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Question 01

The convergence hypothesis is confirmed by data from advanced economies but cannot be confirmed by data that mixes rich with poor countries. Why is this?

a) The business cycles of advanced economies converged during the first third of the twentieth century.

b) Prices in developing countries are sticky in the long-run whereas prices in advanced economies are flexible in the long-run.

c) The simple Solow model does not consider complementary inputs such as infrastructure and human capital.

d) There are significant barriers preventing international factor mobility.

Question 02

Endogenous growth theory differs in what essential aspect from the Solow theory of economic growth?

a) Endogenous growth theory is a monetary theory whereas the Solow theory is a real theory.

b) Endogenous growth theory assumes diminishing returns to capital and the Solow theory assumes constant returns.

c) In endogenous growth theory economies with the same technology and saving rate need not converge to the same steady state as in the Solow model.

d) All of the above are correct.

Question 03

The fundamental disincentive for private producers to produce costly new knowledge is the _________ characteristic of knowledge.

a) non-excludability

b) non-rivalry

c) learning-by-doing

d) all of the above

Question 04

The social tradeoff involved in patent protection is:

a) a longer patent period means less knowledge will be available for use.

b) the higher the cost of a patent application, the fewer patent applications will be made.

c) increasing the cost of new knowledge through patent licensing will decrease the demand to use new knowledge.

d) less than the full-exploitation of new knowledge by potential users is the cost of increasing the incentive for inventors to produce new knowledge.

Question 05

The explanation offered in this chapter for why poor nations appear caught in a poverty trap is that:

a) patents restrict access to new technologies to those nations that can afford the fees.

b) low human capital endowments lead to low rates of diffusion of technological innovations.

c) multinational corporations do not reinvest their profits from poor nations in the poor nations.

d) all of the above.

Question 06

The Kuznets Curve is what?

a) The U-shaped relationship between income inequality and the level of average income.

b) The hump-shaped relationship between income inequality and the level of average income.

c) The negative relationship between income inequality and the level of average income.

d) The positive relationship between income inequality and the level of average income.

Question 07

Which of the following determinants is found to have a positive impact on the rate of economic growth, controlling for the impact of the other determinants?

a) Life expectancy

b) Fertility rate

c) Government consumption

d) Initial GDP

Question 08

Which of the following characteristics is not conclusively related to differences in the rate of economic growth?

a) Life expectancy

b) Rule of law

c) Democratic form of government