Question 1

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

Accepted Answer

The government began to uphold property rights and protect wealth, encouraging entrepreneurial investment.

Question 2

Suppose a country increases its capital per hour worked from $$K_1 to$$ $$K_2$$, but its real GDP per hour worked increases by a smaller amount than before. What economic concept does this illustrate?

Accepted Answer

Diminishing returns to capital

Question 3

According to the economic growth model, which two factors are most important for increasing labor productivity?

Accepted Answer

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

Question 4

If a country’s real GDP per capita grows at a constant rate of 2% per year, approximately how many years will it take for its real GDP per capita to double? (Use the Rule of 70: $$	ext{Years to double} = \frac{70}{	ext{growth rate}})$$

Accepted Answer

$$35$$ years

Question 5

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

Accepted Answer

The rise of streaming services leading to the decline of video rental stores

Question 6

Why does knowledge capital, according to new growth theory, result in increasing returns at the economy level?

Accepted Answer

Because knowledge capital is nonrival and nonexcludable, making it a public good

Question 7

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

Accepted Answer

Subsidizing research and development

Question 8

A country with a weak rule of law and poor enforcement of property rights is likely to experience:

Accepted Answer

Low rates of economic growth due to lack of entrepreneurial investment

Question 9

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

Accepted Answer

Poorer countries tend to grow faster than richer countries, narrowing the income gap

Question 10

Suppose Country A and Country B both start with a real GDP per capita of $5,000. Country A grows at 1.5% per year, while Country B grows at 3% per year. After 50 years, which country will have a higher standard of living, and why?

Accepted Answer

Country B, because small differences in growth rates lead to large differences in living standards over time

Question 11

Which of the following is NOT a reason why many low-income countries experience slow economic growth?

Accepted Answer

High rates of saving and investment

Question 12

If a government wants to promote long-run economic growth, which of the following policies would be LEAST effective?

Accepted Answer

Imposing strict controls on foreign investment

Question 13

Which of the following best explains why the United States has maintained higher growth rates than many other high-income countries?

Accepted Answer

Flexible labor markets and a willingness to adopt new technologies

Question 14

Which of the following is an example of a government policy that could help a developing country escape the 'vicious cycle' of low savings and investment?

Accepted Answer

Encouraging foreign direct investment

Question 15

Suppose a country’s per-worker production function is given by $$Y/L = A \cdot f(K/L)$$, where $$A is $$the level of technology. If $$A$$ increases due to technological change, what happens to the production function?

Accepted Answer

It shifts upward, increasing output per worker for any given level of capital per worker

Question 16

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

Accepted Answer

Negative effects on the environment

Question 17

A country that invests heavily in physical capital but neglects technological change is likely to experience:

Accepted Answer

Slowing growth rates due to diminishing returns to capital

Question 18

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

Accepted Answer

They provide firms with exclusive rights to their inventions, increasing incentives for research and development

Question 19

If a country’s government is highly corrupt and property rights are not protected, what is the most likely impact on economic growth?

Accepted Answer

Entrepreneurs will be less likely to invest, leading to slow or negative economic growth

Question 20

Which of the following is a reason why some countries have not experienced the catch-up predicted by the economic growth model?

Accepted Answer

Weak institutions and lack of rule of law

Ch11 Long-Run Economic Growth: Sources and Policies (Chapter 11 Study Notes)

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