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.
