111) When considering international trade, which of the following would be most conducive to
domestic economic growth?
A) a closed economy
B) an economy in which its domestic industries are protected by tariffs
C) an economy with free and open markets to the outside world
D) an economy in which most decisions are made by a central governmental authority
112) The new growth theory examines the role of
A) technology in economic growth.
B) natural resources in economic growth.
C) exports in economic growth.
D) government in economic growth.
113) The new growth theory of economic growth examines the interaction of
A) labor and population.
B) regulations and capital expansion.
C) resources and labor productivity.
D) technology, research, and innovation.
114) A patent is a government protection that gives
A) consumers the right to sue when products are unsafe.
B) inventors exclusive rights to their product for a time.
C) monopolies the right to be sole producers due to economies of scale.
D) companies the right to produce any good they choose.
115) The reason that the government offers inventors exclusive rights to their product for a
period of time is to
A) reduce market concentration.
B) increase profits of certain companies.
C) maximize consumer utility.
D) promote innovation.
116) Economic growth occurs when there is
A) growth in technology that increases productivity.
B) growth in government spending.
C) lower taxes on individuals.
D) more environmental regulation.
117) Free trade
A) hurts economic growth because foreigners are not bound by the same patent laws as we are.
B) helps economic growth by encouraging the sharing of technology and industrial ideas.
C) hurts economic growth because foreign countries can produce goods with lower labor costs.
D) helps economic growth by increasing tariffs.
118) All of the following unambiguously contribute to economic growth EXCEPT
A) increase in human capital.
B) increase in technology.
C) increase in labor productivity.
D) increase in government spending.
119) A patent is
A) a bond issued by the government.
B) a bond issued by a state.
C) the monopoly right given to a producer/company.
D) an agreement between a union and management on certain labor issues.
120) Which of the following is most likely to reduce the rate of economic growth?
A) a high domestic saving rate
B) investment in human capital
C) subsidies for R&D activities
D) slow technological progress
121) Innovation is
A) always financed by the government.
B) an invention financed by the sale of bonds.
C) the transformation of an invention into something useful.
D) an invention financed by the sale of stock certificates.
122) According to new growth theory, economic growth is driven by
A) positive externalities.
B) the division of labor.
C) higher birth rates.
D) new ideas.
123) A government grant that gives an inventor the exclusive right or privilege to make, use, or
sell his or her invention is known as
A) a positive externality.
B) a negative externality.
C) a protectionism clause.
D) a patent.
124) The federal government awards a patent holder the exclusive right to make, use, and sell an
invention for a period of
A) 20 years.
B) 17 years.
C) unlimited period.
D) 100 years.
125) Which of the following is a TRUE statement?
A) The most important sources of economic growth are the quantity and quality of the land and
other natural resources a country controls.
B) The most important source of economic growth is the rate of population growth since a
growing population stimulates demand for goods and services, and provides the labor to produce
the goods and services.
C) The most important sources of economic growth are the new ideas generated by entrepreneurs
in an economic system that permits them to capture the rewards of their entrepreneurial
activities.
D) The most important source of economic growth is the extent to which the government directly
enters into decisions where research and development activities should be directed and who
should be involved in research and development activity.
126) Which one of the following does NOT appear to contribute to economic growth?
A) innovation
B) knowledge
C) protectionism
D) a system of well-defined property rights
127) Explain the relationship between economic growth and labor productivity.
128) Why are economic growth and saving related?
129) What is the economic role of a patent?
130) How does innovation differ from invention? Why is innovation required for economic
growth?
131) According to Romer and other new growth theorists, what could poor countries do to
stimulate greater economic growth?
132) Explain how the “new growth theory” treats technology differently from the way
economists used to treat technology.
133) Would a new growth theorist expect economic growth to be very rapid in one of the
Communist nations before the fall of Communism? Why or why not?
134) Explain Paul Romer’s ideas concerning economic growth.
9.3 Immigration, Property Rights, and Growth
1) Of the following views on the effects of immigration on the receiving nation’s economic
growth, which have NOT been suggested by economist Julian Simon?
A) Technological progress is driven by population growth.
B) Immigrants raise the standard of living of a nation’s native population.
C) Immigration increases a nation’s labor pool and encourages ingenuity.
D) Immigration costs the local population jobs and greatly lowers their incomes.
2) Which of the following will NOT lead to increased capital investment within a country?
A) government ownership of all properties within the country
B) increased certainty about private property rights
C) the decreased possibility of nationalization of private property
D) increased certainty about being able to reap the gains from investing
3) The more certain private property rights are
A) the less people need to invest in education or human capital development.
B) the less entrepreneurship there will be.
C) the more capital accumulation there will be.
D) the more an economy must grow to maintain a certain living standard.
4) A system of private property rights
A) enhances economic growth by creating incentives for the government to sell its assets.
B) enhances economic growth by inducing people to make capital investments today.
C) retards economic growth by serving the interests of the wealthy only.
D) retards economic growth by limiting the options of people who own nothing.
5) Entrepreneurship functions better when
A) the government performs the entrepreneurial function.
B) there is a well-defined property rights system.
C) saving is relatively low.
D) most of the population has low levels of education.
6) The immediate effect of increased population growth, with real GDP growth unchanged, is to
A) reduce economic growth by reducing per capita real GDP.
B) increase economic growth by stimulating more saving.
C) increase economic growth by boosting the capital stock.
D) leave economic growth unchanged.
7) According to economist Julian Simon
A) legal immigrants have a favorable impact on the welfare of American citizens, but illegal
immigrants have a negative impact. However, the positive effect of the legal immigrants is
stronger than the negative impact of the illegal immigrants.
B) legal immigrants have a favorable impact on the welfare of American citizens, but illegal
immigrants have a negative impact that almost exactly offsets the positive effect of the legal
immigrants.
C) legal and illegal immigrants have a positive effect on the welfare of American citizens.
D) legal and illegal immigrants have a negative effect on the welfare of American citizens.
8) A system of private property rights
A) encourages economic growth by creating incentives to invest in capital and to be innovative.
B) discourages economic growth by discouraging the development of new ideas and ways of
doing things.
C) reduces the efficiency of government, which reduces the growth rate of the economy over
time.
D) encourages investment but discourages entrepreneurial activity, so the effect on economic
growth is uncertain.
9) Entrepreneurship functions better when
A) patent laws are not strongly enforced since they make imitation difficult.
B) government provides technical support to entrepreneurs.
C) a system of private property rights permits entrepreneurs to capture the rewards from their
entrepreneurial activities.
D) universities provide research that is closely interrelated with the entrepreneurial activities.
10) The protection of property rights leads to
A) more poverty.
B) more illiteracy.
C) more capital formation.
D) unemployment.
11) Entrepreneurs often undertake the innovations that are necessary to bring inventions to the
marketplace. Accordingly, what empirical pattern should be expected in an international
comparison?
A) Countries with higher rates of entrepreneurship have higher rates of poverty.
B) Countries with higher rates of entrepreneurship have lower rates of immigration.
C) Countries with higher rates of entrepreneurship have lower rates of economic growth.
D) Countries that protect the property rights of entrepreneurs will have higher rates of economic
growth.
12) In the absence of well-defined property rights, we would likely find
A) people with more incentives to take risks.
B) people with less incentives to take risks.
C) higher economic growth rates.
D) increases in investment activity.
13) Well-defined property rights give entrepreneurs the incentive to
A) engage in risky business endeavors in order to accumulate future wealth.
B) use the eminent domain laws to seize property for public use.
C) lobby Congress in order to increase environmental regulations.
D) evade taxes.
14) Would one expect economic growth to be higher or lower in a country that had poorly
defined property rights? Why?
15) Why might population growth and immigration stimulate economic growth?
9.4 Economic Development
1) Economists have found that as a nation’s per capita real Gross Domestic Product (GDP)
increases
A) the rate of population growth declines.
B) the rate of population growth experiences dramatic increases.
C) there is no effect on population growth.
D) the rate of population growth increases at the same rate as economic growth.
2) All of the following are listed in the text as being keys to economic development EXCEPT
A) a system of property rights.
B) an educated population.
C) an open economy.
D) a higher level of protectionism.
3) What did Malthus say about population growth?
A) Population growth is the key to a nation’s economic growth.
B) Population growth is not a problem if food production keeps up, and Malthus predicted that it
would.
C) Population growth is a huge problem if housing and medical care don’t also increase.
D) The population would grow faster than food supplies, which would be a recipe for disaster.
4) Have Malthus’ predictions about population growth come TRUE?
A) no, because modern birth control has limited population growth in all nations
B) yes, as evidenced by the famine and food shortages affecting every nation today
C) no, because the world’s food supply has grown much more rapidly than Malthus foresaw
D) Yes. The world’s food supply, measured by calories per person, continues to fall.
5) The three stages of economic development include
A) the agriculture stage, the manufacturing stage, and the service sector stage.
B) the computerized stage, the agriculture stage, and the manufacturing stage.
C) the feudal stage, the agriculture stage, and the totalitarian stage.
D) the agriculture stage, the manufacturing stage, and the socialist stage.
6) What occurs in the second stage of economic development?
A) Most of the labor force works in agriculture.
B) The service sector comes to the forefront.
C) The manufacturing sector declines in importance.
D) Manufacturing gains in importance and employs a large portion of the labor force.
7) Economists have determined that there are four factors that seem to strongly affect a nation’s
rate of economic development. Which is NOT one of these four factors?
A) establishing a system of property rights
B) developing an educated population
C) supporting current industries and the jobs they provide instead of adopting new technology
that brings disruptive social changes
D) limiting the extent to which the government imposes trade barriers
8) The study of factors that contribute to the economic growth of a country is known as
A) natural resource economics.
B) entrepreneurial economics.
C) development economics.
D) savings economics.