Question 1

Which of the following correctly and fully defines conditional convergence? Conditional convergence refers to the tendency for

Accepted Answer

A)  poorer countries to grow faster than richer countries, but only if they receive sufficient foreign direct investment so that their steady-state capital stocks converge. 
B)  richer countries to grow faster than poorer countries given similar steady-state capital stocks. 
C)  poorer countries to grow faster than richer countries given similar steady-state capital stocks. 
D)  countries with similar steady-state levels of output to grow faster when they're poor than when they're rich until their per capita GDP levels converge. 
A)  poorer countries to grow faster than richer countries, but only if they receive sufficient foreign direct investment so that their steady-state capital stocks converge. 
B)  richer countries to grow faster than poorer countries given similar steady-state capital stocks. 
C)  poorer countries to grow faster than richer countries given similar steady-state capital stocks. 
D)  countries with similar steady-state levels of output to grow faster when they're poor than when they're rich until their per capita GDP levels converge. D

Question 2

Technological advances are generally expected to have ______ spillovers.

Accepted Answer

A)  negative 
B)  positive 
C)  no 
D)  both positive and negative 
A)  negative 
B)  positive 
C)  no 
D)  both positive and negative B

Question 3

A patent I. provides temporary monopoly power to the company that receives it. II. usually does not expire. III. is issued by the government.

Accepted Answer

A)  II only 
B)  I and II only 
C)  I and III only 
D)  I, II, and III 
A)  II only 
B)  I and II only 
C)  I and III only 
D)  I, II, and III C

Question 4

As long as investment equals depreciation, economic growth is maintained.

Accepted Answer

A) True 
 B)False

Question 5

As more units of capital are added, output

Accepted Answer

A)  increases at an increasing rate. 
B)  increases at a constant rate. 
C)  increases at a decreasing rate. 
D)  remains constant. 
A)  increases at an increasing rate. 
B)  increases at a constant rate. 
C)  increases at a decreasing rate. 
D)  remains constant.

Question 6

Patents allow a firm to enjoy a monopoly, thus increasing the incentive to

Accepted Answer

A)  imitate their competitors. 
B)  decrease capital investment. 
C)  rely on government scientists and engineers. 
D)  research and develop new products. 
A)  imitate their competitors. 
B)  decrease capital investment. 
C)  rely on government scientists and engineers. 
D)  research and develop new products.

Question 7

In a small country each labor hour has capital stock equal to 900 units. This year it produced 20 units of new capital goods, with a depreciation rate of 20 percent, and a production function of . What will its level of capital stock per labor   hour be next year?

Accepted Answer

A)  920 units 
B)  720 units 
C)  900 units 
D)  740 units 
A)  920 units 
B)  720 units 
C)  900 units 
D)  740 units

Question 8

The reason that the United States has experienced sustained economic growth for over 200 years is mostly due to which of the following?

Accepted Answer

A)  timely replacement of physical capital 
B)  continued advances in technological knowledge 
C)  steady increases in population 
D)  strategic government planning 
A)  timely replacement of physical capital 
B)  continued advances in technological knowledge 
C)  steady increases in population 
D)  strategic government planning

Question 9

Government has a role in subsidizing research and development when

Accepted Answer

A)  the beneficiaries are below the poverty line. 
B)  it can increase tax revenue. 
C)  it can more efficiently allocate resources. 
D)  the spillovers are large. 
A)  the beneficiaries are below the poverty line. 
B)  it can increase tax revenue. 
C)  it can more efficiently allocate resources. 
D)  the spillovers are large.

Question 10

R&D spillovers

Accepted Answer

A)  reward research and development. 
B)  are nonrivalrous. 
C)  only benefit the inventor. 
D)  keep ideas within a country. 
A)  reward research and development. 
B)  are nonrivalrous. 
C)  only benefit the inventor. 
D)  keep ideas within a country.

Question 11

What are the factors of production in the Solow model of economic growth?

Accepted Answer

A)  institutions, incentives, and ideas 
B)  physical capital, human capital, and ideas 
C)  working capital, technological advances, and ideas 
D)  motivated workers, honest government, and ideas 
A)  institutions, incentives, and ideas 
B)  physical capital, human capital, and ideas 
C)  working capital, technological advances, and ideas 
D)  motivated workers, honest government, and ideas

Question 12

The Solow growth model predicts that China and other developing countries will eventually surpass the leading economies of the world in terms of their level of Real Gross Domestic Product per capita.

Accepted Answer

A) True 
 B)False

Question 13

Since 1960, the poorest OECD countries have grown the fastest.

Accepted Answer

A) True 
 B)False

Question 14

American culture contributes to economic growth through the encouragement of new ideas by

Accepted Answer

A)  supporting entrepreneurship. 
B)  encouraging a high level of personal savings. 
C)  supporting a retirement income for all citizens. 
D)  expecting a high level of government ownership of manufacturing firms. 
A)  supporting entrepreneurship. 
B)  encouraging a high level of personal savings. 
C)  supporting a retirement income for all citizens. 
D)  expecting a high level of government ownership of manufacturing firms.

Question 15

According to the Solow model, output is a function of the quantity of

Accepted Answer

A)  labor. 
B)  capital. 
C)  ideas. 
D)  Labor, capital, and ideas all contribute to the production of output. 
A)  labor. 
B)  capital. 
C)  ideas. 
D)  Labor, capital, and ideas all contribute to the production of output.

Question 16

Which of the following should lead to an increased rate of economic growth due to increased development of ideas?

Accepted Answer

A)  increased population 
B)  increased consumer wealth and larger markets 
C)  political stability and honest governments 
D)  Each of these answers is correct. 
A)  increased population 
B)  increased consumer wealth and larger markets 
C)  political stability and honest governments 
D)  Each of these answers is correct.

Question 17

The nonrivalry of ideas means that people cannot use the same idea simultaneously.

Accepted Answer

A) True 
 B)False

Question 18

A small country has an aggregate production function given by Y = AK1/2. What would need to happen to its aggregate production function in order to represent an advancement in technology?

Accepted Answer

A)  Capital would need to increase. 
B)  The variable A would need to increase. 
C)  The variable A would need to decrease. 
D)  Capital would need to decrease. 
A)  Capital would need to increase. 
B)  The variable A would need to increase. 
C)  The variable A would need to decrease. 
D)  Capital would need to decrease.

Question 19

If output in an economy is 500, and the investment function is 0.25Y,

Accepted Answer

A)  125 units of output are being consumed. 
B)  375 units of output are being consumed. 
C)  100 units of output are being consumed. 
D)  400 units of output are being invested. 
A)  125 units of output are being consumed. 
B)  375 units of output are being consumed. 
C)  100 units of output are being consumed. 
D)  400 units of output are being invested.

Question 20

According to the Solow model, an increase in the fraction of output that is saved will increase ________ in the long run.

Accepted Answer

A)  investment. 
B)  output. 
C)  per capita GDP. 
D)  All of the answers are correct. 
A)  investment. 
B)  output. 
C)  per capita GDP. 
D)  All of the answers are correct.

Exam 26: Gdp and the Measurement of Progress

Which of the following correctly and fully defines conditional convergence? Conditional convergence refers to the tendency for

Technological advances are generally expected to have ______ spillovers.

A patent I. provides temporary monopoly power to the company that receives it. II. usually does not expire. III. is issued by the government.

As long as investment equals depreciation, economic growth is maintained.

As more units of capital are added, output

Patents allow a firm to enjoy a monopoly, thus increasing the incentive to

In a small country each labor hour has capital stock equal to 900 units. This year it produced 20 units of new capital goods, with a depreciation rate of 20 percent, and a production function of . What will its level of capital stock per labor hour be next year?

The reason that the United States has experienced sustained economic growth for over 200 years is mostly due to which of the following?

Government has a role in subsidizing research and development when

R&D spillovers

What are the factors of production in the Solow model of economic growth?

The Solow growth model predicts that China and other developing countries will eventually surpass the leading economies of the world in terms of their level of Real Gross Domestic Product per capita.

Since 1960, the poorest OECD countries have grown the fastest.

American culture contributes to economic growth through the encouragement of new ideas by

According to the Solow model, output is a function of the quantity of

Which of the following should lead to an increased rate of economic growth due to increased development of ideas?

The nonrivalry of ideas means that people cannot use the same idea simultaneously.

A small country has an aggregate production function given by Y = AK1/2. What would need to happen to its aggregate production function in order to represent an advancement in technology?

If output in an economy is 500, and the investment function is 0.25Y,

According to the Solow model, an increase in the fraction of output that is saved will increase ________ in the long run.

The Big Ideas in Economics

The Power of Trade and Comparative Advantage

Business Fluctuations: Aggregate Demand and Supply

Equilibrium: How Supply and Demand Determine Prices

Elasticity and Its Applications

Taxes and Subsidies

The Price System: Signals, Speculation, and Prediction

Price Ceilings and Floors

International Trade

Externalities: When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination and Pricing Strategy

Oligopoly and Game Theory

Competing for Monopoly: the Economics of Network Goods

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Asymmetric Information: Moral Hazard and Adverse Selection

Consumer Choice

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation, and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Supply and Demand

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

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