Question 1

In the 20 years from 1980- 2000, evidence suggests that there existed a high rate of convergence across countries.

Accepted Answer

During the period from 1980 to 2000, evidence suggests that there was not a high rate of convergence across countries, as many developing countries did not catch up to the income levels of developed countries, and income disparities often persisted or widened.

Question 2

Suppose country A has a per capita income of $1000 while country B has a per capita income of $2000. If country A's GDP grows at 7 percent per year, while country B's GDP grows at 3.5 percent per year, how long will it take for country A's income per capita equal country B's?

Accepted Answer

The answer of Suppose country A has a per capita...

Question 3

An increase in the saving rate will generally cause an increase in productivity growth in the long run.

Accepted Answer

This statement is supported by the theory of endogenous growth, which suggests that higher savings rates lead to higher investment in physical and human capital, resulting in increased productivity growth over time. Additionally, higher savings rates also lead to increased investment in research and development, which can further contribute to productivity growth.

Question 4

What does a negative net investment mean? How will it affect the country's economic growth?

Accepted Answer

The answer of What does a negative net investment mean?...

Question 5

If Canadian income grows at a rate of 2 percent per year and French income grows at a rate of 3 percent each year, it will take about 35 years for Canadian income to double, but only 23 years for French income to double.

Accepted Answer

The doubling time formula is T = ln(2)/ln(1+r), where T is the number of years it takes for income to double and r is the rate of growth expressed as a decimal. Using this formula, we find that for Canada, T = ln(2)/ln(1+0.02) ≈ 35 years, while for France, T = ln(2)/ln(1+0.03) ≈ 23 years. Therefore, the statement is true.

Question 6

"A trade deficit will always hurt a country." Do you agree or disagree? Explain.

Accepted Answer

The answer of "A trade deficit will always hurt a...

Question 7

You have just been appointed to a special Presidential Task Force on Economic Growth. You are responsible for proposing three policies that the government can enact to increase the growth rate. What policies would you recommend and why?

Accepted Answer

The answer of You have just been appointed to a...

Question 8

According to the Solow Model, a higher depreciation rate will always result in a decrease in output.

Accepted Answer

In the Solow Model, a higher depreciation rate means that capital stock decreases faster, leading to a decrease in output.

Question 9

Suppose country A has a per capita income of $1000. If country A's GDP grows at 7 percent per year, how long will it take for country A's income per capita equal $4000?

Accepted Answer

The answer of Suppose country A has a per capita...

Question 10

Can net investment be negative? Explain.

Accepted Answer

The answer of Can net investment be negative? Explain....

Question 11

Explain how the computer and Internet revolution of the 1990s could be responsible for the increase in productivity growth.

Accepted Answer

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Question 12

According to the rule of 70, if a variable grows at x% per year, then that variable will double in approximately 70/(1- x) years.

Accepted Answer

The rule of 70 states that a variable growing at x% per year will double in approximately 70/x years, not 70/(1-x) years.

Question 13

When diminishing returns has set in, adding more labor will decrease real GDP per capita.

Accepted Answer

Diminishing returns imply that adding more labor will increase output at a decreasing rate, but it does not necessarily decrease real GDP per capita unless the additional labor significantly outweighs the output increase.

Question 14

-Refer to Table 8.2. Calculate the growth of real GDP per capita from 1995 to 2001.

Accepted Answer

The answer of 
-Refer to Table 8.2. Calculate the growth...

Question 15

Comment on the following statement: "Higher population growth leads to higher living standards because it leads to an increase in the labor force."

Accepted Answer

The answer of Comment on the following statement: "Higher population...

Question 16

In the Solow Model, will a country choose a saving rate of 100 %? Why or why not?

Accepted Answer

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Question 17

Define human capital. Also explain how it can affect economic growth.

Accepted Answer

The answer of Define human capital. Also explain how it...

Question 18

The larger the market, the higher the costs of technological progress.

Accepted Answer

This statement is not necessarily true. While it may be more expensive to implement technological progress on a larger scale, economies of scale can also come into play, reducing costs. Additionally, some technological progress may actually reduce costs in large markets by increasing efficiency or reducing waste.

Question 19

Describe how new growth theory explains the impact of comprehensive education in a developing country.

Accepted Answer

The answer of Describe how new growth theory explains the...

Question 20

An increase in GDP per capita always results in an increase in real GDP per capita.

Accepted Answer

An increase in GDP per capita does not always result in an increase in real GDP per capita because real GDP per capita accounts for inflation, whereas nominal GDP per capita does not.

Quiz 8: Why Do Economies Grow