41) Which of the following is NOT a necessary precondition for economic growth?
A) economic freedom
B) democracy
C) property rights
D) free markets
E) ALL of the above are necessary preconditions.
42) Which of the following characteristics is a precondition for economic growth?
i.economic freedom
ii.free markets
iii.active government policy to discourage saving
A) i only
B) ii only
C) iii only
D) Both i and ii
E) Both ii and iii
43) Economic freedom means that
A) firms are regulated by the government.
B) some goods and services are free.
C) people are able to make personal choices and their property is protected.
D) the rule of law does not apply.
E) the nation's government is a democracy.
44) Property rights protect
A) only the rights to physical property.
B) only the rights to financial property.
C) all rights except rights to intellectual property.
D) rights to physical property, financial property, and intellectual property.
E) the government's right to impose taxes.
45) Activities that encourage faster growth are
A) high levels of saving and investment in human capital.
B) high levels of consumption and low levels of savings.
C) taxes on saving that serve to encourage more spending and less saving.
D) imposing trade barriers to limit international trade and thereby protect national industries.
E) limiting property rights so that everyone can use any invention.
46) Which of the following statements is FALSE?
A) Saving helps create economic growth.
B) Improvements in quality of education are important for economic growth.
C) Free international trade helps create economic growth.
D) Faster population growth is the key to growth in real GDP per person.
E) Economic freedom requires property rights.
47) In order to increase economic growth, a government can
A) discourage research and development.
B) decrease funding on education.
C) discourage specialization and trade.
D) establish property rights and a legal system.
E) tax saving in order to encourage more spending.
48) Saving
A) slows growth because it decreases consumption.
B) finances investment which brings capital accumulation.
C) has no impact on economic growth.
D) is very low in most East Asian nations.
E) is important for a country to gain the benefits of international trade.
49) A government policy that taxes saving in order to discourage saving and encourage spending will
A) slow economic growth.
B) speed economic growth.
C) create a greater incentive for people to specialize.
D) strengthen people's property rights.
E) increase the growth rate of capital.
50) The fastest growing nations today are those with
A) barriers that significantly limit international trade.
B) the fastest growing exports and imports.
C) government intervention in markets to ensure high prices.
D) few funds spent on research and development.
E) the least saving.
51) Economic growth is enhanced by
A) free international trade.
B) limiting international trade so that the domestic economy can prosper.
C) discouraging saving, because increased saving means less spending.
D) ignoring incentive systems.
E) increasing welfare payments to the poor so they can afford to buy goods.
9.5 Integrative Questions
1) Economic growth in Cuba has been slow. What can best explain the slow growth?
A) lack of economic resources
B) lack of incentive mechanisms and economic freedom
C) labor productivity is low.
D) a non-democratic form of government
E) too much competition within the economy
2) The idea of continuous economic growth as a "perpetual motion machine" best reflects the prediction of which growth theory?
A) the classical growth theory
B) the traditional growth theory
C) the Keynesian growth theory
D) the new growth theory
E) no growth theory
3) Workers in the United States are ________ workers in China because ________.
A) more productive than; workers in the United States have more capital per worker.
B) more productive than; there are more college-educated workers in the United States.
C) less productive than; there are fewer workers in the United States.
D) less productive than; the labor force participation rate is lower in the United States.
E) equally as productive as; China's real GDP per person equals the U.S. real GDP per person.
4) The presence of government corruption in some countries
A) slows their economic growth.
B) speeds their economic growth.
C) invalidates the new growth theory's predictions.
D) supports the classical growth theory's predictions.
E) invalidates the neoclassical growth theory's predictions.
5) Which of the following policies encourages economic growth?
A) increased taxes on income and business profits
B) reduction of government support of higher education
C) high tariffs and strict import quotas on foreign-made products
D) creation of tax free savings accounts
E) limiting the years people spend in education so that they can start productive work
