11) The transformation of an invention into something that benefits the economy is known as
A) an innovation.
B) a patent.
C) an externality.
D) a compounder.
12) When the government grants an inventor a patent,
A) he has the exclusive right to make, sell or use his invention for 5 years.
B) the patent holder has less incentive to invest in R&D because one successful invention removes the need to develop others.
C) the patent holder is guaranteed a profit on his invention.
D) the protection of a current invention would increase spending on R&D.
13) Regarding open economies, economists tend to find evidence that
A) the more closed an economy is, the higher the rate of growth the economy will experience.
B) trade tariffs tend to improve economic growth.
C) free trade encourages a more rapid spread of technology, and hence increases economic growth.
D) open economies tend to have access to smaller markets than do closed economies.
14) According to the text, data supports the conclusion that lower trade barriers
A) help boost per capita real Gross Domestic Product (GDP) growth.
B) help to increase welfare payments.
C) decrease the standard of living in the country.
D) decrease life expectancy.
15) Free trade is viewed as key to economic development because
A) it encourages a faster spread of technology.
B) it encourages a country's exports only.
C) it brings in expensive new technology.
D) none of the above is correct.
16) Which of the following does free trade encourage?
A) More rapid spread of technology
B) Higher rates of economic growth
C) Domestic industries' access to larger markets
D) All of the above
17) Paul Romer's theory on the importance of knowledge differs from traditional theory in that Romer
A) argues that an investment-knowledge cycle allows a once-and-for-all increase in investment to permanently raise a country's growth rate, while traditional theory argues that a once-and-for-all increase in investment leads to a higher standard of living but not to a higher growth rate.
B) argues, that investment is not important in promoting growth, but that the acquisition of knowledge is the sole determinant of economic growth.
C) argues, that an investment-knowledge cycle exists which requires that investment rates keep increasing or else growth rates will fall, while traditional theory argues that growth rates will not fall, although they will not increase either.
D) emphasizes investment rates while traditional theory emphasizes the importance of knowledge as a factor of production.
18) According to economist Paul Romer, economies that wish to experience growth must
A) invest most of their savings in national defense.
B) invest in knowledge.
C) drastically lower their standards of living.
D) become command economies.
19) For developing countries, one of the more effective ways to become more developed is
A) to invest in secondary schools.
B) to invest more in the military.
C) to increase trade barriers.
D) to reduce direct foreign investment.
20) What does the fact that U.S. students are falling behind other nations' students in math and science have to do with economic growth?
A) Nothing. People in the United States just don't like to fall behind in anything as a matter of pride.
B) If U.S. students don't excel in math and science, the nation will see fewer plays written and fewer pieces of music composed.
C) Better technology, a key to economic growth, depends largely on math and science skills.
D) Math and science skills don't foster economic growth, but it takes math skills to calculate a nation's rate of economic growth.