Economic Growth - Chapter 14

Problem 3 List four governmental polices that strengthen private property rights.

1) Enforcement or private property rights by both criminal and civil law. 2) Relatively low tax rates. 3) A minimum of government regulation. 4) A minimum of government corruption.

Problem 1 List four determinants of economic growth.

1) Natural resources 2) Labor 3) capital 4) Technology

2) In 2014, Country Z had per capita Real GDP of :

5600/2 = 2,800

18) A large government hinders economic growth because:

A) A large government necessitates high tax rates B) High tax rates reduce private property rights. C) A large government increases the opportunities for rent seeking. D) All of the above.

10) Labor productivity can be increased by:

A) An increase in human capital. B) An increase in physical capital. D) Both a. and b. above.

11) Increases in capital:

A) Are made possible by saving. B) Require an initial reduction in consumption. C) Lead to per capita economic growth. D) All of the above.

28) According to the view point that economic growth can be sustained:

A) As the population grows, the stock of human intelligence and imagination and imagination grows. B) Depletion of nonrenewable resources is not a hindrance to future economic growth. C) Economic growth leads to environmental improvement rather than degradation. D) All the above.

15) Private property rights can be strengthened:

A) By decreasing government corruption. B) By increasing government regulation. C) By decreasing taxes D) Both a. and c. above.

4) Between 1994 and 2014, Country Z:

A) Did not achieve per capita economic growth.

20) Industrial policy:

A) Ensures that aid will go to the industries with the greatest potential for growth.

24) In a centrally planned economy:

A) Fewer new ideas will be developed than in free market economy.

16) Governments can encourage free and competitive markets by:

A) Imposing licensing requirements. B) Imposing tariffs and quotas C) Imposing price controls. D) None of the above.

7) The standard of living ( per capita Real GDP) in the U.S. :

A) Increased in every decade from 1930 to 2010. B) Increased by more than six-fold between 1930-2010. C) Both of the above.

23) New growth theory:

A) Is most closely associated with Paul Romer. B) Emphasizes new ideas and technological advance. C) Holds that technological advance will allow for ever-increasing standards of living. D) All of the above.

21) Classical growth theory:

A) Is most closely associated with Thomas Robert Malthusian. B) Holds that per capita economic growth cannot be sustained. C) Holds that an increase in the standard of living would lead to population growth. D) All of the above

12) Technological advance:

A) Is the ability to produce more out put per resource. B) Can result from improved capital. C) Can result from free international trade. D) All of the above.

14) Strong private property rights:

A) Provide more incentive for resource owners to develop and direct their resources to their most valuable uses. B) Help a nation's efforts to achieve economic growth. C) Both of the above.

27) In the past, as economic growth occurred:

A) The real prices of nonrenewable resources generally rose. B) Environmental quality generally degraded. D) Neither of the above.

26) The opinion that economic growth cannot be sustained in the future is based on which of the following ideas?

A) The world population is growing faster than its capacity to produce food. B) Economic growth combined with population growth will hasten the depletion of nonrenewable resources. C) Economic growth combined with population growth will hasten environmental degradation. D) All the above.

25) Between 1990 and 2010, economic growth rates:

A) Were generally higher for oil importing countries than for oil exporting countries.

An increase in Real GDP:

A) is absolute economic growth B) may or may not result in a higher standard of living. C) both of above.

5) Between 1990 and 2010:

A) most countries in the world suffered a decrease in per capita Real GDP. B) The % of the developing world's population living in extreme poverty increased. D) Neither of the above. Answer D

Problem 4 Why is it possible to achieve an ever-increasing standard of living, according to new growth theory?

According to new growth theory, An ever increasing standard of living can be achieved because the technological advance made possible by new ideas is virtually limitless.

6) The six most populous countries in the world:

B) Achieved increases per capita Real GDP between 1970 and 2010 ranging from 102% to 846%.

13) Technological advance:

B) Can result from improved production techniques.

22) Neoclassical growth theory:

B) Emphasizes capitol and technology.

9) If the quantity of Labor increases, but there is no increase in capital and no improvement in technology:

B) Per capita Real GDP will likely decrease.

17) Among the necessary functions of government are:

C) Protection of private property rights.

8) Which of the following is correct?

C) Some economists argue that abundant natural resources may be a hindrance to economic growth.

19) Governmental policies that are growth-inducing include:

C) Strong private property rights.

Problem 2 Explain relationship between saving and increases in capital.

Increases in capital are made possible by saving. Resources must be used to produce capital goods instead of consumer goods.

Industrial Policy

Is government aid to those industries that have the greatest Potential for future growth.

Problem 4 Answer continued New ideas are virtually unlimited. And once an idea is developed, it is not subject to

Law of diminishing marginal returns because the new idea can be used by anyone.

Technological Advance

advance is the ability to produce more output per source

3) Between 1994 and 2014 , Country Z:

b) Did achieve absolute economic growth.

Per Capita

economic growth is an increase in per capita real GDP

Absolute

economic growth is an increase in real GDP