Question 1

Which of the following is the most direct determinant of a country's standard of living?

Accepted Answer

The productivity of its workers, measured as output per worker ($$Y/L)$$

Question 2

Suppose Country A and Country B both increase their saving rates, leading to higher investment in physical capital. According to the concept of diminishing returns, what will happen to their growth rates over time?

Accepted Answer

Growth rates will initially rise but eventually slow down as the extra output from additional capital decreases

Question 3

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

Accepted Answer

Encouraging free trade and openness to foreign investment

Question 4

If a country increases its human capital per worker ($$H/L$$), what is the expected effect on productivity?

Accepted Answer

Productivity will increase due to better education and skills

Question 5

Consider the production function $$Y = A 	imes f(K, H, N, L)$$, where $$Y is $$output, $$A is $$technological knowledge, $$K is $$physical capital, $$H is $$human capital, $$N is $$natural resources, and $$L is $$labor. If $$A$$ increases due to technological progress, what happens to $$Y$$?

Accepted Answer

Output $$Y$$ increases because technological progress makes all inputs more productive

Question 6

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

Accepted Answer

Poor countries tend to grow more rapidly than rich countries when starting from a lower capital per worker ($$K/L)$$

Question 7

A government wants to increase productivity by investing in health and nutrition. Which of the following is a likely outcome?

Accepted Answer

Productivity increases as healthier workers are more productive

Question 8

Which of the following is NOT a reason why property rights are important for economic growth?

Accepted Answer

They make it easier for governments to confiscate assets

Question 9

Suppose a country has a high rate of population growth. According to the study materials, which of the following is a possible negative effect?

Accepted Answer

Productivity may decrease as capital is spread more thinly among workers

Question 10

Which of the following statements about foreign investment is correct?

Accepted Answer

Foreign investment increases the host country's capital stock and can raise productivity and wages

Question 11

If a country increases its saving rate, what is the short-run and long-run effect on output per worker ($$Y/L$$)?

Accepted Answer

Short-run: $$Y/L$$ increases; Long-run: $$Y/L$$ growth slows due to diminishing returns

Question 12

Which of the following is an example of a positive externality from investment in human capital?

Accepted Answer

Knowledge diffusion and increased civic engagement

Question 13

A country with significant government corruption is likely to experience which of the following outcomes?

Accepted Answer

Lower investment and slower economic growth due to uncertainty and lack of property rights

Question 14

Which of the following best describes the role of technological knowledge ($$A) in $$the production function?

Accepted Answer

It is a public good that can be shared freely, increasing productivity for all

Question 15

Suppose a country restricts imports and foreign investment to protect domestic industries. Based on historical evidence, what is the likely long-term effect?

Accepted Answer

Lower growth rates and stagnation compared to countries with outward-oriented policies

Question 16

Which of the following is a reason why population growth might enhance technological progress?

Accepted Answer

More people means more scientists, inventors, and frequent discoveries

Question 17

If a country suffers from 'brain drain,' what is the likely impact on its economic growth?

Accepted Answer

Economic growth may slow down due to loss of educated and skilled workers

Question 18

Which of the following is an example of investment in physical capital?

Accepted Answer

Building new factories and purchasing machinery

Question 19

A country with abundant natural resources ($$N) $$but low technological knowledge ($$A) $$and human capital ($$H) is $$likely to:

Accepted Answer

Have low productivity and living standards compared to countries with higher $$A$$ and $$H$$

Question 20

Which of the following best describes the opportunity cost of education?

Accepted Answer

The wages forgone while attending school

Production and Growth: Determinants of Living Standards and Economic Growth

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