Question 1

Consider the four basic factors that contribute to economic growth: human capital,physical capital,natural resources,and technology.Which factor has had the greatest impact on a country's ability to achieve sustained economic growth? Explain.

Accepted Answer

The answer of Consider the four basic factors that contribute...

Question 2

If investment is larger than net investment,then the value of capital will increase.Is this true or false? Explain why.

Accepted Answer

If net investment is negative,then the value of capital will decrease.Investment is always larger than net investment unless depreciation is negative,which is not possible.

Question 3

Net investment can be positive,negative,or zero.Is this true or false? Explain why.

Accepted Answer

Net investment is equal to investment minus depreciation,so depending on whether investment or depreciation is larger,net investment can be positive or negative.

Question 4

Juan has been doing some research on countries in Europe and Africa.Juan has observed that European countries are wealthier and that they have a higher percentage of workers who are college educated.Therefore,Juan concludes that sending more Africans to college will increase economic growth and wealth in Africa.Discuss the validity of this conclusion.

Accepted Answer

The answer of Juan has been doing some research on...

Question 5

Explain the difference between physical capital and human capital.

Accepted Answer

The answer of Explain the difference between physical capital and...

Question 6

According to the Solow growth model,which countries in the world should have reached a steady state? Does the model suggest there should be convergence among all countries,such that the poor countries will catch up to the rich countries? Why or why not?

Accepted Answer

The answer of According to the Solow growth model,which countries...

Question 7

Consider a marketing research company that offers consulting services to companies to help them increase sales.Would one expect to find that the marketing research company has diminishing marginal product of labor? How about diminishing marginal product of physical capital?

Accepted Answer

The answer of Consider a marketing research company that offers...

Question 8

Explain the difference between investment and net investment.

Accepted Answer

The answer of Explain the difference between investment and net...

Question 9

The primary reason why countries around the world have not converged to the same level of income is that they
A) do not have access to the same resources.
B) do not have the same level of the capital stock.
C) have different numbers of people.
D) have different institutions.
E) do not have access to the same technology.

Accepted Answer

Institutions play a crucial role in economic development as they determine the rules of the game and shape incentives for economic agents. Countries with effective institutions are more likely to attract investments, encourage innovation, and minimize corruption, leading to higher levels of economic growth and income. On the other hand, countries with weak institutions are more likely to experience political instability, social conflict, and economic stagnation. Therefore, differences in institutional quality explain the divergence in income levels among countries around the world.

Question 10

Why are institutions so important for economic growth?

Accepted Answer

The answer of Why are institutions so important for economic...

Question 11

Why does the Solow growth model predict that per capita gross domestic product (GDP)levels across nations will equalize as nations approach the steady state?

Accepted Answer

The answer of Why does the Solow growth model predict...

Question 12

To what extent is it possible to achieve sustained economic growth by replicating what has already been done (in terms of,for example,building more roads,factories,and office buildings)? Explain by referring to the concepts of diminishing returns and steady state.

Accepted Answer

The answer of To what extent is it possible to...

Question 13

Identify and describe each of the three factors of production as stated by the aggregate production function.

Accepted Answer

The answer of Identify and describe each of the three...

Question 14

What policy prescriptions follow from the Solow growth model?

Accepted Answer

The answer of What policy prescriptions follow from the Solow...

Question 15

Five college students share a house.As the number of computers owned by these students increases from one to five,what happens to the total number of hours they spend using a computer? As each computer is purchased,what happens to the marginal product,in terms of additional hours spent using the computer?

Accepted Answer

The answer of Five college students share a house.As the...

Question 16

Under what circumstances would you expect a country to reach a steady state such that gross domestic product (GDP)and the capital stock are no longer growing? Explain.

Accepted Answer

The answer of Under what circumstances would you expect a...

Question 17

What does it mean to say capital is the result of economic growth rather than it being the cause of economic growth?

Accepted Answer

The answer of What does it mean to say capital...

Question 18

If country X has a higher growth rate of real investment than country Y,then it must have a higher level of real gross domestic product (GDP)than country Y.Is this true or false? Explain why.

Accepted Answer

Country X could have a lower level of real GDP (for example,China as compared to the United States),but it has a higher growth rate of real GDP than country Y.

Question 19

A company is considering building a new factory in one of two locations: the United States or Haiti.According to the Solow growth model,in which location would you expect the factory to yield a higher return? Explain.

Accepted Answer

The answer of A company is considering building a new...

Question 20

How does the aggregate production function measure the labor input used to produce goods and services? Explain.

Accepted Answer

The answer of How does the aggregate production function measure...

Quiz 25: Growth Theory