Question 1

Which of the following best defines economic growth as discussed in the study materials?

Accepted Answer

An increase in per capita real GDP measured by its rate of change per year.

Question 2

According to the Rule of 72, how many years will it take for a country’s GDP to double if its annual growth rate is 4%?

Accepted Answer

$$72 \div 4 = 18$$ years

Question 3

Which of the following is NOT a factor in the aggregate production function $$GDP = FT(L, K, H) as $$described in the neoclassical growth theory?

Accepted Answer

Government Spending (G)

Question 4

The Solow residual is used to measure which of the following?

Accepted Answer

The growth in real GDP that can be attributed to technological progress.

Question 5

According to classical growth theory, what is the paradox of thrift?

Accepted Answer

Saving is good for the long-run but bad for the short-run.

Question 6

Which of the following best describes the main difference between neoclassical and new growth theories?

Accepted Answer

Neoclassical theory treats technology as exogenous, while new growth theory treats it as endogenous.

Question 7

If a country’s GDP growth rate is 3%, labor growth is 1%, and capital growth is 0.5%, what is the multifactor productivity growth according to the Solow residual?

Accepted Answer

$$3\% - 1\% - 0.5\% = 1.5\%$$

Question 8

Which of the following is a positive externality associated with research and development (R&D)?

Accepted Answer

Other countries benefit from importing or imitating new technology.

Question 9

According to the study materials, which government action is LEAST likely to encourage economic growth?

Accepted Answer

Imposing strict controls on foreign investment.

Question 10

Based on the historical record of Canadian economic growth, which event caused a significant decline in per capita real GDP?

Accepted Answer

The Great Depression

Question 11

Which of the following best explains why birth rates tend to decline as incomes rise in developing countries?

Accepted Answer

Higher opportunity cost of having children and lower infant mortality.

Question 12

According to the classical growth theory, what is required for a country to have more consumption in the future?

Accepted Answer

Consume less today and save the difference between current consumption and income.

Question 13

Which of the following is a key insight from Paul Romer’s contribution to new growth theory?

Accepted Answer

Knowledge is a vital factor of production whose cost is foregone present consumption.

Question 14

If a country has a high rate of saving, what does Figure 8-4 suggest about its likely per capita real GDP?

Accepted Answer

It is likely to have a higher per capita real GDP.

Question 15

Which of the following is NOT a stage in the process of economic development?

Accepted Answer

Financialization stage

Question 16

According to Thomas Malthus’s hypothesis, what was expected to happen as population grew?

Accepted Answer

Population growth would outstrip land and food supplies.

Question 17

Which of the following is a reason why openness to international markets can encourage economic growth?

Accepted Answer

It allows access to larger markets and reduces the knowledge gap.

Question 18

If a country’s labor productivity increases, what is the likely effect on its real GDP per capita?

Accepted Answer

Real GDP per capita will increase.

Question 19

Which of the following best describes the relationship between savings and future consumption according to classical growth theory?

Accepted Answer

Higher savings today lead to higher consumption in the future.

Question 20

Which of the following is a policy that governments can use to support economic growth, based on lessons from history?

Accepted Answer

Protecting private property and supporting the legal system.

Economic Growth and Development: Key Concepts and Theories

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