Question 1

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

Accepted Answer

The British court system became independent, and Parliament took control, ensuring property rights and credible commitments.

Question 2

Suppose a country’s real GDP per capita grows from $$5,000 to 20$$,000 over 70 years. What is the average annual growth rate, $$g$$, that satisfies $$20,000 = 5,000 	imes (1+g$$)^{70}$$?

Accepted Answer

$$g = 0.02 or 2$$%

Question 3

Which of the following is NOT a primary source of productivity growth in an economy?

Accepted Answer

Raising government consumption spending

Question 4

According to Joseph Schumpeter, what is the main driver of long-term economic growth?

Accepted Answer

Entrepreneurship and the introduction of new products that create 'creative destruction'

Question 5

Why did the Soviet Union experience diminishing returns to capital despite rapid capital accumulation from 1950 to the 1980s?

Accepted Answer

There was little incentive for technological change due to lack of competition and rewards.

Question 6

Which of the following government policies is most likely to increase the accumulation of knowledge capital?

Accepted Answer

Subsidizing research and development

Question 7

If a country fails to enforce the rule of law, which of the following is a likely consequence?

Accepted Answer

Lower economic growth due to weak property rights and contract enforcement

Question 8

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

Accepted Answer

Countries with lower initial GDP per capita should grow faster than richer countries, all else equal.

Question 9

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

Accepted Answer

Frequent wars and revolutions

Question 10

A country’s real GDP per capita was $$10,000 in 2000 and 20$$,000 in 2020. What is the average annual growth rate $$g$$? Use the formula $$20,000 = 10,000 	imes (1+g$$)^{20}$$.

Accepted Answer

$$g = 0.035 or 3.5$$%

Question 11

Which of the following is an example of globalization that can promote economic growth in developing countries?

Accepted Answer

Foreign direct investment (FDI)

Question 12

Why is technological progress considered the primary explanation for the extraordinary economic growth in the United States over the last century?

Accepted Answer

It allows for higher productivity and output without proportional increases in capital or labor.

Question 13

Which of the following is NOT a benefit of economic growth?

Accepted Answer

Increasing the spread of diseases

Question 14

If a country’s government does not systematically record property ownership, what is a likely economic consequence?

Accepted Answer

Valuable capital sits idle and cannot be used to secure loans.

Question 15

Which of the following institutional arrangements is most likely to encourage economic growth?

Accepted Answer

Strong property rights and rule of law

Question 16

What does the process of compounding imply about small differences in economic growth rates over long periods?

Accepted Answer

Small differences in growth rates result in large differences in living standards over time.

Question 17

Which of the following best describes the role of patents in economic growth?

Accepted Answer

They provide exclusive rights to inventors, encouraging investment in research and development.

Question 18

Which of the following is a plausible reason why China’s long-term economic growth may slow down in the future?

Accepted Answer

China’s growth has been driven by transition effects and overinvestment in physical capital, not sustained productivity growth.

Question 19

Which of the following is a likely outcome in a country with high levels of corruption, as measured by the World Bank’s index?

Accepted Answer

Lower GDP per capita and more frequent violations of laws, such as parking violations by diplomats

Question 20

Which of the following is an example of creative destruction?

Accepted Answer

A new smartphone technology replaces older models, causing some firms to exit the market.

Long-Run Economic Growth: Sources and Policies

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