396 section 7 Economic Growth and Productivity
Module 39 AP Review
Check Your Understanding
- Explain the link between a country’s growth rate, its investment
spending as a percent of GDP, and its domestic savings. - Which of the following is the better predictor of a future high
long -run growth rate: a high standard of living today or high
levels of savings and investment spending? Explain your answer. - Some economists think the best way to help African countries is
for wealthier countries to provide more funds for basic
infrastructure. Others think this policy will have no long -run
effect unless African countries have the financial and political
means to maintain this infrastructure. What policies would
you suggest?- What is the link between greenhouse gas emissions and growth?
What is the expected effect on growth from emissions
reduction? Why is international burden sharing of greenhouse
gas emissions reduction a contentious problem?
Solutions appear at the back of the book.
Tackle the Test: Multiple-Choice Questions
- Economies experience more rapid economic growth when they
do which of the following?
I. add physical capital
II. promote technological progress
III. limit human capital
a. I only
b. II only
c. III only
d. I and II only
e. I, II, and III - Which of the following can lead to increases in physical capital
in an economy?
a. increased investment spending
b. increased savings by domestic households
c. increased savings from foreign households
d. an inflow of foreign capital
e. all of the above - Which of the following is true of sustainable long-run
economic growth?
a. Long-run growth can continue in the face of the limited
supply of natural resources.
b. It was predicted by Thomas Malthus.
c. Modern economies handle resource scarcity problems
poorly.
d. It is less likely when we find alternatives to natural resources.
e. All of the above are true.
4. Which of the following statements is true of environmental
quality?
a. It is typically not affected by government policy.
b. Other things equal, it tends to improve with economic
growth.
c. There is broad scientific consensus that rising levels of
carbon dioxide and other gases are raising the planet’s
overall temperature.
d. Most economists believe it is not possible to reduce
greenhouse gas emissions while economic growth continues.
e. Most environmental success stories involve dealing with
global, rather than local impacts.
5. According to the MIT study discussed in the module, a cap and
trade system to reduce greenhouse gas emissions in the United
States would lead to
a. no significant costs.
b. significant but not overwhelming costs.
c. a loss of roughly three year’s real GDP over the next 40 years.
d. a reduction in real GDP per capita of over 10%.
e. a loss of 5 years’ worth of economic growth over the next 40
years.