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Chapter 21: Growth and Development
MULTIPLE CHOICE
1. Which of the following is not a factor in the intensive production function?
a. Per capita output.
b. Capital-labor ratio.
c. Wages.
d. Technology.
2. Which of the following is the correct form of the intensive production function?
a. 𝑦 = 𝐴 × 𝑓(𝑘).
b. 𝑓(𝑘)= 𝐴 × 𝑦.
c. 𝐴 = 𝑦 × 𝑓(𝑘).
d. None of the above.
3. Which of the following is an exogenous variable in the Solow growth model or in “old”
growth theory?
a. Per capita output.
b. Capital-labor ration.
c. Wages.
d. Technology.
4. Which of the following is a negative aspect of the Solow growth model or “old” growth
theory?
a. Technology is accounted for as an exogenous parameter.
b. It focuses on savings as a determinant of per capita income.
c. It focuses on the way that investment finances savings.
d. It helps to explain levels of per capital incomes.
5. Capital deepening is the result of:
a. Technological innovation.
b. Increased amounts of education or human capital.
c. Increased amounts of physical capital relative to labor.
d. Better institutions.
6. In new or endogenous growth theory, increased amounts of human capital affect:
a. Institutional quality.
b. Technological efficiency.
c. The labor force.
d. The amount of physical capital.
7. In the trade-and-growth research literature, increased openness can have a positive impact
on growth because:
a. It helps people to become better educated.
b. It helps to promote savings.
c. It increases technological efficiency through positive technology externalities.
d. It better intermediates the investment-savings relationship.
8. Which of the following is not an example of institutions?
a. Positive technological externalities.
b. Rule of law.
c. Property rights.
d. Contract enforcement.
TRUE/FALSE
1. In new growth theory, technology is an exogenous variable in the intensive production
function.
2. In old growth theory, technology is an exogenous variable in the intensive production
function.
3. In the intensive production function, output and the capital-labor ratio are negatively
related.
4. Some research suggests that exports of manufactured goods can generate positive
technological externalities.
5. The higher the rate of population growth, the more investment is required for capital
deepening.
6. The education of girls and women tend to have larger measured positive externalities
than the education of boys and men.
7. Increases in the capital-labor ratio require increases in the capital stock that more than
offset any increase in the population.
8. Institutions are difficult to build and therefore do not help in growth processes.
SHORT ANSWER
1. In what ways can a country increase the amount of savings available for investment in
capital deepening?
2. Why should a country avoid dependence on short-term foreign savings to finance capital
deepening.
3. How do the elements of the Human Development Index (HDI) interact with one another?
4. Please explain the process of capital deepening.
5. Please define the notion of institutions and list the types of institutions that could have an
impact on growth.
6. Please draw a graph of the intensive production function and illustrate capital deepening
in it.
7. Please draw a graph of the intensive production function and illustrate the impact of
positive shift factors.
8. Please explain how it is possible for exports to support growth.
