Page 438 - Krugmans Economics for AP Text Book_Neat

Module 39 AP Review

Solutions appear at the back of the book.
Check Your Understanding

1. Explain the link between a country’s growth rate, its investment effect unless African countries have the financial and political
spending as a percent of GDP, and its domestic savings. means to maintain this infrastructure. What policies would
you suggest?
2. Which of the following is the better predictor of a future high
long -run growth rate: a high standard of living today or high 4. What is the link between greenhouse gas emissions and growth?
levels of savings and investment spending? Explain your answer. What is the expected effect on growth from emissions
reduction? Why is international burden sharing of greenhouse
3. Some economists think the best way to help African countries is
gas emissions reduction a contentious problem?
for wealthier countries to provide more funds for basic
infrastructure. Others think this policy will have no long -run

Tackle the Test: Multiple-Choice Questions

1. Economies experience more rapid economic growth when they 4. Which of the following statements is true of environmental
do which of the following? quality?
I. add physical capital a. It is typically not affected by government policy.
II. promote technological progress b. Other things equal, it tends to improve with economic
III. limit human capital growth.
a. I only c. There is broad scientific consensus that rising levels of
b. II only carbon dioxide and other gases are raising the planet’s
c. III only overall temperature.
d. I and II only d. Most economists believe it is not possible to reduce
e. I, II, and III greenhouse gas emissions while economic growth continues.
e. Most environmental success stories involve dealing with
2. Which of the following can lead to increases in physical capital
global, rather than local impacts.
in an economy?
a. increased investment spending 5. According to the MIT study discussed in the module, a cap and
b. increased savings by domestic households trade system to reduce greenhouse gas emissions in the United
c. increased savings from foreign households States would lead to
d. an inflow of foreign capital a. no significant costs.
e. all of the above b. significant but not overwhelming costs.
c. a loss of roughly three year’s real GDP over the next 40 years.
3. Which of the following is true of sustainable long-run
d. a reduction in real GDP per capita of over 10%.
economic growth?
e. a loss of 5 years’ worth of economic growth over the next 40
a. Long-run growth can continue in the face of the limited
years.
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.

396 section 7 Economic Growth and Productivity