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Reading 14: Economic Growth- LOS c ~ Q5-8

Q5. If in the next year, Country A’s investment in new capital increases by an additional $0.90 per labor hour, and the level of technology remains unchanged, GDP per labor hour will increase:

A)   and the increase will be less than the increase resulting from the previous decade’s $0.90 increase in investment in new capital.

B)   by the same amount as from the previous decade’s $0.90 increase in investment in new capital.

C)   and the increase will be greater than the increase resulting from the previous decade’s $0.90 increase in investment in new capital.

Q6. Country B has implemented policies to ensure that an adequate incentive system is in place to foster economic development in the country. Which of the following are the three components necessary for a country to establish such a system?

A)   Markets, property rights, and monetary exchange.

B)   Property rights, monetary exchange, and investment in human capital.

C)   Markets, property rights, and investment in human capital.

.

Q7. According to the basic principles of the new growth theory, the government of Country B will succeed in fostering new economic development in their country through:

A)   a decrease in real interest rates.

B)   an increase in capital accumulation.

C)   an increase in labor productivity.

Q8. Which of the following is the most basic precondition to economic growth?

A)   Property rights.

B)   An incentive system.

C)   Markets.

[此贴子已经被作者于2009-1-5 11:07:53编辑过]

答案和详解如下:

Q5. If in the next year, Country A’s investment in new capital increases by an additional $0.90 per labor hour, and the level of technology remains unchanged, GDP per labor hour will increase:

A)   and the increase will be less than the increase resulting from the previous decade’s $0.90 increase in investment in new capital.

B)   by the same amount as from the previous decade’s $0.90 increase in investment in new capital.

C)   and the increase will be greater than the increase resulting from the previous decade’s $0.90 increase in investment in new capital.

Correct answer is A)

In accordance with the law of diminishing returns, at a given level of technology, the increase in GDP per labor hour will decrease as incremental capital per labor hour is added.

Q6. Country B has implemented policies to ensure that an adequate incentive system is in place to foster economic development in the country. Which of the following are the three components necessary for a country to establish such a system?

A)   Markets, property rights, and monetary exchange.

B)   Property rights, monetary exchange, and investment in human capital.

C)   Markets, property rights, and investment in human capital.

Correct answer is A)

The three most basic components necessary for a country’s economic growth are markets, property rights, and monetary exchange. Markets allow for the exchange of information among buyers and sellers. Property rights give assurance that no entity can confiscate savings and investments of a country’s citizens. Monetary exchange facilitates the efficient exchange of goods and services.

Q7. According to the basic principles of the new growth theory, the government of Country B will succeed in fostering new economic development in their country through:

A)   a decrease in real interest rates.

B)   an increase in capital accumulation.

C)   an increase in labor productivity.

Correct answer is A)

The new growth theory contends that the two main catalysts of growth are the creation of knowledge capital and lower real interest rates.

Q8. Which of the following is the most basic precondition to economic growth?

A)   Property rights.

B)   An incentive system.

C)   Markets.

Correct answer is B)

A suitable incentive system is the most basic precondition that must exist in order for a society to realize economic growth. The three social institutions that are critical to the development of incentives are markets, property rights, and monetary exchange. Collectively, these three social institutions create incentives for people to specialize and trade, save and invest, and discover new technologies.

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