Question 1

Which of the following best describes the concept of 'creative destruction' as discussed by Joseph Schumpeter?

Accepted Answer

The process by which new innovations lead to the decline of existing firms and industries.

Question 2

Suppose Country A has a real GDP per capita growth rate of 2.2% and Country B has a growth rate of 1.61%. Over 50 years, which country will experience a greater increase in living standards, and why?

Accepted Answer

Country A, because a higher growth rate leads to a larger cumulative increase in real GDP per capita.

Question 3

What is the primary reason the Industrial Revolution began in England according to Douglass North?

Accepted Answer

Political changes that protected property rights and limited the power of the king.

Question 4

Which of the following is the best measure of a country's standard of living?

Accepted Answer

Real GDP per capita

Question 5

If a country's real GDP is rising by 2% per year while its population is rising at 7% per year, what is happening to its standard of living?

Accepted Answer

The country's standard of living is falling.

Question 6

Which of the following is an example of foreign direct investment (FDI)?

Accepted Answer

American Airlines builds a hub in China.

Question 7

According to the economic growth model, what are the two main factors that affect labor productivity?

Accepted Answer

The quantity of capital per hour worked and the level of technology.

Question 8

Which of the following best explains why technological change is more effective than capital accumulation in increasing output per hour worked in high-income countries?

Accepted Answer

Technological change is not subject to diminishing returns, unlike capital accumulation.

Question 9

Which of the following policies is most likely to promote long-term economic growth in a developing country?

Accepted Answer

Strengthening property rights and the rule of law.

Question 10

What is the main reason why knowledge capital leads to increasing returns at the economy level?

Accepted Answer

Knowledge capital is nonrival and nonexcludable.

Question 11

Suppose a country moves from point A to point B on its per-worker production function, increasing capital per hour worked but keeping technology constant. What does this movement represent?

Accepted Answer

An increase in output due to more capital per hour worked.

Question 12

Which of the following is a plausible reason why some high-income countries have stopped catching up to the United States in terms of GDP per capita?

Accepted Answer

Labor markets in the United States are more flexible and less regulated.

Question 13

Which of the following is NOT a likely consequence of slow economic growth in a country?

Accepted Answer

Rapid increases in living standards.

Question 14

If a country with low capital per worker receives a large increase in capital investment, what does the economic growth model predict will happen?

Accepted Answer

The country will experience a large increase in output per worker.

Question 15

Which of the following is a key factor explaining why many low-income countries grow slowly?

Accepted Answer

Weak institutions and lack of rule of law.

Question 16

Which of the following best describes the role of government in promoting knowledge capital?

Accepted Answer

Protecting intellectual property, funding research and development, and subsidizing education.

Question 17

If Botswana had the lowest GDP per capita in 1960 but the highest growth rate between 1960 and 2019, what does this suggest about the catch-up effect?

Accepted Answer

It supports the catch-up effect, which predicts faster growth for countries with lower initial GDP per capita.

Question 18

Which of the following is a real-world example of creative destruction?

Accepted Answer

The rise of streaming services like Netflix leading to the decline of Blockbuster Video.

Question 19

Which of the following is a likely benefit of globalization for low-income countries?

Accepted Answer

Higher growth rates due to increased foreign investment.

Question 20

Which equation correctly represents the calculation of real GDP per capita?

Accepted Answer

$$	ext{Real GDP per capita} = \frac{	ext{Real GDP}}{	ext{Population}}$$

Long-Term Economic Growth: Principles, Patterns, and Drivers

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