Question 1

According to new growth theory, the primary source of growth is capital.

Accepted Answer

A) True 
 B)False  False

Question 2

Haiti has a lower literacy rate (the percentage of those over 15 who can read and write)compared to other Latin American and Caribbean countries. Where does this low literacy rate fit into the factors that explain the wealth of nations?

Accepted Answer

A) It indicates that Haiti is short of physical capital. 
B) It shows that it lacks entrepreneurship. 
C) It shows a lack of natural resources. 
D) It indicates that Haiti is short on human capital. 
A) It indicates that Haiti is short of physical capital. 
B) It shows that it lacks entrepreneurship. 
C) It shows a lack of natural resources. 
D) It indicates that Haiti is short on human capital. D

Question 3

The study of economic growth focuses on the factors that cause an:

Accepted Answer

A) economy to move along its production possibility curve. 
B) economy's production possibility curve to shift out. 
C) economy to move from a point inside its production possibility curve to a point on this curve. 
D) economy's production possibility curve to shift in. 
A) economy to move along its production possibility curve. 
B) economy's production possibility curve to shift out. 
C) economy to move from a point inside its production possibility curve to a point on this curve. 
D) economy's production possibility curve to shift in. B

Question 4

Small differences in growth rates can create large differences in income levels because of:

Accepted Answer

A) specialization. 
B) compounding. 
C) the division of labor. 
D) Say's Law. 
A) specialization. 
B) compounding. 
C) the division of labor. 
D) Say's Law.

Question 5

The Indian government is known for creating obstacles to foreign investment with tariffs, investment caps and tons of red tape. What effect does "red tape" have on growth?

Accepted Answer

A) It discourages entrepreneurship. 
B) It discourages leisure. 
C) It encourages learning by doing. 
D) It encourages specialization. 
A) It discourages entrepreneurship. 
B) It discourages leisure. 
C) It encourages learning by doing. 
D) It encourages specialization.

Question 6

If legally owning a business can spur growth, why don't all business owners legalize their businesses?

Accepted Answer

A) Excessive regulations often make running a legalized business more cumbersome. 
B) Legally owning a business opens new avenues for obtaining loans. 
C) Legalizing a business has no impact on business practices, so why do it? 
D) Business owners don't care about economic growth. 
A) Excessive regulations often make running a legalized business more cumbersome. 
B) Legally owning a business opens new avenues for obtaining loans. 
C) Legalizing a business has no impact on business practices, so why do it? 
D) Business owners don't care about economic growth.

Question 7

Markets help to promote growth by:

Accepted Answer

A) increasing specialization and the division of labor. 
B) reducing specialization and the division of labor. 
C) encouraging self-sufficiency. 
D) undermining a nation's comparative advantage. 
A) increasing specialization and the division of labor. 
B) reducing specialization and the division of labor. 
C) encouraging self-sufficiency. 
D) undermining a nation's comparative advantage.

Question 8

Which of the following would tend to inhibit growth?

Accepted Answer

A) Private property 
B) Limited liability for corporate owners 
C) Requiring government to approve all economic activity 
D) Freedom from regulation 
A) Private property 
B) Limited liability for corporate owners 
C) Requiring government to approve all economic activity 
D) Freedom from regulation

Question 9

According to long-run growth models, which of the following is least likely to increase potential output?

Accepted Answer

A) Increased levels of entrepreneurship 
B) Higher levels of saving and capital accumulation 
C) Increased aggregate demand 
D) More rapid development of growth-compatible institutions 
A) Increased levels of entrepreneurship 
B) Higher levels of saving and capital accumulation 
C) Increased aggregate demand 
D) More rapid development of growth-compatible institutions

Question 10

Economists treat potential output differently when considering the short run than when considering the long run.Explain this difference.

Accepted Answer

In the short run,economists consider pot

Question 11

If output increases by 2 percent and population growth is 3 percent, per capita output:

Accepted Answer

A) falls by about 5 percent. 
B) falls by about 1 percent. 
C) grows by about 1 percent. 
D) grows by about 5 percent. 
A) falls by about 5 percent. 
B) falls by about 1 percent. 
C) grows by about 1 percent. 
D) grows by about 5 percent.

Question 12

Robert Lucas reflects the view of many economists when he argues that the most effective way to reduce world poverty is to:

Accepted Answer

A) eliminate recessions. 
B) increase long-run growth. 
C) provide loans to developing countries. 
D) take money from those who are very wealthy and give to those who are very poor. 
A) eliminate recessions. 
B) increase long-run growth. 
C) provide loans to developing countries. 
D) take money from those who are very wealthy and give to those who are very poor.

Question 13

When the government of India lowered tariff barriers and removed the need for approvals for routine industrial expansion, what source of growth did this reform change directly?

Accepted Answer

A) Physical capital 
B) Human capital 
C) Technology 
D) Growth-compatible institutions 
A) Physical capital 
B) Human capital 
C) Technology 
D) Growth-compatible institutions

Question 14

Economic growth causes:

Accepted Answer

A) the production possibility curve to shift in. 
B) the production possibility curve to shift out. 
C) a movement toward the production possibility curve. 
D) a movement away from the production possibility curve. 
A) the production possibility curve to shift in. 
B) the production possibility curve to shift out. 
C) a movement toward the production possibility curve. 
D) a movement away from the production possibility curve.

Question 15

Technological lock-in:

Accepted Answer

A) occurs when standardization on a technology blocks the adoption of more efficient technologies. 
B) occurs when network externalities are absent. 
C) increases the efficiency with which technology is used. 
D) is no longer possible because of the development of network externalities. 
A) occurs when standardization on a technology blocks the adoption of more efficient technologies. 
B) occurs when network externalities are absent. 
C) increases the efficiency with which technology is used. 
D) is no longer possible because of the development of network externalities.

Question 16

The effect of specialization and the division of labor is that it makes us:

Accepted Answer

A) more productive and more dependent on others. 
B) more productive and less dependent on others. 
C) less productive and more dependent on others. 
D) less productive and less dependent on others. 
A) more productive and more dependent on others. 
B) more productive and less dependent on others. 
C) less productive and more dependent on others. 
D) less productive and less dependent on others.

Question 17

All of the following are important sources of growth except:

Accepted Answer

A) institutions with incentives compatible with growth. 
B) technological development. 
C) decreasing returns to scale. 
D) capital accumulation. 
A) institutions with incentives compatible with growth. 
B) technological development. 
C) decreasing returns to scale. 
D) capital accumulation.

Question 18

If a country's population is 10 million and its GDP is $113 billion, its per capita output is:

Accepted Answer

A) $113. 
B) $1,130 
C) $11,300. 
D) $113,000. 
A) $113. 
B) $1,130 
C) $11,300. 
D) $113,000.

Question 19

Macroeconomics emerged as a separate subject largely in response to:

Accepted Answer

A) Adam Smith's The Wealth of Nations. 
B) Alfred Marshall's distinction between the long run and short run. 
C) Irving Fisher's development of the quantity theory of money. 
D) John M. Keynes's explanation of business cycles. 
A) Adam Smith's The Wealth of Nations. 
B) Alfred Marshall's distinction between the long run and short run. 
C) Irving Fisher's development of the quantity theory of money. 
D) John M. Keynes's explanation of business cycles.

Question 20

What is economic growth? How does it relate to the production possibilities curve model?

Accepted Answer

Economic growth is an increase in the am

Exam 27: The Classical Long-Run Policy Model: Growth and Supply-Side Policies

According to new growth theory, the primary source of growth is capital.

Haiti has a lower literacy rate (the percentage of those over 15 who can read and write)compared to other Latin American and Caribbean countries. Where does this low literacy rate fit into the factors that explain the wealth of nations?

The study of economic growth focuses on the factors that cause an:

Small differences in growth rates can create large differences in income levels because of:

The Indian government is known for creating obstacles to foreign investment with tariffs, investment caps and tons of red tape. What effect does "red tape" have on growth?

If legally owning a business can spur growth, why don't all business owners legalize their businesses?

Markets help to promote growth by:

Which of the following would tend to inhibit growth?

According to long-run growth models, which of the following is least likely to increase potential output?

Economists treat potential output differently when considering the short run than when considering the long run.Explain this difference.

If output increases by 2 percent and population growth is 3 percent, per capita output:

Robert Lucas reflects the view of many economists when he argues that the most effective way to reduce world poverty is to:

When the government of India lowered tariff barriers and removed the need for approvals for routine industrial expansion, what source of growth did this reform change directly?

Economic growth causes:

Technological lock-in:

The effect of specialization and the division of labor is that it makes us:

All of the following are important sources of growth except:

If a country's population is 10 million and its GDP is $113 billion, its per capita output is:

Macroeconomics emerged as a separate subject largely in response to:

What is economic growth? How does it relate to the production possibilities curve model?

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

Filters