Lecture 12 Flashcards
In the Neoclassical growth model, the law of diminishing marginal returns implies that capital accumulation leads to ever
A) larger levels of unemployment but small increases in the standard of living.
B) larger levels of unemployment but larger increases in the standard of living.
C) larger increases in GDP but smaller decreases in living standards.
D) smaller increases in GDP and living standards.
E) larger decreases in GDP and large decreases in living standards.
D) smaller increases in GDP and living standards.
Neoclassical growth theory is based on the assumption of ________ marginal returns to a single factor and ________ returns to scale exhibited by the aggregate production function.
A) increasing; constant B) decreasing; decreasing C) decreasing; constant D) increasing; increasing E) constant; decreasing
C) decreasing; constant
The Neoclassical growth model assumes that with a given state of technology,
A) increases in GDP are possible only if all factors are increased at an equal rate.
B) increases in the use of a single factor result in constant returns.
C) increases in the use of a single factor bring increasing returns.
D) growth in GDP happens only if the labour force grows more quickly than the amount of physical capital.
E) the standard of living will decrease if the labour force grows more quickly than the amount of physical capital.
E) the standard of living will decrease if the labour force grows more quickly than the amount of physical capital.
Modern growth theories are more optimistic than Neoclassical growth theories because the former emphasize the unlimited potential of
A) knowledge-driven technological change.
B) economic theory.
C) modern capital.
D) modern labour.
E) more educated government policy making.
A) knowledge-driven technological change.
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) increasing; higher B) constant; identical C) decreasing; lower D) increasing; lower E) decreasing; higher
D) increasing; lower
Balanced growth of labour and capital in the Neoclassical growth model
A) explains current rising per capita incomes in many countries.
B) leads to rising material living standards.
C) will not increase the level of per capita GDP.
D) is a natural outcome of long-run equilibrium.
E) will result in a constant level of GDP.
C) will not increase the level of per capita GDP.
In the Neoclassical growth model, increases in the stock of physical capital, other things being equal, will lead to
A) increasing GDP and decreased national wealth.
B) increasing GDP and falling living standards.
C) increasing GDP and increasing living standards.
D) decreasing GDP and falling living standards.
E) decreasing GDP and increasing living standards.
C) increasing GDP and increasing living standards.
Economic growth is often associated with structural change in the economy, and this change can present difficult policy challenges to governments. Which of the following government policies would be most useful at addressing the social costs of economic growth?
A) worker re-training and education programs
B) reducing income taxes
C) the imposition of trade restrictions to protect Canadian jobs
D) expansionary monetary policy
E) subsidies directed at Canadian manufacturing firms
A) worker re-training and education programs
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) incorporate factors such as central-bank behaviour.
C) stress the role of knowledge and learning in the economy’s rate of growth.
D) assume that the growth rate of technology is exogenous.
E) ignore the role of technology.
C) stress the role of knowledge and learning in the economy’s rate of growth.
Consider the aggregate production function Y = F(K, L). If the inputs K and L are increased by 5% each and total output (Y) increases by 5% as a result, then this production function is displaying
A) increasing returns to scale. B) a change in technology. C) constant returns to scale. D) diminishing marginal returns. E) decreasing returns to scale.
C) constant returns to scale.
Consider the Neoclassical growth model. The effect of an increase in population (or the labour force) in an economy, with everything else held constant, is
A) a decrease in per capita output.
B) an inward shift of the production possibilities boundary.
C) an increase in per capita national income.
D) a decrease in the capital-output ratio.
E) an increasingly aging population.
A) a decrease in per capita output.
Over a long period of time, perhaps many years, changes in real GDP come primarily from
A) continuous increases in potential GDP. B) upward shifts of the AS curve. C) rightward shifts of the AD curve. D) upward shifts of the AE curve. E) leftward shifts of the AD curve.
A) continuous increases in potential GDP.
A central assumption of the Neoclassical growth model is that
A) long-run growth arises from correcting market failures.
B) long-run growth arises only from technological innovation.
C) there are constant marginal returns to investment.
D) there are increasing marginal returns to capital investment.
E) there are diminishing marginal returns to a single factor.
E) there are diminishing marginal returns to a single factor.
The theory of economic growth concentrates on the ________ over the long run, not on ________.
A) growth of potential output; fluctuations of output around potential
B) growth of investment in capital goods; short-run fluctuations of investment
C) growth of real GDP; growth of potential GDP
D) factor utilization rates; growth of the supplies of factors
E) factor utilization rates; growth of real GDP
A) growth of potential output; fluctuations of output around potential
If a country transfers resources from the production of consumption goods to the production of capital goods, the result will be to
A) raise current consumption. B) raise current living standards. C) raise future consumption. D) lower future living standards. E) decrease the long-run growth rate.
C) raise future consumption.
