Question 1

According to the lecture, why does the persistent non-convergence in global real GDP per capita challenge the predictions of the neoclassical growth model?

Accepted Answer

Because the neoclassical model predicts that countries with similar technology should converge due to decreasing returns to capital.

Question 2

Which of the following best illustrates the 'library metaphor' used in the lecture to explain the role of institutions in economic growth?

Accepted Answer

Both universities have access to the same knowledge, but only one provides incentives to use it, resulting in higher output.

Question 3

Consider the production function $$Y = I \cdot A \cdot K$$^{\alpha}$$L^{1-\alpha}. If $$two countries have the same $$A$$, $$K$$, and $$L$$, but different $$I$ values, what is the implication for their long-run output levels?

Accepted Answer

The country with the higher $$I$$ will have a permanently higher output level.

Question 4

Which of the following is NOT one of the three essential parts of 'technology' as defined in the lecture?

Accepted Answer

Natural resource endowments

Question 5

A country with high financial development is most likely to experience which of the following outcomes?

Accepted Answer

Credit is efficiently allocated to those with the best ideas, regardless of personal connections.

Question 6

Which historical example from the lecture best demonstrates how institutional reform can trigger rapid transitional growth?

Accepted Answer

China's Household Responsibility System, which shifted incentives for agricultural production.

Question 7

Suppose a country implements a light bankruptcy code, reducing the penalties for business failure. According to the lecture, what is the most likely effect on economic growth?

Accepted Answer

Entrepreneurial risk-taking and experimentation will increase, potentially boosting growth.

Question 8

Which of the following is a negative externality associated with rapid economic growth, as discussed in the lecture?

Accepted Answer

Environmental pollution leading to health problems.

Question 9

Why do high, uneven marginal tax rates distort economic activity, according to the lecture?

Accepted Answer

They lead to widespread tax avoidance and the creation of loopholes.

Question 10

According to the lecture, what is the main reason that closed economies (with high barriers to trade and capital flows) tend to lag in economic growth?

Accepted Answer

They are isolated from global knowledge and complex intermediate goods.

Question 11

If a country suffers from weak property rights due to legal imprecision and corruption, which of the following is a likely consequence?

Accepted Answer

Elites or insiders may seize private property, reducing incentives for productive activity.

Question 12

Which of the following best describes the effect of political and geopolitical instability on long-run capital development?

Accepted Answer

It creates uncertainty, leading investors to delay or avoid long-term projects.

Question 13

In the context of the lecture, what is the main difference between parallel growth paths and transitional growth?

Accepted Answer

Parallel growth paths are caused by differences in institutional efficiency, while transitional growth occurs during institutional reform.

Question 14

Which of the following scenarios best illustrates a positive externality in the context of economic growth?

Accepted Answer

A company develops a new technology, and other firms benefit from the knowledge spillover.

Question 15

Suppose a country reforms its legal system to better protect property rights and enforce contracts. According to the lecture, what is the most likely long-term effect?

Accepted Answer

A permanent upward shift to a higher parallel growth path, with higher output levels.

Question 16

Which empirical finding from the lecture supports the argument that institutions, rather than geography, are the primary drivers of long-run prosperity?

Accepted Answer

Nations inheriting flexible, market-oriented British legal structures outperform those with rigid French structures, even after controlling for geography.

Question 17

A country with highly rigid labor market regulations is likely to experience which of the following outcomes?

Accepted Answer

Firms develop defensive practices, such as requiring pre-dated resignation letters from employees.

Question 18

If a government increases the institutional efficiency index $$I in $$the production function $$Y = I \cdot A \cdot K$$^{\alpha}$$L^{1-\alpha}$, what is the expected short-run and long-run effect on output?

Accepted Answer

Short-run: Output increases rapidly; Long-run: Output remains at the new higher level, growing at the same rate as before.

Question 19

Which of the following best explains why modern trade embargoes are so economically painful, according to the lecture?

Accepted Answer

They limit access to complex foreign intermediate goods and global knowledge.

Question 20

According to the lecture, why did Central European nations like Poland and the Czech Republic experience a rapid growth rebound after the collapse of the Soviet Union?

Accepted Answer

They quickly adopted EU-harmonized legal frameworks, improving institutional efficiency.

Institutions, Technology, and Long-Run Economic Growth: A Macroeconomic Perspective

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