Question 1

A key benefit of foreign direct investment to poorer countries is
A)they gain all the returns on such investment.
B)that such investment is very reliable.
C)they avoid the need to have their own stock market.
D)they gain state-of-the-art technological knowledge.

Accepted Answer

Foreign direct investment in poorer countries often bring state-of-the-art technological knowledge and expertise, which can help increase productivity and competitiveness in their industries. This can lead to economic growth and development in the long run.

Question 2

Why does a nation's standard of living depend on property rights?

Accepted Answer

The answer of Why does a nation's standard of living...

Question 3

To increase growth, governments should do all of the following except
A)encourage foreigners to invest in your country.
B)encourage saving and investment.
C)nationalize major industries.
D)encourage research and development.
E)promote free trade.

Accepted Answer

Nationalizing major industries can actually hinder growth as it can lead to inefficient and uncompetitive practices. Therefore, it is not a recommended approach to increase growth.

Question 4

Poor countries often have a difficult time attracting foreign direct investment funds because
A)wages are low in poor countries.
B)investment risks are quite low in poor countries, so rates of return are low.
C)property rights are not protected, so investors fear their property may be confiscated.
D)All of the above are correct.

Accepted Answer

Poor countries often struggle with inadequate legal systems, which generally extend to property rights protection. This contributes to a heightened sense of risk aversion among investors who fear their assets could be seized or nationalized at any time, diminishing the likelihood of foreign investment.

Question 5

Suppose everyone working the land in Exland knows the usefulness of investing in land irrigation systems.Those who work the land may choose not to invest in these profitable irrigation systems as long as
A)the investment is too expensive.
B)the natural climate, such as abundant rain, makes the irrigation projects unnecessary.
C)their property rights, with respect to the land, are subject to change.
D)the government dictates the choice of investment.

Accepted Answer

The answer of Suppose everyone working the land in Exland...

Question 6

Inward-oriented policies hold back economic growth because
A)international trade leads to lower domestic employment.
B)they encourage the brain drain.
C)infant industries are unable to compete with the rest of the world.
D)they do not allow a country to take advantage of the gains from trade.

Accepted Answer

Inward-oriented policies do not allow a country to take advantage of the gains from trade. By limiting international trade, a country may miss out on opportunities for specialization, economies of scale, and access to a wider range of goods and services. This can ultimately hinder economic growth and development.

Question 7

Why is productivity related to the standard of living? In your answer be sure to explain what productivity and standard of living mean.Make a list of things that determine labour productivity.

Accepted Answer

The answer of Why is productivity related to the standard...

Question 8

An important link between politics and economics is that
A)democracies are more productive than non-democracies.
B)democracies must constantly make difficult budgetary choices.
C)political instability is incompatible with long-term private investment.
D)conservative governments tend to focus development on military industries.

Accepted Answer

Political instability creates uncertainty and risk for private investors, which can hinder long-term investment and economic growth. Stable political systems provide a more predictable environment and encourage private investment. Therefore, political stability is a crucial link between politics and economics. The other options are not necessarily true or relevant to the relationship between politics and economics.

Question 9

In addition to investment in physical and human capital, what other public policies might a country adopt to increase productivity?

Accepted Answer

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Question 10

Which of the following expenditures to enhance productivity is most likely to convey a positive externality?
A)FNB buys a new computer.
B)Lebo pays her university tuition fees.
C)SASOL leases a new oil field.
D)General Motors buys a new drill press.

Accepted Answer

Paying university tuition fees improves the education and skills of an individual, which in turn can benefit society by increasing productivity in the workforce and generating innovations. This positive externality is not present in the other choices, as they primarily benefit only the individual firm or company.

Question 11

Some economists argue that it is possible to raise the standard of living by reducing population growth.As an economist interested in incentives rather than coercion, what kind of policy would you recommend to slow population growth?

Accepted Answer

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Question 12

How do outward-oriented policies affect a nation's productivity?

Accepted Answer

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Question 13

Suppose in SA, real GDP/person in 2001 was r₁8 073 and real GDP/person in 2002 was r₁8 635, what was the growth rate of real output per person over this period?
A)2.0 per cent
B)3.1 per cent
C)18.0 per cent
D)18.6 percent
E)5.62 per cent

Accepted Answer

To calculate the growth rate of real output per person, we use the following formula:

Growth rate = [(final value / initial value) - 1] x 100

Plugging in the values we have:

Growth rate = [(r₁8 635 / r₁8 073) - 1] x 100
Growth rate = (1.0309 - 1) x 100
Growth rate = 0.0309 x 100
Growth rate = 3.09%

Therefore, the growth rate of real output per person over this period was 3.1%, which is closest to choice B (3.1%).

Question 14

What is a production function? Write an equation for a typical production function, and explain what each of the terms represents.

Accepted Answer

The answer of What is a production function? Write an...

Question 15

The catch-up effect says that countries with low income can grow faster than countries with higher income.However, in statistical studies that include many diverse countries we do not observe the catch-up-effect unless we control for other variables that affect productivity.Considering the determinants of productivity, list and explain some things that would tend to prohibit or limit a poor country's ability to catch up with the rich ones.

Accepted Answer

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Question 16

Compare and contrast the population theories of Thomas Malthus and Michael Kremer.

Accepted Answer

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Question 17

What is the difference between human capital and technology?

Accepted Answer

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Question 18

Which of the following would decrease the likelihood that foreign business firms will invest in a country?
A)A low corporate profit tax rate
B)Political stability
C)A well-established legal system
D)Political instability

Accepted Answer

Political instability creates uncertainty and risk for foreign firms, making them less likely to invest in a country. The other choices, such as a low corporate profit tax rate, political stability, and a well-established legal system, are all factors that would increase the likelihood of foreign firms investing in a country.

Question 19

Countries like South Korea and Singapore have shown tremendous growth rates in recent years because
A)of diminishing returns.
B)of the catch-up effect.
C)of lower levels of domestic investment in recent years.
D)they have limited international trade.

Accepted Answer

The catch-up effect refers to the phenomenon that countries with lower levels of initial GDP tend to grow at a faster rate than countries with higher levels of initial GDP. South Korea and Singapore, both with relatively lower levels of initial GDP, have been able to capitalize on this catch-up effect and achieve tremendous growth rates in recent years.

Question 20

At first patents might seem like a deterrent to growth because in effect they restrict the use of new technology.Yet many economists believe that patents generate growth.Explain why.

Accepted Answer

The answer of At first patents might seem like a...

Quiz 5: Production and Growth

A key benefit of foreign direct investment to poorer countries is

Why does a nation's standard of living depend on property rights?

To increase growth, governments should do all of the following except

Poor countries often have a difficult time attracting foreign direct investment funds because

Suppose everyone working the land in Exland knows the usefulness of investing in land irrigation systems.Those who work the land may choose not to invest in these profitable irrigation systems as long as

Inward-oriented policies hold back economic growth because

Why is productivity related to the standard of living? In your answer be sure to explain what productivity and standard of living mean.Make a list of things that determine labour productivity.

An important link between politics and economics is that

In addition to investment in physical and human capital, what other public policies might a country adopt to increase productivity?

Which of the following expenditures to enhance productivity is most likely to convey a positive externality?

Some economists argue that it is possible to raise the standard of living by reducing population growth.As an economist interested in incentives rather than coercion, what kind of policy would you recommend to slow population growth?

How do outward-oriented policies affect a nation's productivity?

Suppose in SA, real GDP/person in 2001 was r₁8 073 and real GDP/person in 2002 was r₁8 635, what was the growth rate of real output per person over this period?

What is a production function? Write an equation for a typical production function, and explain what each of the terms represents.

Compare and contrast the population theories of Thomas Malthus and Michael Kremer.

What is the difference between human capital and technology?

Which of the following would decrease the likelihood that foreign business firms will invest in a country?

Countries like South Korea and Singapore have shown tremendous growth rates in recent years because

At first patents might seem like a deterrent to growth because in effect they restrict the use of new technology.Yet many economists believe that patents generate growth.Explain why.