Chapter 9 Global Economic Growth and Development 235
18) According to economist Paul Romer, economies that wish to experience growth must
A) invest most of their savings in national defense.
B) invest in knowledge.
C) drastically lower their standards of living.
D)
b
ecome command economies.
19) For developing countries, one of the more effective ways to become more developed is
A) to invest in secondary schools. B) to invest more in the military.
C) to increase trade barriers. D) to reduce direct foreign investment.
20) What does the fact that U.S. students are falling behind other nations students in math and
science have to do with economic growth?
A) Nothing. People in the United States just don t like to fall behind in anything as a matter of
pride.
B) If U.S. students don t excel in math and science, the nation will see fewer plays written and
fewer pieces of music composed.
C) Better technology, a key to economic growth, depends largely on math and science skills.
D) Math and science skills don t foster economic growth, but it takes math skills to calculate a
nation s rate of economic growth.
21) Human capital is
A) the saving done by human beings.
B) the knowledge and skills that people in the work force acquire through education and
training.
C) a measure of the labor productivity of workers.
D) the investment people make in industries that make capital goods.
22) Which of the following is true of trends in the number of new U.S. patents?
A) There was a steady increase in new patents throughout the 1970s.
B) There was a surge in new patents in the latter part of the 1990s.
C) The number of new patents granted each year has remained unchanged since the early
1970s.
D) The number of new patents granted each year declined by more than 50 percent after 2001.
23) Traditionally, economists regarded improvements in technology as
A) the most important factor that helped explain economic growth, and basically the only
factor that would cause economic growth.
B) an outside factor that helped explain economic growth.
C) an important factor in explaining economic growth that was due to economic forces that
also could easily be explained.
D) unrelated to economic growth in any systematic way.
24) Which of the following is NOT associated with the new growth theory?
A) Natural resources B) Research
C) Technology D) Innovation
25) New growth theory is concerned with
A) finding a good way to measure economic growth.
B) increasing the savings rate in the U.S.
C) understanding the forces that increase productivity.
D) understanding how compounding works.
26) Recently economists have added what factor as a major explanation of economic growth?
A) The growth rate of labor
B) The growth rate of capital
C) The growth rate in labor and capital productivity
D) Technology
27) New growth theory argues that
A) growth is due to the proper government policies concerning interest rates.
B) growth relies on maintaining lower growth rates of population, especially in less
developed countries.
C) technology cannot be looked at as an outside factor without an explanation of what drives
it.
D) technology is the key factor that explains growth but technology is beyond economic
explanation itself.
28) An important foundation of the new growth theory is that
A) we will get more technological advances the more the government is involved.
B) we will get more technological advances when the rewards for producing them are
greater.
C) the growth rate of the capital stock is more important than the growth rate of new
knowledge in generating economic growth.
D) improvements in labor productivity are poor measures of technological growth.
29) Which of the following will tend to cause an increase in technology?
A) an increase in research and development expenditures.
B) the development of new ideas.
C) increases in human capital.
D) all of the above.
30) The development of new products through research and development in new growth theory is
important because
A) there can be a positive impact on future growth.
B) society s scarce resources are being used when they could be used for current
consumption.
C) it will lead to a reduction in the savings rate.
D) new patents are created.
31) Firms are more likely to devote resources to research and development when
A) the country is in recession.
B) they expect to earn rewards from successful research and development.
C) it is easy to copy new techniques of other firms.
D) the country has been experiencing slow economic growth in order to spur economic
growth.
32) A patent is
A) a government protection that gives an inventor the exclusive right to the invention for a
limited time period.
B) a government protection that gives an inventor the exclusive right to the invention for an
unlimited time period.
C) the right to make a product and sell it at a reasonable price.
D) a recognizable right to the profits associated with a new product or new way of making
goods granted by business associations.
33) The reason that patents are granted is
A) to encourage a high rate of consumption.
B) to protect new techniques developed through research and development.
C) to encourage free trade.
D) to increase the labor force.
34) In the United States, a patent lasts
A) 7 years. B) 14 years. C) 20 years. D) forever.
35) Patents stimulate technological advance by
A) making capital more productive.
B) enabling the government to determine which potential technological advances firms
should pursue.
C) providing information about the status of technical knowledge in the economy.
D) allowing inventors to capture the economic rewards of their inventions.
36) The benefits from research and development activities
A) are limited to the firm winning a patent.
B) are limited to the firms investing in similar research and development projects.
C) are limited to the nation in which the research and development is taking place.
D) spill over to others, including foreign residents.
37) Foreign residents can benefit from U.S. research and development activity because
A) they ignore U.S. patent laws and steal the technology.
B) they can import the goods, obtaining inputs at lower cost than they would otherwise.
C) countries usually share patented ideas.
D) patents do a poor job of protecting the inventor.
38) One reason that economists encourage free trade is that
A) it encourages a more rapid spread of technology.
B) it allows us to exploit the workers of less developed countries.
C) we can sell more goods.
D) it increases our capital stock.
39) Which of the following is NOT a reason that free trade stimulates economic growth?
A) Free trade encourages a more rapid spread of technology.
B) Industries have larger markets.
C) The importation of technically advanced products enables the country to imitate the
technology.
D) Free trade keeps domestic prices up, enabling firms to make more profits that can be spent
on research and development.
40) According to the text, the relationship between economic growth and the degree of how closed
an economy is
A) positive. B) negative. C) constant. D) unstable.
41) According to the text, an open economy is likely to have all the following EXCEPT
A) high economic growth. B) relatively more trade barriers.
C) high technological progress. D) relatively more rapid spread of ideas.
42) Innovation is
A) another term for something new.
B) the transformation of an invention into something that is useful to humans.
C) the term for invention when a firm obtains a patent.
D) the term for inventions in the electronic and computer industries.
43) Which of the following statements is NOT consistent with new growth theorists beliefs?
A) Innovation can lead to lower productivity costs.
B) Inventions are much more important than innovation.
C) Technology must be understood in terms of what drives it.
D) Rewards lead to technological advances.
44) New growth theorists believe that
A) wealth creation comes from innovation.
B) wealth creation comes from saving.
C) wealth creation is due to capital spending and not research and development spending
since much research and development spending fails to produce an invention.
D) inventions spread very rapidly, thereby curtailing the need for more innovations.
45) Paul Romer s theory of economic growth differs from traditional theories in that
A) Romer argues that investment in capital goods is not important in encouraging growth
while investment in human capital is, whereas traditional theorists emphasize both human
and physical capital.
B) Romer argues that investment in human capital always occurs before investment in
physical capital, while traditional theories emphasize the priority of physical capital.
C) Romer argues an investment knowledge cycle can exist, but requires constant increases in
investment rates, while traditional theories argue that investment rates can be constant.
D) Romer argues an investment knowledge cycle allows a one time increase in investment to
permanently increase a country s growth rate, while traditional theory argued such an
investment would have only a short term effect.
46) According to Romer,
A) capital drives economic growth. B) invention drives economic growth.
C) ideas drive economic growth. D) government drives economic growth.
47) According to new growth theorists, more technological improvements can be brought about by
A) a government policy that encourages increased consumption.
B) government policies that lead to increases in human capital.
C) tougher immigration laws.
D) the government taking a more active role in regulating industries.
48) Which one of the following helps preserve incentives to develop new technologies?
A) patents B) tariffs
C) quantity restrictions on imports D) income taxes
49) According to the new growth theory,
A) technology should be considered as a factor of production.
B) technology plays a minor role in economic development.
C) technology provides few rewards to the society.
D) technology is a natural by product of invention.
50) New growth theory emphasizes all of the following EXCEPT
A) technology. B) import restrictions.
C) research and development. D) innovation.
51) A government protection for an inventor that provides the inventor with the right to make use
of her invention in any way she desires is
A) an innovation. B) a copyright. C) a patent. D) a trademark.
52) One of the implications of new growth theory is that economic growth arises from
A) limits on international trade.
B) investments in knowledge.
C) financial safety nets for the poor, such as Medicaid.
D) reductions in the birth rate.
53) New growth theorists conclude that
A) invention is more important than innovation in spurring economic growth.
B) the amount of technological innovation in an economy is independent of the rewards
offered for innovation.
C) rates of global economic growth are limited by the amount of raw materials available.
D) economic growth can continue as long as we keep coming up with new ideas.
54) The development of human capital
A) is a form of investment.
B) does not appear to enhance economic growth.
C) enhances economic growth, but it does not improve the productivity of the labor force.
D) enhances economic growth, but the individuals acquiring the capital are not made better
off themselves.
55) Which of the following factors are considered under new growth theory ?
A) technology B) research
C) innovation D) All of the above are correct.
56) 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
57) 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.
58) 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.
59) 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.
60) 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.
61) 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.
62) 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.
63) 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.
64) 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.
65) 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
66) 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.
67) 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.
68) 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.
69) 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.
70) 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.
71) 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
72) What is the economic role of a patent?
73) How does innovation differ from invention? Why is innovation required for economic growth?
74) According to Romer and other new growth theorists, what could poor countries do to stimulate
greater economic growth?
75) Explain how the new growth theory treats technology differently from the way economists
used to treat technology.
76) 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?
77) Explain Paul Romer s ideas concerning economic growth.
9.5 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 economists Michael Kremer and 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) Increased uncertainty about private property rights
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.