ECON100 - Chapter 15 - Questions and terms from slides

How do economies grow rapidly

• Rapidly add to their physical capital through high savings and investment spending.

• Increase their human capital by improving their educational institutions.

• Make fast technological progress through research and development.

Human capital

the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country.

Physical capital

Tangible, human-made assets like machinery, buildings, and tools that are used to create goods and services

What distinguishes technological progress as a key driver of economic growth according to the passage?

Scientific knowledge must be combined with significant research and development (R&D) spending, often by the private sector, to translate ideas into practical technologies.

Government and education

Much of a nation’s human capital comes from government spending on education funding primary, secondary, and higher education as well as research

Policy impact

Differences in human capital growth reflect government priorities; China’s rapid rise in literacy shows the effect of strong education policies, not higher income levels.

Which of the following statements best captures the role of government subsidies in promoting long-run economic growth?

Government subsidies are crucial in building and maintaining physical infrastructure, funding education to increase human capital, and supporting research and development, especially in advanced economies.

Financial systems and growth

Governments indirectly support investment by ensuring strong, well-regulated financial systems that channel savings into productive uses

Trust and regulation

When people trust banks, savings fuel business investment; without trust and regulation, money is hoarded and growth slows.

Importance of Property Rights

Strong property and intellectual property rights encourage innovation by ensuring creators can benefit from their work

Government role in property rights

Governments protect innovation through patents, temporary monopolies that reward inventors while eventually promoting competition.

Corruption

Bribery and bureaucracy hinder investment; reform can boost growth.

Over intervention

Excessive government control or subsidies reduces productivity and slows growth.

Which of the following best explains how government institutions contribute to long-run economic growth?

Political stability, protection of property rights, and a well-regulated financial system are essential because they create trust, incentivize innovation, and enable savings to be efficiently channeled into productive investment