1. According to economists today, economic growth depends on:
1) resources.
2) technology.
3) institutions.
4) resources and technology.
5) resources, technology, and institutions.
2. Which of the following is FALSE?
1) Real-world observations shape economic theory.
2) Economic theory shapes policy decisions.
3) Policies affect real-world events.
4) Economic theory has no impact on real-world events.
5) None of these statements is false.
3. After the Great Depression, the main focus of macroeconomics was:
1) growth theory.
2) the study of business cycles.
3) the study of stock markets.
4) the study of why businesses fail.
4. The Solow Growth Model serves as a foundation of:
1) macroeconomic theory.
2) microeconomic theory.
3) growth theory.
4) all economic theory.
5. According to the Solow Growth Model, which of the following is/are the primary source(s) of economic growth?
A - Natural resources
B - Human capital
C - Physical capital
D - A and B
E - A and C
F- B and C
G- A, B, and C
6. According to the Solow Growth Model, the marginal product of capital is:
1) zero and increases as the quantity of capital increases
2) zero and decreases as the quantity of capital increases.
3) negative and increases as the quantity of capital increases.
4) negative and decreases as the quantity of capital increases.
5) positive and increases as the quantity of capital increases.
6) positive and decreases as the quantity of capital increases.
7. If building new capital is costless and the capital depreciation rate is zero, then an economy will reach a steady state in which the marginal product of capital is:
1) equal to zero.
2) greater than zero.
3) less than zero.
8. Which of the following is true for an economy before it reaches the steady-state?
1) Investment and net investment are both positive.
2) Investment is positive but net investment is zero.
3) Investment is zero but net investment is positive.
4) Investment and net investment are both zero.
9. The idea of convergence suggests that when underdeveloped nations begin to develop, they typically have _____________ growth rates as they catch up to the developed nations.
1) higher
2) lower
3) similar
4) very low
10. Which of the following is true after allowing for sustained technological advance in the Solow Growth Model?
I. The steady-state situation is avoidable.
II. The marginal product of each unit of capital will increase.
III. A diminishing marginal product is avoidable.
Only I only II
Only III
I and II
I and III
II and III
I, II, and III
11. What is the primary difference between the basic Solow model and the second Solow model?
1) The models are theoretically similar. The second Solow model is only more mathematically complex than the basic model.
2) The second Solow model allows for technological change, while the basic model doesn't.
3) The basic Solow model features diminishing returns, in contrast to the second model.
4) The marginal product eventually becomes zero in the basic model, while such a situation is avoidable in the second Solow model.
12. All of the following can result in economic growth except:
1) improved schools and colleges.
2) a boost in population growth.
3) a favorable climate.
4) an improved health care system.
13. Which of the following will result in a movement along with the aggregate production function?
I. a technological advancement
II. training of the workforce
III. an increase in the country's capital stock
I and II
I and III
II and III
I, II, and III
14. Which of the following is NOT true about technological change in the Solow model?
1) Technological change is random.
2) Technological change occurs exogenously.
3) Technological change is driven by the incentives of the innovators.
4) Technological change is not due to any inherent characteristics of the economy.
15. What is the key difference between the new growth theory and the growth theory as envisioned by Solow?
1) There is no difference; technological change is endogenous in both these theories.
2) There is no difference; technological change is exogenous in both these theories.
3) Technological change is endogenous in the new growth theory and exogenous in the Solow theory.
4) Technological change is exogenous in the new growth theory and endogenous in the Solow theory.
16. Which of the following was proposed by the new growth theory?
I. Capital resources cannot grow indefinitely.
II. Technological change is caused by factors inside the economy.
III. Technological changes are entirely unpredictable events.
IV. Institutions matter.
I and II
I and IV
II and IV
III and IV
I, II, III, and IV
17. All of the following except _____________ are barriers to natural growth.
1) corruption
2) political instability
3) high tax rates
4) free markets
5) All of these are barriers to natural growth.
18. Which of the following is supported by the modern growth theory?
A - Population growth is an obstacle to economic growth.
B - Competition encourages the discovery of new goods and services, which leads to economic growth.
C - A country can grow faster if it disengages itself from international trade with foreign nations.
D - Taxes should be abolished, as they hurt incentives necessary for economic growth.
All of these. A and B
A, B, and D
19. According to the new growth theory, the low living standards in many developing countries can be explained by a lack of:
A - natural resources.
B - free markets.
C - sound institutions.
D - strong military resources.
all of these.
B and C.
A and D.
