table 11-5 -Refer to Table 11-5.Consider the statistics in the table above in describing the industrialized countries.Are these consistent with the economic growth model? Briefly explain.

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

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

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

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

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.

The term "brain drain" refers to

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.

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