The convergence theory is based on the idea of:
A. decreasing marginal returns.
B. decreasing income per capita.
C. increasing rates of income per capita.
D. increasing opportunity costs.
102.When a country adds more capital to its existing stock:
A. the additional productivity is less than the previous increases to productivity.
B. the additional productivity is more than the previous increases to productivity.
C. it experiences rapidly increasing rates of growth.
D. it experiences rapid declines in its level of income.
103.When a country continually adds more capital to its existing stock:
A. productivity will increase at a decreasing rate.
B. productivity will increase at a decreasing rate.
C. productivity will decrease at a decreasing rate.
D. productivity will decrease at an increasing rate.
104.Countries that start with very little physical capital will get a:
A. higher return from adding a unit of capital than a country that starts at a higher initial level will.
B. lower return from adding a unit of capital than a country that starts at a higher initial level will.
C. similar return from adding a unit of capital than a country that starts at a higher initial level will.
D. higher return from adding a unit of capital the more natural resources they possess.
105.The basic idea behind the convergence theory is:
A. that countries starting at low levels of will tend to grow at much faster rates than those starting with high levels of income.
B. each additional unit of capital provides larger gains when you're coming from behind.
C. also the basic idea behind the catch-up effect.
D. All of these are true.
106.The convergence theory predicts that:
A. even if countries differ in their rates of savings, population growth, and other features, they will still converge to the same growth rate, although not the same level of income.
B. countries that start out poor should initially grow faster than ones that start out rich, but will eventually slow to the same growth rate.
C. poor countries are not generally expected to sustain a high growth rate and surpass the existing rich countries.
D. All of these are predicted by the convergence theory.
107.According to convergence theory, countries that start out poor should initially grow:
A. faster than ones that start out rich, but will eventually slow to the same growth rate.
B. slower than ones that start out rich, but will eventually grow to the same growth rate.
C. faster than ones that start out rich, and will eventually surpass their level of income.
D. slower than ones that start out rich, and therefore will never reach a similar growth rate.
108.When looking at real world data, we see that:
A. the convergence theory holds nearly universally.
B. the convergence theory holds for some countries, but not others.
C. the convergence theory does not hold empirically.
D. the convergence theory was proved false.
109.The investment trade-off:
A. is a reduction in current consumption to pay for the investment in capital intended to increase future production.
B. is why countries don't devote all their resources to capital investment.
C. defines the opportunity cost of capital investment.
D. All of these are true.
110.A reduction in current consumption to pay for the investment in capital intended to increase future production is known as the:
A. consumption effect.
B. substitution effect.
C. investment trade-off.
D. income effect.
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