1. Even though many rich countries already have very high levels of physical and human capital, they are able to continuously grow because they:
a. have higher levels of real GDP growth.
b. can continuously increase any of the components that lead to productivity growth.
c. trade with other rich countries.
d. have higher per capita income.
2. All else equal, at a young age, would you rather have a high level of savings or a pool of savings that was increasing at a faster rate? As a general rule of thumb, over long time periods, small differences in:
a. growth rates can overcome even large initial differences in endowments.
b. endowments can overcome small initial differences in growth rates.
c. endowments can overcome even large initial differences in growth rates.
d. growth rates and endowments end up being the same.
3. Low rates of savings in Canada can limit the accumulation of physical capital. This is because if a country must rely primarily on:
a. international sources of savings in order to provide funds for investment, a low savings rate will result in a low rate of physical capital accumulation.
b. any sources of savings in order to provide funds for investment, a low savings rate will result in a low rate of physical capital accumulation.
c. domestic sources to provide for investment, a low per capita consumption will result in a low rate of physical capital accumulation.
d. domestic sources of savings in order to provide funds for investment, a low savings rate will result in a low rate of physical capital accumulation.
4. Realizing that poor countries must solve many problems at once has shifted donors away from the idea of giving multiple small payments and toward the idea of a “Big Push”. This Big Push entails giving a very large sum of money that could be used to fix multiple problems at once. In fact, the amount of money required might be so large that rich countries might be the only ones who could afford the donation.
1) From the donor country's perspective, the trade-off associated with this idea is that:
a. it is easier to give one large sum than several small sums.
b. improving the lives and welfare of foreigners will mean more money for domestic problems
c. improving the lives and welfare of people in the home country will mean more money for foreign problems.
d. improving the lives and welfare of foreigners will mean less money for domestic problems.
2) From the recipient's perspective, the trade-off associated with this idea is that:
a. a sudden large donation might make it more difficult to allocate the funds to the needed projects.
b. a large donation might make it more difficult to repay the funds in a timely manner.
c. reducing poverty and encouraging sustainable growth might overstimulate the economy, leading to inflation.
d. a developing country might begin pushing for policies that it thinks will attract more foreign funds, rather than pushing for policies that are actually in the country's best interests.