Sample Questions and Answers
- 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
Answer: b) Real GDP - 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
Answer: c) Gross Domestic Product (GDP) - 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
Answer: c) Increase in the output of goods and services - 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
Answer: c) A country with a consistent increase in GDP per capita over several years - 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
Answer: b) Advances in technology and innovation - 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
Answer: c) Growth that does not deplete resources for future generations - 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
Answer: c) The skills, knowledge, and abilities of the labor force - 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
Answer: c) Implementing deregulation policies - 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
Answer: b) Diminishing returns to capital - Which sector is considered the primary driver of economic growth in most advanced economies?
a) Agriculture
b) Manufacturing
c) Services
d) Natural resources
Answer: c) Services - 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
Answer: a) The process of developing countries growing at a faster rate than developed countries - 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
Answer: b) Investment increases capital formation, which boosts productivity - 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)
Answer: a) Declining poverty rates - 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
Answer: c) It increases efficiency and productivity, driving growth - 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
Answer: c) Low savings rate - 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
Answer: b) Technological innovation and human capital play a central role in growth - 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
Answer: c) Increased government budget deficits - 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
Answer: b) Encouraging competition and spreading innovation - 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
Answer: c) The output produced with different combinations of capital and labor - 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
Answer: b) Policies that aim to improve economic conditions in developing countries - 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
Answer: c) An increase in human capital can lead to higher productivity and 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
Answer: b) Environmental degradation - 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
Answer: b) The benefits of technological innovation spreading to other industries - 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
Answer: b) The savings rate and investment in education and technology - 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
Answer: c) Investment in infrastructure - 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
Answer: a) The spread of technological advancements across countries - 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
Answer: a) Be a barrier to growth due to over-reliance on extraction industries - 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
Answer: c) Economic growth can either reduce or increase inequality depending on the distribution of growth benefits - 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
Answer: c) A high standard of living and extensive access to technology
- 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
Answer: b) Improvement in the quality of life and economic health - 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
Answer: b) An increase in the standard of living - 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
Answer: b) Technological innovation and capital accumulation - 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
Answer: b) It allows countries to specialize in areas of comparative advantage - 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
Answer: b) The increase in physical capital like machinery and infrastructure - 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
Answer: a) Endogenous growth theory
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