Deck 18: Economic Growth and Development

Question 1

Economic growth refers to an increase in real GDP:

A) per capita resulting from a more efficient use of resources.
B) resulting from a decrease in the population.
C) resulting from an increase in the productive capacity.
D) resulting from a decrease in the amount of environmental damage.

Answer 1

C

Question 2

Real GDP per capita is the measure of output per person that has been adjusted for:

A) inflation.
B) environmental damage.
C) depreciation.
D) income received from abroad.

Answer 2

A

Question 3

Which of the following measures is NOT included in the Human Development Index?

A) life expectancy
B) years of schooling
C) income per capita
D) healthcare spending

Answer 3

D

Question 4

Which of the following measures is included in the Human Development Index?

A) healthcare spending
B) defense spending
C) income per capita
D) educational Spending

Question 5

Which of the following statements is true?

A) The Human Development Index and real GDP are equivalent ways of measuring economic development.
B) Income per capita is included in the Human Development Index.
C) Countries with high real GDP per capita tend to rank lower on the Human Development Index.
D) An increase in the real GDP automatically leads to an increase in the value of Human Development Index.

Question 6

A country that shows an improvement in broader measures of the quality of life but not an increase in its productive capacity experiences:

A) both economic growth and economic development.
B) economic growth but no economic development.
C) economic development but no economic growth.
D) neither economic growth nor economic development.

Question 7

In the early stages of development, population _____because death rates ____ relative to birth rates.

A) increases; fall
B) increases; rise
C) decreases; fall
D) decreases; rise

Question 8

If the population of a country increase by 2 percent and the real GDP per capita increases by 1 percent, then we can conclude that the real GDP of the country must have:

A) decreased by 1 percent.
B) decreased by 3 percent.
C) increased by 1 percent.
D) increased by 3 percent.

Question 9

If the real GDP of a country increases by 5 percent and the real GDP per capita increases by 3 percent over a period of time, then we can conclude that the population of the country during this time:

A) decreased by 2 percent.
B) decreased by 3 percent.
C) increased by 2 percent.
D) increased by 3 percent.

Question 10

If the real GDP of a country increases by 3 percent and the population of the country increases by 2 percent over a period of time, then the real GDP per capita of the country must have:

A) increased by 2 percent.
B) increased by 1 percent.
C) decreased by 2 percent.
D) decreased by 1 percent.

Question 11

Which of the following is a measure of income inequality?

A) real GDP
B) Gini coefficient
C) Human Development Index
D) Gross Happiness Index

Question 12

The Gini coefficient is a measure of inequality that takes values between:

A) 0 and 10.
B) 0 and 1.
C) 1 and 10.
D) 1 and 100.

Question 13

If everyone in a country earns the same income, then the Gini coefficient of the country will be:

A) 0.
B) 0.5.
C) 1.
D) 100.

Question 14

If all the income of a country goes to one person, then the Gini coefficient of the country will be:

A) 0.
B) 0.5.
C) 1.
D) 100.

Question 15

A production possibility frontier shows the:

A) minimum amount of resources required to produce two different goods.
B) maximum amount of resources required to produce two different goods.
C) different combinations of two goods that can be produced using all available resources.
D) different combinations of two goods that can be produced using least amount of resources.

Question 16

An increase in capacity utilization is reflected in:

A) an outward shift of the production possibility frontier.
B) a movement down and along the production possibility frontier.
C) a movement up and along the production possibility frontier.
D) a movement from inside the production possibility frontier toward the frontier.

Question 17

The production possibility frontier can shift out as a result of all of these EXCEPT an:

A) increase in land.
B) increase in labor.
C) increase in capacity utilization.
D) improvement in technology.

Question 18

Which of the following is NOT an assumption of Solow's neoclassical growth model?

A) Capital has a diminishing marginal product.
B) Countries have different technology.
C) Countries have different levels of physical capital.
D) Countries have identical levels of human capital.

Question 19

According to the Solow's neoclassical growth model:

A) capital will flow from poor countries to rich countries.
B) capital will be most productive in countries with high levels of capital.
C) productivity levels will converge in the long run.
D) productivity differences are a result of differing levels of human capital.

Question 20

According to the neoclassical growth model of Robert Solow, countries with a _____ capital per worker will attract additional physical capital.

A) higher level of human
B) lower level of human
C) higher level of physical
D) lower level of physical

Question 21

According to Solow's neoclassical growth model, a country can achieve economic growth by increasing:

A) human capital per worker.
B) money supply.
C) physical capital per worker.
D) research and development.

Question 22

According to the neoclassical growth model of Robert Solow, all countries will have the same _____ in the long run.

A) amount of capital
B) labor force
C) productivity levels
D) price levels

Question 23

Which of the following statements is NOT true?

A) In the Solow model, developing countries have the same technology as developed countries.
B) In the Solow model, developing countries have the same population as developed countries.
C) In the Solow model, developing countries have a higher marginal product of capital.
D) In the Solow model, all countries converge to the same level of capital per worker.

Question 24

The neoclassical growth model of Robert Solow assumes that all countries are identical in terms of:

A) population.
B) technology.
C) capital stock.
D) labor force.

Question 25

According to the neoclassical growth model of Robert Solow, any difference in productivity between countries arises from differences in:

A) human capital per worker.
B) technology.
C) physical capital per worker
D) population level.

Question 26

According to economist Robert Lucas, the reason that physical capital does not flow easily to developing countries is that in developing countries:

A) technology does not exist to use capital.
B) marginal product of capital is low.
C) human capital levels are lower.
D) population levels are lower.

Question 27

According to economist Robert Lucas, _____ are among the reasons that physical capital does not flow easily from developed to developing countries.

A) a lack of human capital and differences in technology
B) a lack of human capital and political instability
C) a high tax on capital and a low marginal product of capital
D) political instability and a low marginal product of capital

Question 28

Refer to the figure Economic Growth. The figure shows two production possibility frontiers for a country that produces sugar and aluminum. If the country's frontier is currently PPF₁, then which one of the following shifts represents an increase in capacity utilization?
​
Figure: Economic Growth

A) B to C
B) B to D
C) A to C
D) D to C

Question 29

Refer to the figure Economic Growth. The figure shows two production possibility frontiers for a country that produces sugar and aluminum. If the country's frontier is PPF₂, then which one of the following shifts does NOT represent an increase in capacity utilization?
​
Figure: Economic Growth

A) D to F
B) E to F
C) C to E
D) B to E

Question 30

Refer to the figure Economic Growth. The figure shows two production possibility frontiers for a country that produces sugar and aluminum. If the country's PPF is currently PPF₁ and it is operating at point B, then which one of the following CANNOT shift the country to point E?
​
Figure: Economic Growth

A) improvement in technology
B) increase in labor force
C) increase in capacity utilization
D) increase in physical capital

Question 31

Refer to the figure Economic Growth. The figure shows two production possibility frontiers for a country that produces sugar and aluminum. If the country's PPF is currently PPF₁ and it is operating at point B, then a shift to which of the following points represents economic growth?
​
Figure: Economic Growth

A) D
B) C
C) A
D) F

Question 32

Refer to the figure Economic Growth. The figure shows two production possibility frontiers for a country that produces sugar and aluminum. If the country's PPF is currently PPF₁ and it is operating at point B, then a shift to either _____ represents economic growth.
​
Figure: Economic Growth

A) D or F
B) C or E
C) D or C
D) E or F

Question 33

An increase in which one of the following will NOT lead to economic growth?

A) physical capital
B) human capital
C) money supply
D) technology

Question 34

Which of the following statements is true?

A) According to the neoclassical growth model of Robert Solow, differences in human capital per worker are the reason for productivity differences between countries.
B) In the long run, an increase in money supply will lead to inflation without leading to economic growth.
C) According to economist Robert Lucas, capital does not flow from rich to poor countries because poor countries have lower marginal product of capital.
D) According to the neoclassical growth model of Robert Solow, countries do not converge with each other in productivity levels because of differences in technology.

Question 35

Investment made to acquire lasting interest in a firm operating in another country is known as foreign _____ investment.

A) institutional
B) direct
C) venture capital
D) private equity

Question 36

The interest rate on business loans in developing countries is typically _____ than those in developed countries, reflecting a _____ demand for loans relative to supply.

A) lower; low
B) lower; high
C) higher; low
D) higher; high

Question 37

Which one of the following is a solution for the lack of domestic loans that are available to businesses in developing countries because of high interest rates?

A) expansionary monetary policy
B) microcredit
C) foreign direct investment
D) private equity

Question 38

The extension of small loans to poor borrowers is known as:

A) microcredit.
B) direct credit.
C) institutional credit.
D) private credit.

Question 39

The difference between debt crowdfunding and equity crowdfunding is that investors in debt crowdfunding _____ and investors in equity crowdfunding:

A) receive interest on their loans; make donations in return for rewards.
B) become part owners of a business; receive interest on their loans.
C) receive interest on their loans; become part owners of a business.
D) make donations in return for rewards; become part owners of a business.

Question 40

In the context of growth and development, laws, rules, and customs are known as:

A) institutions.
B) constitutions.
C) organizations.
D) property rights.

Question 41

Which of the following statements is NOT true?

A) Economic growth refers to the increased productive capacity of an economy.
B) Economic development refers to an increased capacity utilization in the economy.
C) Economic growth can be depicted through a rightward shift of the production possibility frontier.
D) Economic growth can occur without any economic development.

Question 42

An increase in money supply leads to which of the following in the long run?

A) economic growth
B) economic development
C) decreased income inequality
D) an increased rate of inflation

Question 43

An increase in _____ does not lead economic growth.

A) human capital and money supply
B) money supply and capacity utilization
C) capacity utilization and physical capital
D) human capital and physical capital

Question 44

An increase in which of the following may help countries make more productive use of additional units of physical capital?

A) money supply
B) domestic loans
C) foreign direct investment
D) human capital

Question 45

An increase in which of the following factors entails beneficial side effects or positive externalities that can make physical capital more productive?

A) money supply
B) human capital
C) land
D) labor

Question 46

Which of the following is NOT a reason for a lack of economic growth in developing countries?

A) corruption
B) geography
C) money supply
D) unfit leadership

Question 47

Can a country achieve economic growth indefinitely just by accumulating more physical capital per worker? Justify your answer.

Question 48

Based on the neoclassical growth model of Robert Solow, capital should flow from developed countries to developing countries. However, we do not see this happening in the real world. Explain why the Solow model predicts this flow and why this is not observed in the real world.

Question 49

Consider three different countries - P, M, and R. Country P is a poor country, country M is a middle-income country, and country R is a rich country. Which country will likely have the lowest Gini coefficient? Which country will likely have the highest? Justify your answer.