Question 1

Which of the following best explains why the Industrial Revolution began in England, according to Douglass North?

Accepted Answer

The British government made credible promises to uphold property rights and protect wealth after the Glorious Revolution.

Question 2

Suppose Country A has a real GDP per capita growth rate of 1.5% per year, while Country B has a growth rate of 2.5% per year. If both countries start with the same real GDP per capita, after 40 years, which country will have a higher standard of living, and why?

Accepted Answer

Country B, because a higher growth rate leads to a much larger increase in real GDP per capita over time due to compounding.

Question 3

Which of the following is NOT a main source of technological change according to the study materials?

Accepted Answer

Discovery of new natural resources

Question 4

The per-worker production function demonstrates diminishing returns to capital. Which of the following best describes this concept?

Accepted Answer

Each additional unit of capital increases output by a smaller amount than the previous unit.

Question 5

According to Paul Romer's new growth theory, why does knowledge capital result in increasing returns at the economy level?

Accepted Answer

Knowledge capital is nonrival and nonexcludable, so many firms can benefit from the same knowledge.

Question 6

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

Accepted Answer

Imposing strict controls on foreign investment

Question 7

Suppose a country increases its capital per hour worked but does not experience any technological change. According to the per-worker production function, what will happen to output per hour worked in the long run?

Accepted Answer

Output per hour worked will increase, but at a decreasing rate due to diminishing returns.

Question 8

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

Accepted Answer

The introduction of the automobile leads to the decline of horse-drawn carriage makers.

Question 9

Why do many low-income countries fail to experience rapid economic growth, according to the study materials?

Accepted Answer

They suffer from weak institutions, wars, poor education and health, and low rates of saving and investment.

Question 10

If a country's real GDP grows by 3% per year and its population grows by 4% per year, what happens to real GDP per capita?

Accepted Answer

It decreases by 1% per year.

Question 11

Which of the following best describes the 'catch-up' effect predicted by the economic growth model?

Accepted Answer

Poor countries will grow faster than rich countries, allowing them to converge in terms of GDP per capita.

Question 12

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

Accepted Answer

A German car manufacturer builds a factory in Brazil.

Question 13

Why is technological change considered 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, while capital accumulation is.

Question 14

Which of the following is a reason why the United States has outpaced other high-income countries in economic growth, according to the study materials?

Accepted Answer

The U.S. financial system is relatively efficient and provides high liquidity.

Question 15

Which of the following best explains the concept of 'free riding' in the context of knowledge capital?

Accepted Answer

Firms benefit from knowledge capital created by others without paying for it.

Question 16

Suppose a country wants to move from point A to point C on its per-worker production function, where point C represents both higher capital per hour worked and higher output per hour worked. What must occur?

Accepted Answer

The country must experience technological change and increase capital per hour worked.

Question 17

Which of the following is a policy that governments can use to encourage the creation of knowledge capital?

Accepted Answer

Granting patents and copyrights to protect intellectual property

Question 18

If a country is experiencing slow economic growth, which of the following is a likely consequence according to the study materials?

Accepted Answer

Higher infant mortality and lower standards of living

Question 19

Which of the following statements about the measurement of productivity growth in the United States is correct?

Accepted Answer

The shift toward a service-based economy has made productivity growth harder to measure.

Technological Change, Economic Growth, and Living Standards: A Study Guide

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