Question 1

Which of the following is NOT considered a major determinant of long-run economic growth according to the study materials?

Accepted Answer

Growth in government spending

Question 2

Suppose a country increases its annual growth rate from 2% to 5%. According to Table 10-1, what is the approximate value of $100 after 70 years at a 5% growth rate?

Accepted Answer

$3,043

Question 3

Which of the following best describes a cost of economic growth?

Accepted Answer

Forgone consumption, where current goods and services are sacrificed for future growth

Question 4

In the neoclassical growth model, what happens if only the labour force increases while capital remains fixed?

Accepted Answer

GDP increases, but material living standards eventually decline due to diminishing returns

Question 5

Which equation correctly represents national saving ($$NS) in $$the long-run macroeconomic model?

Accepted Answer

$$NS = Y - C - G$$

Question 6

What is a plausible negative side effect of increased immigration on economic growth, as discussed in the study materials?

Accepted Answer

It may stretch the country's absorptive capacity, such as housing and infrastructure

Question 7

According to the neoclassical growth model, what is the role of technological change?

Accepted Answer

It is assumed to be exogenous and can increase potential output even without capital or labour growth

Question 8

Which of the following is a benefit of economic growth highlighted in the study materials?

Accepted Answer

Economic growth provides higher incomes that often lead to a demand for a cleaner environment

Question 9

If desired private saving is given by $$S_p = Y^* - T - C$$ and public saving by $$S_{gov} = T - G$$, what is the formula for national saving ($$NS$$)?

Accepted Answer

$$NS = Y^* - C - G$$

Question 10

Which statement best describes the relationship between investment rates and growth rates across countries, as shown in Figure 10-4?

Accepted Answer

There is a positive relationship between investment rates and growth rates

Question 11

What is the main difference between neoclassical and advanced (endogenous) growth theories?

Accepted Answer

Advanced theories treat technological change as endogenous, responding to economic signals

Question 12

Which of the following is an example of 'embodied technical change'?

Accepted Answer

Improvements in the quality of new capital goods

Question 13

Why do most economists believe that absolute limits to growth are not relevant?

Accepted Answer

Because technology and resource stocks are constantly changing

Question 14

Which policy is considered most effective for reducing greenhouse gas emissions and promoting cleaner energy, according to the study materials?

Accepted Answer

Placing a higher cost on emissions through a carbon tax or cap-and-trade system

Question 15

If a country wants to increase its potential output, which of the following strategies would be LEAST effective according to the neoclassical growth model?

Accepted Answer

Increasing government consumption spending

Question 16

What is the effect of an increase in the supply of national saving ($$NS) on $$the real interest rate and investment?

Accepted Answer

It pushes down the real interest rate and encourages investment

Question 17

Which of the following scenarios best illustrates 'learning by doing' as a source of endogenous technological change?

Accepted Answer

Workers become more efficient at assembling products over time, leading to higher output

Question 18

According to the study materials, what is a key challenge for public policy in sustaining economic growth?

Accepted Answer

Resource exhaustion and environmental degradation

Question 19

Which of the following is a plausible misconception about the effects of economic growth?

Accepted Answer

Economic growth always leads to equal distribution of income

Question 20

If a country experiences balanced growth in both capital and labour with constant technology, what is the expected effect on per capita output according to the neoclassical model?

Accepted Answer

No increase in per capita output

Long-Run Economic Growth: Concepts, Benefits, Costs, and Sources

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