Economic Growth: Concepts and Patterns Practice Exam Quiz
Which of the following is the most commonly used measure of economic growth?
a) Consumer Price Index
b) Real GDP
c) Unemployment Rate
d) Interest Rates
Economic growth is primarily measured by changes in which of the following?
a) Stock prices
b) Inflation rates
c) Gross Domestic Product (GDP)
d) Exchange rates
What does a positive economic growth rate indicate?
a) Decrease in output
b) Increase in unemployment
c) Increase in the output of goods and services
d) Decrease in consumer demand
Which of the following is an example of a country experiencing rapid economic growth?
a) A country with a declining GDP per capita
b) A country with stable inflation rates
c) A country with a consistent increase in GDP per capita over several years
d) A country with declining real wages
Which of the following factors contributes most to long-term economic growth?
a) High consumer spending
b) Advances in technology and innovation
c) High inflation
d) Increased government debt
The concept of ‘sustainable economic growth’ refers to: a) Economic growth that is temporary
b) Growth that leads to environmental degradation
c) Growth that does not deplete resources for future generations
d) Growth driven solely by government spending
In the context of economic growth, ‘human capital’ refers to: a) Physical assets such as machinery
b) The government’s financial resources
c) The skills, knowledge, and abilities of the labor force
d) The nation’s trade policies
Which of the following policies is most likely to stimulate economic growth?
a) Increasing taxes on business investments
b) Decreasing government spending
c) Implementing deregulation policies
d) Restricting international trade
Which of the following is a key feature of the Solow growth model?
a) Emphasis on government intervention
b) Diminishing returns to capital
c) Dependence on international trade
d) Exclusion of technological factors
Which sector is considered the primary driver of economic growth in most advanced economies?
a) Agriculture
b) Manufacturing
c) Services
d) Natural resources
The term ‘economic convergence’ refers to: a) The process of developing countries growing at a faster rate than developed countries
b) The tendency of economies to become more divergent over time
c) An increase in inequality between rich and poor nations
d) The shift in the global economy toward more government control
Which of the following best describes the role of investment in economic growth? a) Investment increases national debt
b) Investment increases capital formation, which boosts productivity
c) Investment only benefits large corporations
d) Investment decreases the need for technological advancements
Which of the following is a characteristic of a country experiencing rapid economic growth?
a) Declining poverty rates
b) Increasing income inequality
c) Shrinking manufacturing sectors
d) Decreased foreign direct investment (FDI)
Which of the following is a typical effect of technological innovation on economic growth?
a) It leads to higher unemployment rates
b) It results in the decline of labor productivity
c) It increases efficiency and productivity, driving growth
d) It decreases the supply of labor
Which of the following is NOT a characteristic of a country with high economic growth?
a) High levels of human capital investment
b) Strong infrastructure development
c) Low savings rate
d) High levels of innovation and research
What does the term ‘endogenous growth theory’ suggest?
a) Economic growth is solely driven by external factors like trade
b) Technological innovation and human capital play a central role in growth
c) Growth depends mainly on government policies
d) Growth is determined by changes in labor force size only
Which of the following would likely result from prolonged periods of low economic growth?
a) Decreased unemployment rates
b) Increased levels of investment
c) Increased government budget deficits
d) Rising standards of living
Increased globalization tends to affect economic growth by: a) Limiting technological advancement
b) Encouraging competition and spreading innovation
c) Increasing nationalization of industries
d) Reducing foreign investment
What is the ‘cobb-douglas production function’ commonly used to model?
a) The relationship between government debt and growth
b) The impact of population growth on economic output
c) The output produced with different combinations of capital and labor
d) The effect of inflation on economic growth
The term ‘structural adjustment programs’ refers to: a) Short-term loans to stabilize economies
b) Policies that aim to improve economic conditions in developing countries
c) Unconditional aid packages from international organizations
d) Policies that encourage higher government spending
Which of the following factors is least likely to contribute to economic growth?
a) A stable political environment
b) High levels of government regulation
c) A well-educated workforce
d) Investment in infrastructure
Answer: b) High levels of government regulation
What is the relationship between human capital and economic growth?
a) A decrease in human capital slows economic growth
b) Human capital has no effect on economic growth
c) An increase in human capital can lead to higher productivity and growth
d) Human capital only affects short-term growth
Which of the following is a potential risk of rapid economic growth?
a) Lower unemployment rates
b) Environmental degradation
c) Decreased income inequality
d) Increased government surpluses
Which of the following is an example of a ‘spillover effect’ in economic growth?
a) The increase in wages due to higher productivity
b) The benefits of technological innovation spreading to other industries
c) The redistribution of wealth from the rich to the poor
d) The reduction in government spending on welfare programs
Which of the following is the best indicator of a nation’s ability to sustain long-term growth?
a) The current unemployment rate
b) The savings rate and investment in education and technology
c) The amount of government debt
d) The size of the country’s military
Which factor does NOT typically hinder economic growth?
a) Political instability
b) High rates of corruption
c) Investment in infrastructure
d) Poor access to healthcare
What does ‘technological diffusion’ mean in the context of economic growth?
a) The spread of technological advancements across countries
b) The decline of old technologies
c) The adoption of technology by only a few firms
d) The concentration of technology in government-owned sectors
The presence of natural resources can sometimes: a) Be a barrier to growth due to over-reliance on extraction industries
b) Always lead to rapid economic development
c) Lead to rapid capital accumulation in the economy
d) Have no effect on long-term economic growth
Which of the following is true about the relationship between economic growth and income inequality?
a) Economic growth always leads to a reduction in inequality
b) Economic growth has no relationship with inequality
c) Economic growth can either reduce or increase inequality depending on the distribution of growth benefits
d) Economic growth always increases inequality
Which of the following is a characteristic of a highly developed economy?
a) Low levels of investment in capital goods
b) High levels of industrial output but low service sector growth
c) A high standard of living and extensive access to technology
d) A focus on primary industries like agriculture and mining
Which of the following best defines ‘economic development’?
a) An increase in the stock market
b) Improvement in the quality of life and economic health
c) A steady increase in GDP
d) A decrease in poverty rates only
The process of economic growth tends to lead to: a) A decrease in the number of goods and services available
b) An increase in the standard of living
c) A decline in the labor force participation rate
d) A reduction in the national debt
Which of the following factors primarily influences the long-run growth rate of an economy?
a) Government spending
b) Technological innovation and capital accumulation
c) Currency exchange rates
d) Population control policies
Which of the following is a benefit of globalization on economic growth?
a) It leads to trade restrictions and tariffs
b) It allows countries to specialize in areas of comparative advantage
c) It reduces the availability of foreign investment
d) It decreases the flow of labor across borders
Which of the following best describes ‘capital accumulation’ in economic growth?
a) The process of reducing a country’s debt
b) The increase in physical capital like machinery and infrastructure
c) The growth of a country’s financial markets
d) The decrease in the labor force participation rate
Which economic theory argues that differences in national growth rates are due to differences in technological innovation?
a) Endogenous growth theory
b) Classical growth theory
c) Neoclassical growth theory
d) Keynesian economics
A country that invests heavily in education is likely to experience: a) A decrease in economic growth
b) No change in economic growth
c) Long-term economic growth due to improved human capital
d) Short-term economic instability
Which of the following describes a characteristic of a ‘capital-intensive’ economy?
a) High reliance on technology and machinery
b) A focus on the agricultural sector
c) Large investments in human capital
d) A heavy reliance on natural resources
What is the relationship between inflation and economic growth in the long run?
a) Inflation leads to economic growth at all times
b) Low inflation tends to foster stable economic growth
c) High inflation is always beneficial for economic growth
d) Inflation has no effect on economic growth
Which of the following is an example of ‘creative destruction’?
a) A new technology replacing outdated methods and industries
b) Government intervention to stabilize an economy
c) The merging of two corporations to reduce competition
d) A nation reducing its environmental footprint
Which factor is most likely to contribute to a country experiencing a demographic dividend?
a) A rapidly aging population
b) A large working-age population with a declining dependency ratio
c) A high birth rate with a low death rate
d) A declining labor force participation rate
Which of the following is a key limitation of the GDP growth measure?
a) It accounts for all environmental costs of production
b) It does not measure income distribution within a country
c) It reflects non-market activities like household labor
d) It includes the informal economy
Which of the following is an example of a ‘negative externality’ that can hinder economic growth?
a) The spread of technological knowledge
b) The increase in government spending
c) Pollution from industrial production
d) A reduction in tariffs and trade barriers
Which of the following does NOT contribute to a country’s economic growth?
a) Increased technological innovation
b) A decline in domestic investment
c) A rising level of foreign investment
d) A stable and educated workforce
The ‘Law of Diminishing Returns’ in economics implies that: a) The more capital is invested, the higher the returns in the long run
b) Each additional unit of capital or labor increases output by the same amount
c) After a certain point, adding more capital or labor will yield smaller increases in output
d) Capital will always lead to increasing returns in the economy
What is the ‘golden rule’ level of capital accumulation in an economy?
a) The level where economic growth is maximized in the short term
b) The level of capital that minimizes environmental damage
c) The level of capital that maximizes consumption per capita in the steady state
d) The level of capital that leads to full employment
Which of the following is most likely to reduce economic growth in the long run?
a) Increased investment in research and development
b) A sudden rise in oil prices
c) A well-educated workforce
d) Government policies encouraging free trade
Which of the following is considered a ‘supply-side’ factor that can influence economic growth?
a) Monetary policy adjustments by central banks
b) The level of government spending on infrastructure
c) Investment in education and workforce development
d) A rise in consumer demand for goods and services
Which of the following would be considered a primary driver of economic growth in a developing economy?
a) Expansion of the service sector
b) Increased trade liberalization and foreign investment
c) A strong regulatory framework for financial markets
d) High taxation on corporate profits
Which of the following is an example of an ‘open economy’ contributing to economic growth?
a) A country focusing on self-sufficiency and reducing imports
b) A country actively engaging in international trade and investment
c) A country with no foreign exchange rate policies
d) A country limiting foreign direct investment
Which of the following is NOT an example of economic growth from the supply side?
a) Investment in infrastructure
b) Improvements in technology
c) Increased consumer spending
d) Enhanced labor productivity
Which of the following is a key feature of the Harrod-Domar model of growth?
a) The role of technological progress in growth
b) The importance of capital accumulation and savings
c) The influence of labor force participation rates on growth
d) The importance of government spending in driving economic growth
What role do ‘institutional factors’ play in economic growth?
a) They ensure that government spending always promotes growth
b) They directly contribute to economic output but are hard to quantify
c) They set the legal, political, and economic environment that affects growth
d) They are irrelevant to economic growth
Which of the following is true about ‘economic growth in emerging economies’?
a) It is primarily driven by shifts in the global financial system
b) It often relies on the exploitation of natural resources
c) It typically leads to severe environmental degradation
d) It is driven mainly by reduced international trade barriers
Which of the following would most likely promote economic growth in a developed country?
a) A shift away from service industries
b) Increased investments in technology and human capital
c) Increased tariffs on imported goods
d) A reduction in international trade partnerships
The ‘Balanced Growth’ approach to economic development suggests: a) Focusing on one industry to fuel growth
b) Investing evenly in all sectors of the economy
c) Relying solely on foreign investment for growth
d) Cutting government spending drastically to increase growth
Which of the following is an example of a demand-side factor influencing economic growth?
a) Improvements in technological capabilities
b) Increased government spending on infrastructure
c) Higher consumer spending and investment
d) A reduction in income inequality
Which of the following is true about the relationship between infrastructure and economic growth?
a) Infrastructure development does not significantly influence economic growth
b) Infrastructure development can stimulate productivity and economic activity
c) Infrastructure spending leads to higher unemployment rates
d) Infrastructure development primarily leads to environmental damage
In the context of economic growth, ‘dualism’ refers to: a) The coexistence of two separate economic sectors, one advanced and one traditional
b) The competition between different political systems
c) The division of global trade into developed and developing regions
d) The splitting of global finance into state-controlled and private sectors
Which of the following is a key characteristic of a developing economy?
a) A high level of industrialization and technological innovation
b) A high proportion of the population in the working-age group
c) A lack of economic diversification
d) A high per capita income and well-established infrastructure
Which of the following factors is most likely to stimulate economic growth in a developing country?
a) High tariffs on imported goods
b) Increased foreign direct investment (FDI)
c) A reduction in labor productivity
d) High levels of government debt
In an economy, ‘technological spillovers’ refer to:
a) The decline in wages due to automation
b) The ability of new technologies to benefit other industries
c) The government’s role in funding technological innovation
d) The restricted use of technology in underdeveloped sectors
The concept of ‘sustained economic growth’ refers to:
a) Economic growth that fluctuates with business cycles
b) A temporary boost in GDP growth rates
c) A long-term increase in the productive capacity of the economy
d) The elimination of inflationary pressures
Which of the following would likely reduce economic growth in the long run?
a) Increases in capital investment
b) Large increases in national debt without corresponding growth in production
c) Innovation in technology and production methods
d) Investment in human capital
Which of the following best describes a ‘demand-side’ policy to promote economic growth?
a) A reduction in corporate taxes
b) An increase in government spending to boost aggregate demand
c) A decrease in the money supply
d) Deregulation of industries
Which of the following is most likely to increase the potential output of an economy in the long run?
a) Higher levels of taxation
b) Improvements in human capital (e.g., education and skills)
c) Reductions in government infrastructure spending
d) Increases in tariffs on imported goods
The ‘Solow-Swan model’ of economic growth focuses on the relationship between:
a) Government spending and private sector investments
b) Technological progress, capital accumulation, and population growth
c) The supply of money and price levels
d) Short-term cycles of inflation and deflation
Which of the following is most likely to contribute to economic convergence between rich and poor countries?
a) High tariffs on imported technology
b) Greater investment in education and healthcare in poorer countries
c) A rise in political instability
d) Isolation from global markets
Which of the following is a characteristic of an economy that is experiencing ‘structural transformation’?
a) A shift from industrialization to a service-based economy
b) A reduction in the number of entrepreneurs
c) A decline in foreign direct investment
d) A shift from a reliance on natural resources to high-tech industries
Which of the following is a limitation of Gross Domestic Product (GDP) as a measure of economic growth?
a) It ignores the effects of technology on production
b) It includes both market and non-market activities
c) It does not account for income inequality or environmental degradation
d) It reflects only the output of government activities
The concept of ‘catch-up growth’ refers to:
a) Economic growth that is faster in advanced economies than in developing economies
b) Rapid economic growth by developing countries as they adopt technology from developed nations
c) A reduction in the economic growth rate after a period of expansion
d) Long-term stagnation in developing countries
Which of the following is most associated with a ‘supply-side’ policy to promote economic growth?
a) A decrease in government spending
b) Increased government subsidies for innovation
c) A decrease in taxes on income and capital
d) Increases in public sector employment
Which factor is most important for an economy to transition from a developing to a developed status?
a) A low inflation rate
b) Access to foreign technology and investment
c) A decrease in population growth rates
d) Reduced government intervention in the economy
The ‘Malthusian Theory of Population’ suggests that:
a) Population growth will always lead to technological innovation
b) Population growth will outpace the growth of resources, leading to famine and poverty
c) Population growth is irrelevant to economic growth
d) Population decline is the primary reason for economic stagnation
Which of the following would most likely occur during a period of rapid economic growth?
a) A decrease in consumer confidence
b) An increase in employment and wages
c) A decline in government revenues
d) A rise in interest rates due to falling demand for credit
Which of the following factors is considered a ‘leading indicator’ of economic growth?
a) The unemployment rate
b) The consumer price index (CPI)
c) Consumer confidence and business investment levels
d) Real GDP growth
Which of the following is most associated with ‘inclusive growth’?
a) Growth that benefits only the wealthiest sectors of society
b) Growth that is equally shared across all segments of society, reducing inequality
c) Growth driven solely by foreign investments
d) Growth based on resource extraction without concern for environmental sustainability
In the context of economic growth, ‘human capital’ refers to:
a) The physical machinery and infrastructure that contribute to production
b) The education, skills, and health of a country’s workforce
c) The government’s ability to regulate markets and trade
d) The financial assets owned by individuals or corporations
Which of the following would most likely improve the ‘labor productivity’ of an economy?
a) An increase in population growth without corresponding infrastructure development
b) A reduction in investment in research and development
c) The implementation of better educational and training programs for workers
d) A decrease in technological advancements
Which of the following policies would most likely contribute to long-term sustainable economic growth?
a) Encouraging short-term consumption over savings
b) Promoting investment in technology and infrastructure
c) Introducing restrictive trade barriers
d) Limiting foreign investments in the domestic market
What does the ‘poverty trap’ refer to in terms of economic growth?
a) A situation where economies experience rapid growth without improvements in social outcomes
b) A condition where low-income countries cannot invest enough to achieve sustainable growth
c) The economic slowdown caused by high levels of public debt
d) The reduction in global trade due to protectionist policies
Which of the following is a feature of a ‘market-driven economy’?
a) High levels of government regulation and intervention
b) Decisions about production and investment are largely made by private individuals and companies
c) Government controls all key industries and markets
d) The economy focuses on equitable distribution of wealth
Which of the following does the ‘neoclassical growth theory’ emphasize as the main driver of economic growth?
a) Technological progress and human capital accumulation
b) Government spending and monetary policies
c) The distribution of wealth across society
d) Population control policies
Which of the following is a common policy recommendation for countries to experience rapid economic growth?
a) Implementing protectionist trade barriers
b) Promoting free-market policies and international trade
c) Increasing government control over private businesses
d) Reducing public investment in education and infrastructure
Which of the following best characterizes the economic growth pattern of Asian economies, such as China and India, in the past few decades?
a) High growth driven by industrialization and global integration
b) Slow growth due to political instability
c) Economic stagnation due to government control of resources
d) Decline in growth due to environmental degradation
Which of the following is a likely consequence of a sudden increase in interest rates in an economy?
a) Increased investment in business and infrastructure
b) Higher unemployment due to reduced borrowing and spending
c) Economic expansion driven by increased consumer spending
d) A reduction in income inequality
Which of the following is an example of ‘capital deepening’?
a) A decrease in the amount of machinery and technology available to workers
b) An increase in the availability of natural resources for production
c) A rise in the number of skilled workers and technologies in use
d) A reduction in investment in physical capital
Which of the following factors most likely leads to a positive long-term relationship between economic growth and the environment?
a) Heavy reliance on fossil fuels
b) Investment in renewable energy and sustainable practices
c) Cutting environmental regulations to promote industrial output
d) Short-term exploitation of natural resources
Which of the following is a fundamental assumption of endogenous growth theory?
a) Technological progress is exogenous and beyond control
b) The economy’s long-term growth rate depends on policy decisions, technology, and innovation
c) Economic growth is solely driven by increases in physical capital
d) Population growth is the key determinant of long-term economic growth
Which of the following is most associated with the ‘new growth theory’?
a) The importance of technological progress and knowledge spillovers
b) The idea that growth is solely driven by capital accumulation
c) The view that long-term growth is determined by population growth
d) The belief that all economies naturally converge to the same growth rate
Which of the following best describes the relationship between economic growth and income inequality?
a) Economic growth always reduces income inequality
b) Economic growth tends to increase income inequality in the short run
c) Economic growth has no effect on income inequality
d) Economic growth leads to uniform income distribution
Which of the following factors typically leads to economic growth in a country?
a) High unemployment rates
b) Increased savings and investment
c) High inflation
d) Increased government regulation
Which of the following is considered a ‘supply-side’ policy to promote economic growth?
a) Expansionary fiscal policy
b) Decreasing taxes on businesses and entrepreneurs
c) Increasing government spending on infrastructure
d) Raising interest rates to control inflation
Which of the following best characterizes an economy experiencing ‘stagflation’?
a) High economic growth with low unemployment
b) Economic stagnation combined with high inflation
c) High inflation with falling interest rates
d) Rapid growth driven by technological innovation
Which of the following is a key factor in the theory of ‘human capital accumulation’ driving economic growth?
a) Investment in physical infrastructure
b) Increases in the education, health, and skills of the labor force
c) High levels of foreign direct investment
d) Excessive government regulation
What is meant by the ‘dependency ratio’ in the context of economic growth?
a) The ratio of government debt to national income
b) The proportion of the working-age population to the non-working-age population
c) The ratio of total exports to total imports
d) The ratio of savings to investment in the economy
The concept of ‘creative destruction’ refers to:
a) The process by which outdated technologies are replaced by new innovations
b) The collapse of a country’s economy due to over-reliance on exports
c) The destruction of a country’s physical capital in a natural disaster
d) The destruction of jobs caused by the introduction of technology
Which of the following is most likely to increase productivity in the long run?
a) A decrease in the capital stock
b) A reduction in investment in research and development
c) Improvements in technology and infrastructure
d) A reduction in the labor force participation rate
Which of the following is an example of an exogenous factor affecting economic growth?
a) The accumulation of human capital
b) Technological innovation
c) Government policies on taxes and spending
d) Changes in the global oil price
Which economic model emphasizes the role of savings and investment in determining the steady-state growth of an economy?
a) Keynesian cross model
b) Solow-Swan model
c) Real business cycle model
d) New growth theory
Which of the following best explains the phenomenon of ‘diminishing returns’ in the context of economic growth?
a) As capital increases, each additional unit of capital results in a proportional increase in output
b) After a certain point, additional capital or labor leads to smaller increases in output
c) Technological innovation results in unlimited returns for capital investments
d) The more an economy invests in capital, the less it invests in human resources
Which of the following is likely to decrease the rate of economic growth in the long term?
a) A reduction in government corruption
b) A significant decrease in the birth rate
c) A reduction in investment in education
d) A technological breakthrough
In the context of economic growth, what does ‘catch-up growth’ typically involve for developing countries?
a) A sharp decline in productivity
b) Rapid growth driven by the adoption of technology from more advanced economies
c) A fall in income levels
d) Economic stagnation due to political instability
Which of the following is a key feature of the ‘neoclassical growth model’?
a) The economy’s long-term growth rate depends on technological progress and capital accumulation
b) The government is the primary driver of long-term economic growth
c) Economic growth is determined by short-term business cycles
d) Population growth is the only factor affecting long-term economic growth
The concept of ‘savings-investment identity’ refers to the idea that:
a) Savings must always equal investment in an economy
b) Investment is irrelevant to economic growth
c) Government spending on infrastructure is not related to savings
d) The savings rate in an economy has no effect on the level of investment
Which of the following is most likely to foster innovation and technological progress in an economy?
a) High levels of government regulation in markets
b) A lack of investment in education and training programs
c) Protection of intellectual property rights and investment in research
d) High tariffs on foreign goods
What does ‘structural unemployment’ refer to?
a) Unemployment caused by temporary fluctuations in the economy
b) Unemployment due to a mismatch between workers’ skills and the demands of the economy
c) Unemployment caused by the natural decline of the labor force
d) Unemployment resulting from government policies that restrict hiring
Which of the following is a characteristic of ‘economic convergence’ between rich and poor countries?
a) Rich countries continue to grow faster than poorer countries
b) Poor countries experience faster growth, eventually catching up with rich countries
c) Poor countries always lag behind rich countries, even with substantial investment
d) Economic growth is independent of income levels in countries
In the Solow model, an increase in the savings rate will result in:
a) A higher steady-state level of output per capita
b) A permanent increase in the growth rate of output
c) A decrease in capital accumulation over time
d) A decline in labor force participation
Which of the following is a consequence of rapid economic growth?
a) It always leads to a decrease in inflation
b) It may lead to higher levels of income inequality
c) It typically causes a reduction in environmental degradation
d) It leads to reduced levels of foreign trade and investment
Which of the following is an example of ‘pro-poor growth’?
a) Economic growth that benefits the wealthiest members of society the most
b) Growth that is associated with improvements in education and health in poorer segments of society
c) Growth that leads to a decrease in government services
d) Growth that results from the exploitation of natural resources
Which of the following is an important determinant of economic growth in an open economy?
a) The level of government subsidies for domestic industries
b) The balance between imports and exports
c) The degree of trade protectionism
d) The level of technological advancement and innovation
In the context of economic growth, ‘capital flight’ refers to:
a) A mass migration of skilled workers abroad
b) The rapid movement of financial capital out of a country due to political or economic instability
c) The reduction in capital investment in the country
d) The transfer of financial assets into government bonds
Which of the following is an effect of the ‘resource curse’?
a) Countries rich in natural resources tend to have higher growth rates
b) Resource-rich countries often experience slower economic growth and political instability
c) Resource-rich countries are more likely to be democracies
d) The resource curse only affects developed economies
Which of the following is an example of ‘inclusive growth’?
a) Growth that only benefits the top 1% of the population
b) Growth that is accompanied by a reduction in poverty and inequality
c) Growth that is driven solely by foreign investment
d) Growth that is achieved through unsustainable resource extraction
Which of the following is most likely to result in a higher standard of living in the long run?
a) A focus on short-term economic growth driven by consumption
b) Investment in infrastructure, education, and health
c) Reducing government spending on public goods
d) Encouraging import substitution strategies
Which of the following best describes the concept of ‘economic development’?
a) The increase in a country’s GDP over time
b) The improvement in the standard of living and quality of life
c) The reduction in a country’s poverty rate
d) The increase in population growth
Which of the following factors is most likely to contribute to long-term economic growth?
a) A constant population size
b) Technological advancements and innovation
c) A reduction in the labor force participation rate
d) An increase in natural resource depletion
The ‘endogenous growth theory’ emphasizes the role of:
a) External factors such as global trade
b) Human capital and technological innovation as internal drivers of growth
c) Population growth as the main driver of economic expansion
d) Fixed capital accumulation as the primary source of growth
What does the term ‘long-run economic growth’ refer to?
a) The cyclical fluctuations in output that occur over time
b) The persistent increase in the output of goods and services over time
c) Short-term economic fluctuations caused by business cycles
d) The decline in an economy’s real GDP
Which of the following is an example of a ‘structural change’ that may drive economic growth?
a) A rise in consumer demand for durable goods
b) A shift from agriculture-based industries to manufacturing and services
c) An increase in consumer savings rates
d) A decrease in taxes on individual income
In the Solow model of economic growth, what is considered the primary driver of long-term growth?
a) Population growth
b) Technological progress
c) Government investment in infrastructure
d) Government spending
Which of the following would most likely lead to a decrease in economic growth in the long run?
a) Increased savings and investment
b) A sharp increase in the labor force
c) Increased technological innovation
d) A decline in capital investment due to a financial crisis
What is the primary purpose of ‘development economics’?
a) To analyze economic growth in industrialized nations
b) To assess the effectiveness of trade policies
c) To understand and promote economic development in less-developed countries
d) To determine the impact of inflation on growth
Which of the following describes the ‘dual economy’ model in the context of development economics?
a) A model in which developed countries grow faster than developing countries
b) A situation where two sectors (e.g., agriculture and industry) coexist with different growth rates
c) A model in which the entire economy is based on manufacturing
d) A dual currency system used to stabilize the economy
Which of the following is an example of an ‘export-led growth strategy’?
a) Focusing on domestic consumption to increase national output
b) Encouraging the production and export of goods to global markets
c) Imposing high tariffs on imports to protect domestic industries
d) Increasing government investment in local services
Which of the following factors most likely explains why some countries fail to achieve long-term growth?
a) Lack of investment in education and infrastructure
b) Over-reliance on technological innovation
c) High levels of international trade
d) Rapid population growth with no accompanying job creation
What is ‘human capital’ in the context of economic growth?
a) The total value of a country’s physical capital
b) The knowledge, skills, and abilities of the workforce
c) The quantity of natural resources available for use
d) The money invested by the government in infrastructure projects
Which of the following is most likely to lead to ‘crowding out’ in an economy?
a) A decrease in government spending
b) An increase in government borrowing that raises interest rates
c) A decrease in interest rates that encourages private investment
d) A decrease in tax rates on businesses
Which of the following would be most likely to stimulate economic growth in a developing country?
a) A reduction in foreign direct investment
b) Increased restrictions on international trade
c) Improved access to education and healthcare
d) Decreased investment in infrastructure
The concept of ‘sustainability’ in economic growth refers to:
a) Achieving a rapid increase in GDP year after year
b) Ensuring that economic growth does not deplete natural resources or harm future generations
c) Focusing on short-term economic cycles and consumer spending
d) Maintaining a balance between capital investment and labor force growth
Which of the following is a key feature of the ‘Harrod-Domar growth model’?
a) The model assumes that technological progress is the main driver of growth
b) The model highlights the importance of savings and investment in driving economic growth
c) The model focuses on trade liberalization as a main source of growth
d) The model does not include government intervention in economic growth
What does ‘inclusive growth’ mean?
a) Growth that leads to equal income distribution across all sectors of society
b) Growth that primarily benefits wealthy individuals and corporations
c) Growth that includes increased government intervention in the economy
d) Growth that benefits the entire population, including the poorest segments
Which of the following describes ‘capital accumulation’ in the context of economic growth?
a) The process of increasing the stock of capital goods in an economy over time
b) The process of increasing the money supply in an economy
c) The reduction of government spending to increase private sector investments
d) The shifting of resources from agriculture to industrial sectors
Which of the following is a factor that promotes convergence in economic growth across countries?
a) The adoption of similar technology by poorer countries
b) The creation of trade barriers to protect domestic industries
c) Large differences in savings rates between countries
d) High population growth rates in developed countries
Which of the following is an example of a ‘demand-side’ policy to stimulate economic growth?
a) Lowering interest rates to encourage borrowing and spending
b) Reducing government regulations to increase business investment
c) Providing tax cuts to businesses for expansion
d) Cutting tariffs to increase foreign trade
Which of the following is most likely to increase total factor productivity (TFP) in an economy?
a) A decline in labor force participation
b) Investments in education and workforce training
c) A reduction in government subsidies for research and development
d) A slowdown in technological advancement
Which of the following is a potential negative consequence of rapid economic growth?
a) Improved living standards for all citizens
b) Increased environmental degradation
c) A decrease in government debt
d) A reduction in income inequality
What is the ‘golden rule’ of capital accumulation?
a) Capital accumulation should be maximized to increase output
b) Investment should focus solely on human capital
c) The rate of investment should balance the rate of population growth
d) Investment should be directed toward increasing consumption levels
Which of the following is an example of an exogenous factor that influences economic growth?
a) Changes in government spending
b) Technological innovation
c) Changes in global oil prices
d) Increases in the savings rate
Answer: c) Changes in global oil prices
Which of the following is considered an endogenous factor in the context of economic growth?
a) Natural resource availability
b) Population growth
c) Technological progress driven by innovation
d) Global trade policies
What is the primary focus of ‘new growth theory’?
a) External factors driving economic growth
b) The accumulation of physical capital
c) The role of knowledge, human capital, and technological innovation in sustaining long-term growth
d) The importance of maintaining low inflation rates
Which of the following is an example of a ‘supply-side’ policy designed to stimulate economic growth?
a) Lowering interest rates to increase consumer spending
b) Increasing government spending on infrastructure
c) Reducing taxes on businesses to encourage investment
d) Raising tariffs to protect domestic industries
The ‘Lewis model’ of economic development focuses primarily on:
a) The importance of foreign investment in driving growth
b) The shift of labor from agriculture to industrial sectors as a driver of economic development
c) The role of capital accumulation in driving growth
d) The impact of technological innovation on output
Which of the following factors is most likely to limit the economic growth of developing countries?
a) High levels of industrialization
b) Political instability and poor governance
c) High levels of technology adoption
d) Strong financial markets
What is the relationship between economic growth and income inequality according to Kuznets’ curve?
a) Economic growth always leads to lower income inequality
b) Economic growth initially increases inequality, but as development continues, inequality decreases
c) Economic growth has no impact on income inequality
d) Economic growth always leads to higher income inequality
What is ‘total factor productivity’ (TFP)?
a) The total output of an economy divided by the number of workers
b) The increase in output that cannot be attributed to the accumulation of capital or labor
c) The total income generated by an economy’s labor force
d) The rate at which capital is depreciating in an economy
What does the ‘steady-state’ level of output represent in the Solow growth model?
a) The level of output when all economic resources are fully utilized
b) The point where an economy stops growing due to resource depletion
c) The level of output where capital per worker and output per worker remain constant
d) The level of output where technological progress has no further impact
Which of the following is an example of a ‘pro-poor’ economic growth strategy?
a) Encouraging investments in high-tech industries
b) Promoting policies that primarily benefit the wealthy
c) Focusing on increasing job opportunities for low-income individuals
d) Cutting taxes for multinational corporations
What does the term ‘economic convergence’ refer to?
a) The process by which all countries eventually reach the same level of GDP
b) The tendency for poorer economies to grow faster than richer economies, leading to a reduction in income inequality across countries
c) The increase in global economic integration and trade liberalization
d) The shift of economic activity from developed nations to emerging markets
Which of the following best describes the role of foreign direct investment (FDI) in economic growth?
a) FDI has no impact on economic growth in developing countries
b) FDI can provide capital, technology, and expertise that contribute to economic growth
c) FDI leads to a reduction in domestic savings rates and investments
d) FDI is primarily beneficial in developed countries, but not in developing countries
In the context of economic growth, ‘demographic transition’ refers to:
a) The shift from high birth and death rates to lower birth and death rates as a country develops
b) The rapid increase in population growth leading to economic stagnation
c) The migration of labor from rural areas to urban centers
d) The movement of capital from low-income countries to high-income countries
Which of the following is an example of a ‘demand-side’ factor that can stimulate economic growth?
a) Increasing investment in physical capital
b) Increasing government spending on social welfare programs
c) Reducing taxes on business profits
d) Improving labor market efficiency through reforms
What is the primary difference between ‘capital deepening’ and ‘technological progress’?
a) Capital deepening involves increasing the amount of capital per worker, while technological progress involves innovations that increase productivity without increasing capital
b) Technological progress increases the amount of capital per worker, while capital deepening increases technological innovation
c) Both capital deepening and technological progress are achieved through government intervention
d) Capital deepening leads to slower economic growth, while technological progress leads to faster growth
Which of the following is a common feature of economies experiencing ‘inclusive growth’?
a) The benefits of growth are distributed unevenly, with the wealthy benefiting more
b) Only urban areas benefit from economic growth
c) Economic policies ensure that growth reaches all segments of society, particularly the disadvantaged
d) Economic growth is achieved primarily through increased government control over markets
Which of the following is most likely to occur in the late stages of economic development according to the ‘stages of growth’ model?
a) A country shifts from a focus on agriculture to industrialization and services
b) Economic growth slows down due to a lack of capital
c) The country experiences an agricultural boom
d) The labor force becomes increasingly dependent on agriculture
The ‘endogenous growth theory’ suggests that long-term growth can be achieved through:
a) An increase in savings rates alone
b) Government interventions that limit market forces
c) Policies that foster innovation, human capital accumulation, and knowledge dissemination
d) A reduction in international trade barriers
Which of the following is the best indicator of a country’s economic development rather than its economic growth?
a) Changes in the GDP per capita
b) The number of international trade agreements signed
c) Improvements in health care, education, and income distribution
d) An increase in exports and imports
Which of the following is considered a ‘spillover effect’ of economic growth?
a) Reduced poverty in regions that do not directly participate in growth activities
b) A decrease in unemployment in the private sector
c) A reduction in government intervention in the economy
d) A stagnation in technological innovation
Which of the following is a likely effect of ‘creative destruction’ on economic growth?
a) It slows down the rate of technological innovation
b) It leads to the replacement of outdated industries and technologies with more efficient ones
c) It results in long-term economic stagnation
d) It increases market concentration and monopolies