Question 1

Which of the following best explains why the Industrial Revolution led to sustained economic growth in England?

Accepted Answer

The government began to uphold property rights and protect wealth, encouraging investment and entrepreneurship.

Question 2

Suppose a country has a real GDP per capita growth rate of 2.2% per year. Using the rule of 70, approximately how many years will it take for the country's real GDP per capita to double?

Accepted Answer

$$70 \div 2.2 \approx 31.8$$ years

Question 3

Which of the following is NOT a main source of technological change according to the economic growth model?

Accepted Answer

Increasing the number of natural resources

Question 4

A country increases its capital per hour worked, but its output per hour worked increases by smaller and smaller amounts. This is an example of:

Accepted Answer

Diminishing returns to capital

Question 5

According to new growth theory, why does knowledge capital lead to increasing returns at the economy level?

Accepted Answer

Knowledge capital is nonrival and nonexcludable, so its benefits can be shared widely.

Question 6

Which government policy is most likely to address the problem of free riding in the creation of knowledge capital?

Accepted Answer

Granting patents and copyrights to protect intellectual property

Question 7

If a country’s per-worker production function shifts upward, what is the most likely cause?

Accepted Answer

Technological change

Question 8

Why did the Soviet Union’s focus on increasing capital stock fail to sustain long-term economic growth?

Accepted Answer

There was little incentive for technological change and innovation.

Question 9

Which of the following best describes the 'catch-up' hypothesis in economic growth?

Accepted Answer

Poorer countries will grow faster than richer countries, narrowing the income gap.

Question 10

Which of the following is NOT a reason why many low-income countries experience slow economic growth?

Accepted Answer

High rates of saving and investment

Question 11

A country with a flexible labor market, efficient financial system, and willingness to accept creative destruction is most likely to:

Accepted Answer

Experience rapid adoption of new technologies and higher economic growth

Question 12

Which of the following policies would most directly help a developing country escape the 'vicious cycle' of low savings and investment?

Accepted Answer

Encouraging foreign direct investment (FDI)

Question 13

If a country’s real GDP per capita increased from $$10,000 to 24$$,000 over 40 years, what was its average annual growth rate? (Use the formula $$g = \frac{\ln(Y_t/Y_0$)}{t}$$, where $$Y_t is $$the final value, $$Y_0 is $$the initial value, and $$t is $$the number of years.)

Accepted Answer

$$g = \frac{\ln(24,000/10,000)}{40} \approx 2.2\%$$

Question 14

Which of the following is an example of 'creative destruction' as described by Joseph Schumpeter?

Accepted Answer

The rise of digital streaming services leading to the decline of video rental stores

Question 15

Which of the following is a likely consequence if a country fails to protect property rights and enforce contracts?

Accepted Answer

Entrepreneurs will be less willing to invest, slowing economic growth.

Question 16

A country’s government wants to promote long-run economic growth. Which combination of policies is most likely to be effective?

Accepted Answer

Enhancing property rights, subsidizing education, and encouraging technological change

Question 17

Which of the following best explains why some high-income countries have stopped catching up to the United States in terms of real GDP per capita?

Accepted Answer

The United States has more flexible labor markets and a more efficient financial system.

Question 18

Which of the following is a potential downside of economic growth in high-income countries, as discussed in the chapter?

Accepted Answer

Negative effects on the environment and depletion of natural resources

Question 19

If a developing country wants to prevent 'brain drain,' which policy should it prioritize?

Accepted Answer

Improving health care and education to create opportunities at home

Question 20

Which of the following scenarios best illustrates the concept of diminishing returns to capital?

Accepted Answer

A pizza shop adds a 20th oven, but output barely increases compared to when it added the second oven.

Chapter 11: Long-Run Economic Growth—Sources and Policies

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