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.
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