Deck 7: Drivers of Growth: Technology, Policy, and Institutions

Question 1

The Solow model is used to explain ________.

A) why some economies experience higher rates of growth than others.
B) the relationship between price and quantity demanded.
C) the relationship between the rate of inflation and the rate of unemployment.
D) the notion of opportunity cost.

Answer 1

why some economies experience higher rates of growth than others.

Question 2

A key difference between human capital and technology is that ________.

A) human capital is excludable
B) human capital is nonrival
C) scarce resources are used in the production of human capital
D) technology is an input in the production of new technology

Answer 2

human capital is excludable

Question 3

The ability of an owner of a piece of property to deny its use to others is labeled________.

A) excludability.
B) rivalry.
C) non-rivalry.
D) lugubrious.

Answer 3

excludability.

Question 4

U.S. educational achievements________.

A) began to stagnate in the 1970s.
B) have always fallen behind our European and Asian counterparts.
C) have not had a measurable effect on U.S. growth rates.
D) have not been duplicated outside the U.S.

Question 5

Which of the following is nonrival in character?

A) labor.
B) capital.
C) a desk.
D) technology.

Question 6

Investments in public infrastructure ________.

A) are not subject to diminishing returns
B) are a misallocation of national savings
C) typically decline during periods of rapid economic growth
D) may boost productivity and income

Question 7

Another term for an economic variable whose value is given is________.

A) endogenous.
B) exogenous.
C) autonomous.
D) ornamental.

Question 8

Education achievements ________.

A) are a sufficient condition for economic development to occur.
B) are a guarantee of making a poor country wealthy.
C) cannot raise human capital.
D) are both rival and nonrival in character.

Question 9

Because original ideas are likely to become known and used by others, without the inventor's knowledge or consent, ________.

A) technology is the key driver of economic growth
B) new ideas contribute little to economic growth
C) we refer to ideas as rival
D) technology is inherently exogenous

Question 10

Capital and labor are distinct from technology since________.

A) technology is exogenous
B) technology is rival in its use.
C) capital and labor are physical things.
D) technology is a physical thing.

Question 11

The Interstate Highway system in the U.S. has boosted economic productivity mainly through ________.

A) the positive impact on tourism
B) reduction in transportation costs
C) increased competition among fast food restaurants
D) increased speed of military deployments

Question 12

Building infrastructure is left to the government since________.

A) the cost of such projects would not be economical for any individual firm.
B) borrowing costs make such projects prohibitively expensive.
C) inflation tends to erode the real value of debt.
D) a natural monopoly would result if this activity were undertaken by an individual private firm.

Question 13

The knowledge and skills that workers have built up through education and training programs is known as________.

A) the college premium.
B) human capital.
C) productivity.
D) financial torsion.

Question 14

The U.S. interstate system was begun under________.

A) President Franklin Delano Roosevelt in 1933 as part of the New Deal.
B) President Herbert Hoover in 1923.
C) President Dwight D. Eisenhower in 1956.
D) President George W. Bush in 2002 after the 9/11 attacks.

Question 15

Government spending on child development promotes economic productivity by ________.

A) encouraging research and development
B) increasing national savings
C) increasing human capital
D) building infrastructure

Question 16

For the period 1915 to 2005, educational improvements in the U.S. labor force contributed what percentage of real per-capita GDP growth?

A) 0.01.
B) 15.
C) 317.
D) 34

Question 17

Physical objects are rival in the sense that________.

A) they are necessarily in opposition to one another.
B) they are nontrivial.
C) when they are used in one activity, they cannot be used in another.
D) some countries possess natural resources , e.g. oil, while some do not.

Question 18

Which of the following is most easily excludable?

A) ideas.
B) capital.
C) technology.
D) a set of designs or instructions.

Question 19

The nonrivalrous character of technological ideas suggests that________.

A) patent law protection is ultimately inefficient.
B) technological change follows a logarithmic pattern.
C) technology developed in one industry, e.g. the vodka industry, cannot be used in another industry, e.g. the automobile industry.
D) ideas can be used over and over again.

Question 20

Which of the following groups receives the highest wages?

A) high school drop-outs.
B) college drop-outs.
C) individuals who complete a bachelor's degree program.
D) individuals with advanced degrees.

Question 21

Governments that steal from their own citizens are known as________.

A) pure democracies.
B) kleptocracies.
C) Mugabes.
D) antediluvians.

Question 22

Government spending on public health promotes economic productivity by ________.

A) encouraging research and development
B) increasing national savings
C) increasing human capital
D) building infrastructure

Question 23

The Coca-Cola Company has chosen to keep its soda formula a secret, ________.

A) because soda is a non-rival good
B) to preserve its patent rights
C) because the soda formula is a rival good
D) to reap the benefits of excludability

Question 24

The Doing Business reports are considered by many economists to have contributed to economic growth and poverty reduction. The effectiveness of the reports may be attributed to ________.

A) their encouragement to governments to reduce impediments to business
B) their encouragement to businesses to migrate to business-friendly locations
C) their deepening of economists' understanding of economic growth
D) their exposing of corrupt officials and practices

Question 25

Intellectual property rights provided by patent systems typically________.

A) provide tax incentives to encourage research and development.
B) allow for the depreciation of capital.
C) compensate the government for building infrastructure.
D) last about twenty years.

Question 26

The legal system in which the law is continually reinterpreted by judges is labeled________.

A) a Napoleonic system of law.
B) a tropicalismo system.
C) a common law system.
D) a constitutional system.

Question 27

The legal system based on common law derives from the experience of which country?

A) France.
B) England.
C) Germany.
D) Rome.

Question 28

The three ways government can encourage research and development are________.

A) patents, foreign aid and direct government spending.
B) foreign aid, direct government spending and tax incentives.
C) direct government spending, tax incentives and patents.
D) tax incentives, patents and foreign aid.

Question 29

According to Nobel Prize winner Douglass North, the most important factor in limiting economic growth in developing countries today is________.

A) the relatively low level of saving.
B) the relatively high rate of inflation.
C) the inability to develop effective low-cost contract enforcement.
D) the inadequate state of the health care system

Question 30

Imagine that encryption and related technologies become so advanced that the knowledge produced by research and development are as excludable as any other good, while technology remains nonrival. In a world in which technology is both nonrival and excludable, do the government policies of government spending on R&D, tax incentives for R&D, and patents continue to make sense?

Question 31

Private businesses tend to spend too little on research and development, because ________.

A) investments to increase the capital stock are a better way to boost productivity
B) governments tend to spend too much on research and development
C) patent laws make it difficult to reap the benefits of such spending
D) technology is often nonexcludable

Question 32

Which of the following is poorest country?

A) Canada.
B) Mexico.
C) Haiti.
D) New Orleans.

Question 33

The amount of foreign aid provided by the United States________.

A) constitutes a major proportion of federal government outlays.
B) is the highest in percentage terms for any developed market economy.
C) averages about 2.7 percent of U.S. income per year.
D) is a very small percentage of gross national income.

Question 34

Patent trolls________.

A) are paid by innovative firms to the federal government.
B) buy up patents then attempt to extract large payments from firms using similar technology.
C) develop new machines and machine processes in small-scale firms, rather than large corporations.
D) can evolve into natural monopolies.

Question 35

The elements of an effective legal system include ________.

A) strict limits on the ability of judges to interpret law
B) a temperate climate
C) a large body of legislators
D) an adequate supply of lawyers

Question 36

According to the Solow model, which type of government spending is more likely to raise the long-term growth rate of output per person, spending on infrastructure or spending on research and development?

Question 37

Use the distinction between rival and nonrival to explain the college premium.

Question 38

English common law is particularly effective because________.

A) it was derived from the Napoleonic codes of the period of industrialization.
B) it is the only system that provides protection for personal property rights.
C) it is able to evolve over time.
D) of the diverse character of the British Empire.

Question 39

Entities that buy up patents then try to extract large payments from companies that use similar technologies are known as________.

A) Solow pirates.
B) tertiary leeches.
C) Great Googly Mooglies.
D) patent trolls.

Question 40

The Doing Business reports provide information on________.

A) the size of a country's national debt.
B) the rate of inflation.
C) the independence of individual central banks.
D) how easy it is to conduct business in different parts of the world.

Question 41

The Romer model is distinct from the Solow model in that the former assumes that________.

A) technology is fixed.
B) an increase in price affects quantity demanded, rather than demand.
C) some labor is devoted to producing new technology.
D) output per worker is fixed.

Question 42

Extreme global poverty is defined as________.

A) income of less than one dollar a day.
B) foreign debt in excess of 100% of GDP
C) one percent of U.S. income.
D) one-fourth of U.S. income.

Question 43

A likely way to increase the productivity of workers engaged in research and development is to ________.

A) increase the size of the labor force
B) increase the number of workers engaged in research and development
C) invest more in the education of scientists
D) increase the national saving rate

Question 44

In a logarithmic scale________.

A) the ratio of capital to labor is constant.
B) the vertical axis lies along the horizontal axis.
C) equal distances reflect the same percentage change.
D) values along the vertical axis correspond to the square root of values along the horizontal axis.

Question 45

An economy with population 500 million has a research and development productivity of 0.0005, and its output per person has risen from one period to the next along its balanced growth path from 350 to 362.5. The fraction of this economy's population engaged in research and development is ________.

A) 14%
B) 2.5%
C) 3.6%
D) 10 %

Question 46

How does the centrality of institutions and property rights in economic growth help to explain the predominance of rich countries in temperate climates and of poor countries in the tropics?

Question 47

The result that the growth rate of output per worker is equal to 1.43 × is ________.

A) true of the Solow model only
B) true of both the Solow model and the Romer model
C) true of the Romer model only
D) true under the common-law legal system only

Question 48

The quote, "If I have seen farther than others, it is because I have stood on the shoulders of giants" is attributed to________.

A) Albert Einstein.
B) Paul Romer.
C) Friedrich Nietszche.
D) Sir Isaac Newton.

Question 49

A change in which of the following can change the long-run growth rate of the economy in the Romer model?

A) investments in public infrastructure
B) the national saving rate
C) the fraction of the population engaged in and the productiveness of research and development
D) government spending and tax rates

Question 50

Growth of output per person at a constant rate is referred to as ________.

A) a balanced growth path
B) a steady state
C) a ratio scale
D) an amplification effect

Question 51

Mobutu Sese Seko was President of________.

A) Canada.
B) Zaire.
C) Cote d'Ivoire
D) Tajikistan.

Question 52

An example of foreign aid that has improved economic conditions is ________.

A) funding of public health programs
B) funding of the U.S. Interstate Highway System
C) programs to reduce foreign debt
D) the Napoleonic code

Question 53

The key assumption of the Romer model that allows an explanation of sustained growth in output per person is ________.

A) technology is nonrivalrous
B) the total amount of labor is fixed
C) some labor is devoted to producing new technology
D) the saving rate is fixed

Question 54

The key endogenous variable in endogenous growth theory is ________.

A) the level of technology
B) the productivity of research and development
C) the growth rate of output
D) the level of per capita income

Question 55

The goal of endogenous growth theory is to explain________.

A) supply and demand in individual markets.
B) the causes of technological advance.
C) the business cycle.
D) the relationship between economic growth and the rates of inflation and unemployment.

Question 56

Output per person is 170 in an economy in which 15 percent of the population are engaged in research and development, where their productivity is 0.002, and the total population size is 100 million. If this economy is on a balanced growth path, then output per person in the next period will be ________.

A) 175.1
B) 195.5
C) 176.2
D) 177.3

Question 57

Because old ideas are an input in the production of new ideas, nothing prevents the growth rate of output per person from rising without limit. Comment.

Question 58

If the level of technology rises from 8 to 8.2 in one period, the growth rate of technology is ________.

A) 2.5 percent
B) 20 percent
C) two percent
D) 0.2 percent

Question 59

The impact of foreign aid on developing countries has been reduced by________.

A) the low rate of saving in these countries.
B) the Marshall Plan.
C) the misuse of foreign aid funds by corrupt governments.
D) the low rate of consumption in these countries.

Question 60

An economy has 20 million workers in research and development, where their productivity is 0.004, and the level of technology is 6.75. The depreciation rate is 0.15, and the saving rate is 0.2. The per worker production function is y = Ak1/3 (1-α), and there are 180 million production workers. Show that, in equilibrium, the ratio of capital to output is constant.

Question 61

Assume that the growth rate of the capital stock in each period is determined by the level of output in the previous period.
According to the Romer model, an increase in population will cause________.

A) an immediate increase in output per capita and a permanent increase in output per capita.
B) an immediate decrease in output per capita and a permanent increase in output per capita.
C) an immediate increase in output per capita and a permanent decrease in output per capita.
D) an immediate and permanent decrease in output per capita.

Question 62

According to the Romer model, tax incentives to support research and development will lead to________.

A) higher tax rates in the future.
B) an increase in the general level of prices.
C) a decrease in the general level of prices.
D) increased per capita income.

Question 63

Spending on education is likely to raise output per person by ________.

A) increasing the productiveness of R&D
B) by increasing the population
C) increasing the fraction of the population engaged in productive activities
D) increasing the saving rate

Question 64

Assume that the growth rate of the capital stock in each period is determined by the level of output in the previous period.
An economy of 80 million people has ten percent of them engaged in research and development, where their productivity is 0.0035. The economy is on a balanced growth path, when suddenly 2.88 million people move from goods production into R&D, raising the fraction there to 13.6 percent. In the one period that begins with this labor reallocation, the growth rate of output is ________. [Refer to the instruction above.]

A) 2.8%
B) 0.0%
C) 3.8%
D) 2.2%

Question 65

Assume that the growth rate of the capital stock in each period is determined by the level of output in the previous period.
Technological spillover________.

A) is made possible by the nonrivalry of ideas.
B) generates an increase in both capital and labor.
C) is caused by population growth.
D) is caused by population decline.

Question 66

The growth accounting equation is gY = gA + (0.3)gK + (0.7) gL. An economy with an initial workforce of 50 million allocates 20 percent of them to research and development, where their productivity is 0.003. If the labor input in this economy is growing at one percent, and the growth rates of capital and output are equal, what is that common growth rate? Is this a realistic scenario?

Question 67

Assume that the growth rate of the capital stock in each period is determined by the level of output in the previous period.
The Solow model is distinct from the Romer model in that an increase in population tends to cause________.

A) a permanent decrease in the standard of living in the Romer model.
B) an increase in spillover effects in the Solow model, but not in the Romer model.
C) a permanent increase in the standard of living in the Solow model.
D) a permanent increase in the standard of living in the Romer model.

Question 68

When technology improves in a country with a fast-growing population ________.

A) output rises, but output per person does not
B) output rises in that country, while output per person rises in other countries
C) output per person rises in that country and around the world
D) output per person rises temporarily, then declines

Question 69

The Romer and Solow models reach the same conclusion with respect to________.

A) output growth in the long-run.
B) the impact of changing population.
C) the effect of an increase in the saving rate.
D) the general level of prices.

Question 70

The graph above might represent the ________.

A) response to an increase in the fraction of the population engaged in research and development
B) response to a rise in the productiveness of research and development
C) response to an increase in the total population
D) response to a rise in the saving rate

Question 71

Assume that the growth rate of the capital stock in each period is determined by the level of output in the previous period.
An economy of 82 million people has twenty percent of them engaged in research and development, where their productivity is 0.003. The economy is on a balanced growth path, when suddenly the productiveness of R&D rises to 0.004. For the one period that begins with this productivity increase, the growth rate of output is ________. [Refer to the instruction above.]

A) 8.7%
B) 9.4%
C) 6.6%
D) 7%

Question 72

In the Romer model, as more labor is devoted to research and development there is________.

A) an immediate increase in output per capita and a permanent increase in output per capita.
B) an immediate decrease in output per capita and a permanent increase in output per capita.
C) an immediate increase in output per capita and a permanent decrease in output per capita.
D) an immediate decrease in output per capita and a permanent decrease in output per capita.

Question 73

The observation that countries with high rates of population growth don't have higher per capita income ________.

A) suggests that the Solow model is unrealistic
B) implies that technology doesn't work as well in countries where the population is growing rapidly
C) is not supported by most empirical studies
D) is consistent with the Romer model as applied to the world as a whole

Question 74

In the Romer model. as more labor is devoted to research and development________.

A) there is an immediate decrease in output per capita.
B) there is an immediate increase in output per capita.
C) output per capita is unaffected, but the savings rate begins to rise.
D) output per capita is unaffected, but the savings rate begins to fall.

Question 75

On the graph above, for a while after t = 0, the growth rate of output per worker is ________ the growth rate prior to time zero, and ________.

A) below; rising
B) below; falling
C) above; constant
D) above; falling

Question 76

Assume that the growth rate of the capital stock in each period is determined by the level of output in the previous period.
An economy of 25 million people has twenty percent of them engaged in research and development, where their productivity is 0.0056. The economy is on a balanced growth path, when suddenly a wave of immigration raises the population to 27 million. Assume that the new workers are immediately "on the job," and that the fraction engaged in R&D remains twenty percent. For the one period that begins with this population increase, the growth rate of output per person is ________. [Refer to the instruction above.]

A) 4.3%
B) 1.8%
C) 3%
D) 8%

Question 77

The current world population is________.

A) 6 million.
B) 6 billion.
C) 6 trillion.
D) 6 gazillion.

Question 78

The Romer model suggests that there is a trade-off between ________.

A) the use of resources in research and development and the productiveness of R&D
B) the rate of saving and the long-run growth of output
C) per capita output in the short-run and long-run
D) the size of the total population and the saving rate

Question 79

One difference between a policy of direct spending by the government on research and development and an alternative policy of tax incentives to encourage private spending on R&D is ________.

A) the former improves the productivity of R&D, while the latter raises its level
B) the former requires a decrease in national saving, while the latter causes an increase
C) the former raises the level of R&D spending, while the latter also improves its productivity
D) the former requires an increase in national saving, while the latter causes a decrease

Question 80

Endogenous growth theory supports the conclusion that________.

A) government spending cannot influence the level of research and development.
B) increased government spending on research and development is counterproductive.
C) per capita income growth is a function of real factors, such as the supply of money.
D) increased government spending on research and development is useful.