Lecture 12 Flashcards
New theories of economic growth based on the idea that growth is endogenous
A) stress the role of knowledge and learning in the economy’s rate of growth.
B) ignore the role of technology.
C) assume that the rate of growth of the economy is equal to the rate of population growth.
D) incorporate factors such as central-bank behaviour.
E) assume that the growth rate of technology is exogenous.
A
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) constant returns to scale.
B) a change in technology.
C) diminishing marginal returns.
D) decreasing returns to scale.
E) increasing returns to scale.
A
Modern growth theories are more optimistic than Neoclassical growth theories because the former emphasize the unlimited potential of
A) more educated government policy making.
B) modern capital.
C) knowledge-driven technological change.
D) economic theory.
E) modern labour.
C
The theory of economic growth concentrates on the ________ over the long run, not on ________.
A) factor utilization rates; growth of the supplies of factors
B) growth of real GDP; growth of potential GDP
C) growth of investment in capital goods; short-run fluctuations of investment
D) growth of potential output; fluctuations of output around potential
E) factor utilization rates; growth of real GDP
D
If government policies are to be successful in enhancing a country’s long-run growth rate, they likely work through generating
A) an increase in current consumption and a reduction in saving.
B) fiscal policies that shift the AD curve to the right.
C) a leftward shift in the AS curve.
D) greater private investment in physical and human capital.
E) higher levels of current consumption.
D
Economic growth allows increasing numbers of people around the world to enjoy higher incomes and to escape (material) poverty. Which of the following statements best describes the current limits to this growth?
A) The inability of developing countries to increase their human capital will prevent further economic growth.
B) Innovation and technological change with respect to resource development have been exhausted.
C) Rising consumption due to higher incomes puts increasing pressure on the world’s natural ecosystems and its ability to cope with further pollution and environmental degradation.
D) Increasing prices of natural resources will limit further economic growth.
E) The supply of financial capital is insufficient to maintain this level of economic growth.
C
The Neoclassical growth model assumes that with a given state of technology,
A) increases in the use of a single factor bring increasing returns.
B) the standard of living will decrease if the labour force grows more quickly than the amount of physical capital.
C) increases in the use of a single factor result in constant returns.
D) increases in GDP are possible only if all factors are increased at an equal rate.
E) growth in GDP happens only if the labour force grows more quickly than the amount of physical capital.
B
Refer to Figure 25-1. Which of the following statements best describes what we know about the difference between the two economies at Year 0?
A) There is no opportunity cost of economic growth for Economy A at Year 0.
B) Economy A’s households are consuming a larger percentage of GDP than Economy B’s households.
C) Economy A has a higher level of real GDP at Year 0 than Economy B.
D) Economy B’s households are consuming a larger percentage of GDP than Economy A’s households.
E) There is no opportunity cost for economic growth for Economy B at Year 0.
B
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) an increase in per capita national income.
B) a decrease in per capita output.
C) an increasingly aging population.
D) a decrease in the capital-output ratio.
E) an inward shift of the production possibilities boundary.
B
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; increasing
B) decreasing; decreasing
C) constant; decreasing
D) increasing; constant
E) decreasing; constant
E
In the Neoclassical growth model, increases in the stock of physical capital, other things being equal, will lead to
A) decreasing GDP and increasing living standards.
B) increasing GDP and falling living standards.
C) decreasing GDP and falling living standards.
D) increasing GDP and decreased national wealth.
E) increasing GDP and increasing living standards.
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) unresponsive; endogenous
B) unresponsive; unrelated
C) responsive; exogenous
D) responsive; endogenous
E) unresponsive; exogenous
D
