Paul Romer's Theory on the Importance of Knowledge Differs from Traditional

question 82

Multiple Choice

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.

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Definitions:

States

Administrative divisions within a country, possessing certain governmental powers as defined by the nation's constitution or by historical precedent.

Thaddeus Stevens

A distinguished politician and abolitionist from the 19th century in the U.S., recognized for his pivotal role in the enactment of the 13th Amendment that eradicated slavery.

Radical Republicans

A faction of American politicians within the Republican Party from about 1854 to the end of Reconstruction in 1877 who advocated for the immediate abolition of slavery and stern retribution to the Southern states.

Andrew Johnson

The 17th President of the United States, serving from 1865 to 1869, known for his efforts to quickly reincorporate the Southern states after the Civil War and his subsequent impeachment.