Chapter 25.3 Flashcards
Modern or "new" theories of long-run economic growth are based on the assumptions that technological change is mainly \_\_\_\_\_\_\_\_ to an economy and that investment yields \_\_\_\_\_\_\_\_ marginal returns. A) exogenous; diminishing B) exogenous; constant C) exogenous; increasing D) endogenous; decreasing E) endogenous, increasing
E
The "new" theories of economic growth emphasize that the pace of technological change is \_\_\_\_\_\_\_\_ to economic signals, and that it is \_\_\_\_\_\_\_\_ to the economic system. A) responsive; exogenous B) responsive; endogenous C) unresponsive; exogenous D) unresponsive; endogenous E) unresponsive; unrelated
B
According to the “new” theories of economic growth, increasing marginal returns to capital investment is
A) possible, but only in the early stages of innovation before imitators rush in to drive prices down.
B) possible after initial fixed costs of innovation have been borne.
C) possible only if the capital is government-owned infrastructure.
D) impossible, and is thus a weak source of growth.
E) impossible because diminishing returns are unavoidable.
B
New theories of economic growth based on the idea that growth is endogenous
A) assume that the rate of growth of the economy is equal to the rate of population growth.
B) assume that the growth rate of technology is exogenous.
C) incorporate factors such as central-bank behaviour.
D) ignore the role of technology.
E) stress the role of knowledge and learning in the economy’s rate of growth.
E
With respect to long-run economic growth, one rationale for the idea that there may be increasing marginal returns to investment is that
A) as further investment takes place the economy moves down to the right along the marginal product schedule.
B) as further investment takes place the economy moves upward to the left along the marginal product schedule.
C) the investment costs to “followers” are lower than those for “pioneers.”
D) initial investment shifts the the investment demand schedule to the left, making further investment less costly.
E) initial investment shifts the the aggregate demand schedule to the left, making further investment less costly.
C
According to some modern theories of long-run economic growth, successive increments of investment have \_\_\_\_\_\_\_\_ returns since some fixed costs are \_\_\_\_\_\_\_\_ for subsequent firms. A) constant; identical B) increasing; lower C) increasing; higher D) decreasing; higher E) decreasing; lower
B
In new theories of “endogenous growth,” increasing marginal returns to investment can occur because
A) investment costs for followers can be higher than for pioneers.
B) knowledge provides the input that allows investment to be profitable.
C) many investments require large fixed costs, the benefits of which are not available to subsequent firms.
D) little risk is associated with the process of innovation for technological followers.
E) early investors create an infrastructure favorable to followers.
E
Compared to Neoclassical growth theory, newer “endogenous growth” theories are more ________ regarding the prospect of continuous increases in the standard of living, due in part to its emphasis on the ________.
A) pessimistic; endogeneity of technological change
B) pessimistic; accelerating depletion of natural resources
C) pessimistic; increasing birth rates as a result of higher real income per capita
D) optimistic; accelerating depletion of natural resources
E) optimistic; endogeneity of technological change
E
Consider the newer theories of economic growth. Given the rapid growth of world population in recent decades, the present needs and aspirations of the world’s population can likely only be met through
A) enormous increases in financial capital.
B) increasing knowledge and technological improvements.
C) reductions in the world’s capital stock, as a means of controlling the exhaustion of natural resources.
D) coordination of fiscal and monetary policies.
E) relatively small increases in the saving rates of the developing economies.
B
Modern growth theories are more optimistic than Neoclassical growth theories because the former emphasize the unlimited potential of
A) modern capital.
B) knowledge-driven technological change.
C) more educated government policy making.
D) modern labour.
E) economic theory.
B
Which of the following statements is true of new growth theory, and NOT true of Neoclassical growth theory?
A) It cannot explain improved living standards over the long term.
B) It can explain improved living standards over the long term.
C) Economic growth does not have an impact on resource exhaustion.
D) Economic growth depends only on population growth.
E) Economic growth is the result of innovation.
B
One reason that investment in innovation is often considered to have increasing marginal returns is because
A) new products increase firms’ profits.
B) R&D costs are negligible relative to firms’ total costs.
C) innovation is mostly through “leaning by doing.”
D) new ideas or innovations can spawn ever further new ideas and innovations.
E) after the initial investment is made, subsequent investors face more difficult and expensive production problems.
D
Consider the competing products made by Apple (iPhone) and Samsung, for example. The innovation generated by these firms as a result of their intense rivalry is an example of A) covert collusion. B) constant returns to scale. C) exogenous technological change. D) endogenous technological change. E) decreasing marginal returns.
D
Consider the significant costs to the innovators and developers of 3D printing technology. Modern growth theory suggests that
A) there will be decreasing marginal returns to this investment.
B) there will be constant returns to this investment.
C) there will be increasing marginal returns to this investment.
D) follower firms will face higher costs than the pioneer firms.
E) the knowledge acquired in this innovation process will remain private.
C
