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Free CFA Economics Practice Questions & Answers
2,050 exam-style Economics questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 151
In the neoclassical model, long‑run per‑capita growth is driven by:
Select an option first.
Correct answer: A — Technological progress
Explanation: A is correct: Only technology sustains long‑run per‑capita growth. B faces diminishing returns. C increases total GDP, not per‑capita. D is not a long‑run driver.
Question 152
In the neoclassical model, capital deepening stops raising per‑capita output when:
Select an option first.
Correct answer: A — The economy reaches the steady state
Explanation: A is correct: Steady state = marginal product of capital equals its cost. B/C/D do not define the steady state.
Question 153
At the steady state, per‑capita output grows at the rate of:
Select an option first.
Correct answer: A — Technological progress
Explanation: A is correct: Only technology drives per‑capita growth at steady state. B/C/D do not sustain per‑capita growth.
Question 154
A country below its steady‑state capital level will experience:
Select an option first.
Correct answer: A — High marginal returns to capital
Explanation: A is correct: Low capital → high marginal product → rapid growth. B/C/D contradict the model.
Question 155
A country above its steady‑state capital level will experience:
Select an option first.
Correct answer: A — Slower growth or even declining per‑capita output
Explanation: A is correct: Too much capital → low marginal product → slow growth. B/C/D contradict the model.
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Question 156
Conditional convergence suggests that:
Select an option first.
Correct answer: A — Countries converge only if they share similar structural characteristics
Explanation: A is correct: Convergence depends on institutions, savings, education, etc. B is absolute convergence. C contradicts convergence theory. D is incorrect.
Question 157
Poor countries can grow faster than rich countries because:
Select an option first.
Correct answer: A — They have low capital and high marginal returns
Explanation: A is correct: Low capital → high marginal product → rapid growth. B/C/D do not explain faster growth.
Question 158
Absolute convergence predicts that:
Select an option first.
Correct answer: A — All countries eventually reach the same income level
Explanation: A is correct: Absolute convergence = universal convergence. B is conditional convergence. C/D contradict the theory.
Question 159
Convergence may fail when:
Select an option first.
Correct answer: A — Countries differ in institutions and human capital
Explanation: A is correct: Poor institutions prevent catching up. B/C/D support convergence.
Question 160
A developing country with strong institutions and high savings is likely to:
Select an option first.
Correct answer: A — Converge faster toward developed‑country income levels
Explanation: A is correct: Good institutions + high investment → rapid catch‑up growth. B/C/D contradict growth theory.
Question 161
Access to foreign capital helps developing countries grow because:
Select an option first.
Correct answer: A — It supplements domestic savings
Explanation: A is correct: Foreign capital fills the savings gap → more investment. B/C/D are incorrect.
Question 162
A country that restricts imports may experience slower growth because:
Select an option first.
Correct answer: A — It loses access to foreign technology
Explanation: A is correct: Import restrictions limit technology transfer. B/C/D contradict trade theory.
Question 163
Foreign direct investment (FDI) contributes to growth by:
Select an option first.
Correct answer: A — Bringing technology and management expertise
Explanation: A is correct: FDI transfers knowledge and capital. B/C/D are incorrect.
Question 164
Higher national savings contribute to long‑term growth by:
Select an option first.
Correct answer: A — Increasing investment capacity
Explanation: A is correct: Savings → investment → capital accumulation. B/C/D reduce growth.
Question 165
A country with low savings but high investment must rely on:
Select an option first.
Correct answer: A — Foreign capital inflows
Explanation: A is correct: Investment > savings → financed by foreign capital. B/C/D do not fill the savings gap.
Question 166
Investment contributes to growth only if:
Select an option first.
Correct answer: A — It increases productive capacity
Explanation: A is correct: Productive investment expands output. B/C/D do not raise long‑term growth.
Question 167
A country with high savings but weak investment likely suffers from:
Select an option first.
Correct answer: A — Poor business environment
Explanation: A is correct: Weak institutions discourage investment. B/C/D contradict the scenario.
Question 168
Capital accumulation slows when:
Select an option first.
Correct answer: A — Depreciation exceeds new investment
Explanation: A is correct: Net investment = investment − depreciation. B/C/D increase growth.
Question 169
Strong institutions support growth by:
Select an option first.
Correct answer: A — Protecting property rights
Explanation: A is correct: Secure property rights encourage investment. B/C/D weaken growth.
Question 170
Weak institutions reduce growth because they:
Select an option first.
Correct answer: A — Increase uncertainty and discourage investment
Explanation: A is correct: Uncertainty → lower investment → slower growth. B/C/D contradict institutional economics.
Question 171
A country with strong rule of law is likely to experience:
Select an option first.
Correct answer: A — Higher investment
Explanation: A is correct: Rule of law → predictable environment → more investment. B/C/D contradict growth theory.
Question 172
Political instability harms growth because:
Select an option first.
Correct answer: A — Investors delay or cancel investment
Explanation: A is correct: Instability increases risk → reduces investment. B/C/D do not explain slower growth.
Question 173
Corruption reduces growth by:
Select an option first.
Correct answer: A — Increasing transaction costs
Explanation: A is correct: Corruption acts like a tax → reduces efficiency. B/C/D contradict corruption’s effects.
Question 174
Well‑developed financial markets support growth by:
Select an option first.
Correct answer: A — Allocating capital efficiently
Explanation: A is correct: Efficient markets channel funds to productive uses. B/C/D hinder growth.
Question 175
A weak financial system slows growth because:
Select an option first.
Correct answer: A — Productive firms cannot access financing
Explanation: A is correct: Credit constraints limit investment. B/C/D do not explain slower growth.
Question 176
Financial liberalization can boost growth by:
Select an option first.
Correct answer: A — Increasing access to credit
Explanation: A is correct: Liberalization → more credit → more investment. B/C/D contradict financial theory.
Question 177
Excessive credit growth can harm long‑term growth because:
Select an option first.
Correct answer: A — It increases financial instability
Explanation: A is correct: Credit booms → crises → long‑term damage. B/C/D are incorrect.
Question 178
Free trade supports growth by:
Select an option first.
Correct answer: A — Allowing countries to specialize
Explanation: A is correct: Specialization → efficiency → growth. B/C/D contradict trade theory.
Question 179
Capital inflows can raise growth if they:
Select an option first.
Correct answer: A — Finance productive investment
Explanation: A is correct: Productive investment → higher output. B/C/D do not raise long‑term growth.
Question 180
A country that integrates into global markets is likely to experience:
Select an option first.
Correct answer: A — Faster technology diffusion
Explanation: A is correct: Openness accelerates technology transfer. B/C/D contradict open‑economy growth theory.
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