Question : 9.3   Economic Growth Theories: Old and New 1) Thomas Malthus : 1240972

 

9.3   Economic Growth Theories: Old and New

 

1) Thomas Malthus was an economist who contributed to the ________ theory of growth.

A) classical

B) neoclassical

C) new growth

D) socialist

E) Keynesian

 

2) The Malthusian theory

A) is also called the classical growth theory and predicts that we will run out of resources.

B) is also called the neoclassical growth theory.

C) predicts that the real GDP per person will continue to increase as long as technology increases.

D) claims that the subsistence wage will increase over time.

E) shows that the production function will shift upward continuously.

 

3) A key element of the classical growth theory is that

A) economic growth can be sustained as long as government intervention does not occur.

B) increases in technology drive economic growth.

C) an increase in population leads to increase in labor supply and a decline in real GDP per person.

D) low taxes promote economic growth.

E) market forces drive economic growth.

4) The classical theory was developed in the late 18th and early 19th centuries

A) and therefore is not accepted today.

B) during a time of population decline.

C) and has proponents today who fear population growth and overpopulation.

D) and cannot be explained using the modern tool of the productivity function.

E) and still applies to the most developed nations today, though not to the less developed nations.

 

5) Classical growth theory predicts that in the long run there will be

A) zero economic growth.

B) positive economic growth.

C) negative economic growth.

D) sustained increases in the productivity growth rate.

E) sustained increases in economic growth.

 

6) According to classical growth theory, people earn only a subsistence real income because of growth in

A) technology.

B) capital.

C) population.

D) employment.

E) labor productivity.

7) Which of the following are predicted by the classical growth theory?

i.Population growth will end economic growth.

ii.Real GDP per person will return to subsistence level.

iii.Technology drives persistent economic growth.

A) i and ii

B) i, ii and iii

C) i only

D) ii only

E) i and iii

 

8) If real GDP per person rises above the subsistence level then, according to classical growth theory,

A) population growth will slow down.

B) a population explosion will occur.

C) labor productivity growth permanently increases.

D) real GDP per person will remain above the subsistence level.

E) real GDP per person will fall below the subsistence level.

 

9) According to classical growth theory, if labor productivity increases,

A) the population grows and eventually real GDP returns to the subsistence level.

B) the population grows but more slowly than real GDP so that people’s incomes are permanently higher.

C) the pursuit of profit causes further increases in capital per hour and technology and economic growth continues indefinitely.

D) the growth rate of real GDP per person permanently increases.

E) people save more, which increases the capital per hour even more, and so economic growth continues indefinitely.

10) Classical growth theory predicts that increases in real GDP per person will

A) not last because higher income leads to a population explosion.

B) last because higher growth leads to new technology.

C) last because people make choices in the pursuit of higher profits.

D) not last because higher income encourages smaller families and a lower population growth rate.

E) last only if the government directs firms to make more investments in capital and new technology.

 

11) Classical growth theory predicts that economic growth

A) will continue at the classical rate of 3 percent forever.

B) will eventually stop because of population growth.

C) occurs because of hard-working citizens.

D) is merely an illusion.

E) decreases the supply of labor.

 

12) The classical growth theory asserts that

A) economic growth will continue indefinitely.

B) economic growth and population growth complement each other.

C) population growth increases a nation’s economic growth.

D) population growth will lead to people earning only a subsistence level of income.

E) population growth leads to more growth in technology.

13) In classical growth theory, if real GDP per person is above the subsistence level,

A) the economy will keep growing without limit.

B) population grows and lowers real GDP per person to its subsistence level.

C) technological growth occurs and keeps real GDP per person above its subsistence level.

D) the pursuit of profit will cause economic growth to accelerate.

E) None of the above is correct because the classical growth theory asserts that real GDP per person can never exceed the subsistence level.

 

14) Classical growth theory predicts

A) a slowdown in population growth over time.

B) real GDP per person will remain at the subsistence level over time.

C) sustained increases in economic growth in the long run.

D) the population growth rate slows as real GDP per person rises.

E) sustained increases in the standard of living in the long run.

 

15) The new growth theory was developed by ________ and proposes that ________.

A) Paul Romer; the desire for profits drives increases in real GDP per person

B) Robert Solow; increases in technology growth are responsible for economic growth

C) Thomas Malthus; increases in population drive wages to their subsistence level

D) Adam Smith; markets will determine the appropriate economic growth rate

E) Ben Bernanke; changes in the money supply drive economic growth

16) In explaining economic growth, new growth theory stresses the role played by

A) human choices.

B) population moderation.

C) women in the workforce.

D) the participation rate of elderly workers.

E) the government in directing the nation’s investments.

 

17) According to the new growth theory, which of the following promote economic growth?

i.discoveries that bring profit

ii.choices that expand human capital

iii.random events that create technology change

A) i and iii

B) i and ii

C) i, ii and iii

D) ii only

E) i only

 

18) In new growth theory, growth in real GDP per person occurs because

i.human capital grows indefinitely.

ii.technology advances as a result of choices individuals make.

iii.profit incentives encourage technological change.

A) i only

B) ii only

C) iii only

D) both i and iii

E) i, ii, and iii

19) New growth theory asserts that

i.human capital grows because of choices.

ii.discoveries result from choices.

iii.competition brings profits.

A) i only

B) ii only

C) iii only

D) both i and iii

E) both i and ii

 

20) According to the new growth theory, real GDP per person grows because

A) the population increases.

B) the labor force participation rate increases.

C) people make choices in pursuit of profits.

D) the retirement age increases.

E) the government subsidizes firms’ research and development.

 

21) The new growth theory asserts that profits are

A) permanent, because they are derived from discoveries.

B) temporary, because the discoveries that lead to profits are eventually used by all.

C) an illusion, since costs are never fully covered.

D) permanent, because physical activities can be replicated.

E) not an essential component determining whether the economy grows or not.

22) The new growth theory asserts that

A) the population growth rate will increase when real GDP per person increases.

B) a discovery can be used by only one person, the discoverer.

C) technology improves slowly while population grows rapidly.

D) production processes can be replicated at many different firms in the economy.

E) eventually people earn only a subsistence living.

 

23) A central theme of the new growth theory is that

A) firms don’t really experience profit.

B) humans can work harder than previously thought.

C) the economy doesn’t experience diminishing returns.

D) firms don’t experience diminishing returns.

E) the government is more efficient than private markets.

 

24) The new growth theory

A) corrects for poor estimates of population growth.

B) eliminates technological advances from the growth picture.

C) applies to only very poor, less-developed nations.

D) explains the source of technological advances.

E) asserts that economic growth can be rapid but can only persist for a limited period of time.

25) New growth theory asserts that ________ will lead us to greater productivity and economic growth.

A) new machinery

B) government regulation

C) unlimited wants

D) leisure time

E) nothing

 

26) Which of the following statements is likely to be made by someone who believes in the new growth theory?

A) Population growth will limit long-run gains in real GDP per person.

B) Competition will encourage discoveries of new ideas leading to greater economic growth.

C) Although technological changes increase real GDP, these changes are random and unexplainable.

D) Choices made by human capital are likely to be inefficient.

E) Economic growth will eventually slow.

 

27) The new growth theory’s comparison of the economy to a perpetual motion machine implies that

A) permanent growth is not possible.

B) the economy will forever create and destroy jobs.

C) overpopulation will eventually overtake the resources of the planet.

D) technology changes just happen.

E) labor productivity has no influence on the economy.

28) Which of the following theories predicts that there can be no sustained rise in real GDP per person above the subsistence level?

i.Classical growth theory

ii.New growth theory

A) i only

B) ii only

C) Neither i nor ii

D) Both i and ii

E) None of the above because whether the rise in real GDP per person is sustained or not depends on what created the rise.

 

29) Classical growth theory predicts that increases in

A) real GDP per person are permanent and sustainable.

B) real GDP per person are temporary and not sustainable.

C) resources permanently increase labor productivity.

D) resources permanently increase real GDP per person.

E) competition increase economic growth.

 

30) If real GDP per person is above the subsistence level then, according to classical growth theory,

A) the population will increase.

B) the population will decrease.

C) the standard of living will continue to improve.

D) labor productivity will increase.

E) more technological advances occur.

31) According to classical growth theory, when real GDP per person ________, the population grows.

A) is less than the subsistence real income

B) exceeds the subsistence real income

C) exceeds capital per hour of labor

D) is less than capital per hour of labor

E) is constant

 

32) New growth theory predicts that

A) economic growth is only temporary.

B) economic growth can last indefinitely.

C) economic growth is eroded by changes in taxes.

D) government policies can do nothing to foster increased growth.

E) ultimately people earn a subsistence wage.

 

33) The new growth theory states that

A) technological advances are the result of random chance.

B) technological advances are the result of discoveries and choices.

C) technological advances are the responsibility of the government.

D) the subsistence level income leads to technological advances.

E) it is impossible to replicate production activities.

34) According to new growth theory, growth

A) occurs when real GDP greater than the subsistence level.

B) is unending.

C) ends when competition disappears.

D) depends on the population growth rate.

E) cannot be sustained without government help.

 

35) The theory that suggests that our unlimited wants will lead to perpetual economic growth is the

A) classical growth theory.

B) sustained growth theory.

C) old growth theory.

D) new growth theory.

E) Malthusian growth theory.

 

36) According to the new growth theory, ________ is the factor that motivates technological change.

A) random chance

B) profit

C) diminishing returns

D) the replication of activities

E) decisions about how much human capital to acquire

9.4   Achieving Faster Growth

 

1) At its most basic level, economic growth depends on

A) creating the right incentives.

B) saving by the government.

C) government leadership.

D) government’s fixing prices to encourage stability.

E) political freedom.

 

2) If a country lacks ________, economic growth ________.

A) a democratic form of government; cannot occur

B) a proper incentive system; cannot occur

C) pure capitalism; will be slower compared to other countries

D) a proper incentive system; will occur at a pace suggested by the new growth theory

E) economic freedom; will increase at a faster pace

 

3) The presence of an incentive system that encourages growth

A) guarantees that growth will occur.

B) creates the right conditions for growth to occur.

C) cannot exist in poor countries.

D) existed even in hunter-gatherer societies.

E) means that the government must be a democracy.

4) All of the following are preconditions for economic growth EXCEPT

i.property rights.

ii.democracy.

iii.free markets.

A) i only

B) ii only

C) iii only

D) Both i and ii

E) i, ii, and iii

 

5) A key reason why some nations show little or no growth is

A) overpopulation that overuses limited resources.

B) lack of incentives to undertake actions toward growth.

C) too much private property not directed by the government.

D) patents in rich nations that keep technology only for the rich.

E) too much international trade so that all economic growth spills over to foreigners.

 

6) An important condition required for economic growth is

A) a democratic government.

B) a totalitarian government.

C) a libertarian government.

D) economic freedom.

E) the incentive to limit international trade so that all economic growth remains within the country.

7) A basic precondition necessary to achieve economic growth is

A) well-functioning factories.

B) well-being of society.

C) a well-functioning legal system.

D) a well-organized work force.

E) a strong central government that directs the nation’s research and development activities.

 

8) Economic freedom

A) is not important for nations to grow.

B) must come from a democratic government.

C) is founded, in part, on the rule of law.

D) is created when the nation imposes many regulations on businesses.

E) is harmed by having too many property rights.

 

9) Economic freedom requires

A) that there are no regulations and restrictions set on businesses and households by the government.

B) the rule of law and the ability to enforce the laws.

C) strong labor unions.

D) freedom to bribe government officials.

E) that the government be a democracy.

10) Economic freedom provides the

A) political system that encourages democracy.

B) social system that supports families.

C) production system that discourages property rights.

D) incentive system that encourages growth-producing activities.

E) necessary alternative to free markets.