Question 1

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

Accepted Answer

The British government began to uphold property rights and protect wealth, incentivizing entrepreneurs to invest in new technologies.

Question 2

According to the economic growth model, which of the following is the most important source of long-run increases in real GDP per capita?

Accepted Answer

Continuous technological change

Question 3

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

Accepted Answer

Country A, with about a 197% increase in real GDP per capita

Question 4

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

Accepted Answer

Increasing the minimum wage

Question 5

The per-worker production function demonstrates diminishing returns to capital. What does this mean?

Accepted Answer

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

Question 6

Why did the Soviet Union’s economic growth slow down despite heavy investment in capital?

Accepted Answer

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

Question 7

According to Paul Romer’s new growth theory, why is knowledge capital different from physical capital?

Accepted Answer

Knowledge capital is nonrival and nonexcludable, leading to increasing returns at the economy level.

Question 8

Which government policy is most likely to encourage the creation of knowledge capital?

Accepted Answer

Granting patents and copyrights to protect intellectual property

Question 9

Joseph Schumpeter’s concept of 'creative destruction' refers to:

Accepted Answer

The process by which new products and technologies replace old ones, driving economic growth.

Question 10

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 is quicker to adopt new technologies.

Question 11

Which of the following is a key reason why many low-income countries experience slow economic growth?

Accepted Answer

Weak institutions and lack of enforcement of property rights

Question 12

Suppose a country wants to escape the 'vicious cycle' of low savings and investment. Which policy would be most effective?

Accepted Answer

Opening up to globalization and encouraging foreign direct investment

Question 13

If a country’s per capita income is not rising, but its citizens are experiencing improvements in health, education, and civil liberties, what is most likely driving these improvements?

Accepted Answer

Increases in technology and knowledge

Question 14

Which of the following equations correctly represents the growth rate of real GDP per capita?

Accepted Answer

$$	ext{Growth Rate} = \frac{	ext{Real GDP per capita in Year 2} - 	ext{Real GDP per capita in Year 1}}{	ext{Real GDP per capita in Year 1}} 	imes 100$$

Question 15

Which of the following is an example of a government policy that promotes savings and investment?

Accepted Answer

Providing tax-advantaged savings plans or investment tax credits

Question 16

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

Accepted Answer

Technological change

Question 17

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

Accepted Answer

Poorer countries grow faster than richer countries, narrowing the gap in GDP per capita.

Question 18

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

Accepted Answer

Negative effects on the environment

Question 19

If a country’s government wants to encourage technological change, which of the following would be the most effective policy?

Accepted Answer

Subsidizing research and development

Question 20

Which of the following best explains why China’s rapid economic growth may not continue indefinitely?

Accepted Answer

Much of China’s growth has come from capital investment, which faces diminishing returns.

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

Study Guide - Practice Questions

Study Guide - Flashcards