Economic Growth: Master the Fundamentals with Interactive Quizzes

Question 1

According to the Solow model, which factor does not directly contribute to economic growth?

Accepted Answer

Government spending

Answer

Capital stock

Answer

Labor force

Answer

Technological progress

Question 2

Which characteristic of technological progress significantly contributes to economic growth?

Accepted Answer

It increases the productivity of labor and leads to sustained economic growth.

Answer

It can only be embodied in new physical capital.

Answer

It can lead only to new products and processes.

Answer

It reduces the role of human capital in the production process.

Question 3

Which policy measure is primarily designed to promote economic growth through human capital development?

Accepted Answer

Investing in education, training, and skills development

Answer

Providing tax incentives for research and development

Answer

Increasing government spending on healthcare

Answer

Reducing corporate tax rates

Question 4

What is a fundamental assumption underlying the Solow growth model?

Accepted Answer

Technological progress is constant and exogenous to the model.

Answer

Technological progress is endogenous and driven solely by market forces.

Answer

The economy operates at full employment with no potential output gap.

Answer

Capital and labor are perfect complements in the production process.

Question 5

What is meant by the concept of diminishing returns to capital?

Accepted Answer

As the quantity of capital employed increases, the marginal product of capital eventually decreases.

Answer

As the quantity of capital employed increases, the average product of capital continually increases.

Answer

As the quantity of labor employed increases, the marginal product of labor eventually decreases.

Answer

As the quantity of labor employed increases, the average product of labor continually increases.

Question 6

In the Solow model, which of the following is explicitly omitted as a factor of production?

Accepted Answer

Entrepreneurship

Answer

Capital

Answer

Labour

Answer

Technology

Question 7

The production function in the Solow model is characterized by:

Accepted Answer

Constant returns to scale

Answer

Diminishing returns to scale

Answer

Increasing returns to scale

Answer

Negative returns to scale

Question 8

Which of the following is NOT a benefit associated with human capital?

Accepted Answer

Reduced crime rates

Answer

Increased productivity

Answer

Higher wages

Answer

Improved health outcomes

Question 9

Which of the following factors is unlikely to contribute to technological progress?

Accepted Answer

Natural disasters

Answer

Research and development

Answer

Education

Answer

Government subsidies

Question 10

Which of the following is NOT a challenge to promoting economic growth?

Accepted Answer

Abundant natural resources

Answer

Income inequality

Answer

Climate change

Answer

Political instability

Question 11

The 'golden rule' of capital accumulation suggests that:

Accepted Answer

Capital should be accumulated until the marginal product of capital equals the rate of population growth

Answer

Capital should be accumulated until the marginal product of capital equals the rate of technological progress

Answer

Capital should be accumulated until the marginal product of capital equals the rate of interest

Answer

Capital should be accumulated indefinitely

Question 12

How can government interventions address market failures caused by negative externalities?

Accepted Answer

Impose taxes or fees on activities generating negative externalities

Accepted Answer

Subsidize activities that generate positive externalities

Accepted Answer

Set limits or quotas on activities causing negative externalities

Answer

Reduce government regulations on economic activities

Question 13

Evaluate the Harrod-Domar and Solow models of economic growth. Discuss their key differences, strengths, and limitations, considering their applicability to various economic contexts.

Accepted Answer

The Harrod-Domar model focuses on investment, while the Solow model emphasizes technological advancement.

Accepted Answer

The Solow model predicts steady-state growth, unlike the Harrod-Domar model.

Answer

Both models are universally applicable to all economic situations.

Answer

The Harrod-Domar model is more complex and challenging to apply than the Solow model.

Question 14

According to the Solow model, which of the following is a primary factor influencing the long-term growth rate of an economy?

Accepted Answer

Technological improvements

Answer

Openness to trade

Answer

Government spending

Answer

Monetary policy

Question 15

Which of the following is NOT considered a possible advantage of economic expansion?

Accepted Answer

Increased disparity in income

Answer

Lower unemployment rates

Answer

Improved living standards

Answer

Enhanced health outcomes

Question 16

Which of the following factors could potentially hinder economic expansion?

Accepted Answer

Financial system instability

Answer

A competent workforce

Answer

Strong property rights protection

Answer

Abundant natural resources

Question 17

What is the primary distinction between extensive and intensive economic growth?

Accepted Answer

Extensive growth relies on increased input quantities, while intensive growth emphasizes input efficiency.

Answer

Extensive growth is more prevalent in developed economies, while intensive growth is more prevalent in developing economies.

Question 18

Which of the following is a potential negative consequence of rapid economic growth?

Accepted Answer

Environmental degradation

Answer

Reduced poverty

Answer

Improved health outcomes

Answer

Increased social cohesion

Question 19

One of the central aims of economic growth theory is to:

Accepted Answer

Comprehend the factors influencing long-term economic growth

Answer

Develop policies to stimulate economic growth in the short term

Answer

Provide short-term economic predictions

Question 20

Which of the following is a crucial factor in determining the natural unemployment rate?

Accepted Answer

Structural factors like skill mismatches and technological developments

Answer

Government outlays

Answer

Inflation rate