Question 1

The Solow model shows that a key determinant of the steady-state ratio of capital to labor is the:

Accepted Answer

A)   level of output.
B)   labor force.
C)   saving rate.
D)   capital elasticity in the production function.

Question 2

A reduction in the saving rate starting from a steady state with more capital than the Golden Rule causes investment to ______ in the transition to the new steady state.

Accepted Answer

A)   increase
B)   decrease
C)   first increase, then decrease
D)   first decrease, then increase

Question 3

The Solow model with population growth but no technological change cannot explain persistent growth in standards of living because:

Accepted Answer

A)   total output does not grow.
B)   depreciation grows faster than output.
C)   output, capital, and population all grow at the same rate in the steady state.
D)   capital and population grow, but output does not keep up.

Question 4

According to the Kremerian model, large populations improve living standards because:

Accepted Answer

A)   crowded conditions put more pressure on people to work hard.
B)   there are more people who can make discoveries and contribute to innovation.
C)   more people have the opportunity for leisure and recreation.
D)   most people prefer to live with many other people.

Question 5

Exhibit: Steady-State Capital-Labor Ratio 0. B)  k1. C)  k2. D)  k3." class="answers-bank-image d-inline" rel="preload" > In this graph, the capital-labor ratio that represents the steady-state capital-ratio is:

Accepted Answer

A)   k0.
B)   k1.
C)   k2.
D)   k3.

Question 6

In the Solow growth model with no population growth and no technological progress, the higher the steady capital-per-worker ratio, the higher the steady-state:

Accepted Answer

A)   growth rate of total output.
B)   level of consumption per worker.
C)   growth rate of output per worker.
D)   level of output per worker.

Question 7

When an economy reaches a steady state other than the Golden Rule, what actions should the policy makers take to achieve the Golden Rule steady state when:
a. The economy begins with more capital than in the Golden Rule steady state
b. The economy begins with less capital than in the Golden Rule steady state

Accepted Answer

a. When the economy begins with more cap...

Question 8

Analysis of population growth around the world concludes that countries with high population growth tend to:

Accepted Answer

A)   have high income per worker.
B)   have a lower level of income per worker than other parts of the world.
C)   have the same standard of living as other parts of the world.
D)   tend to be the high-income-producing nations of the world.

Question 9

If a war destroys a large portion of a country's capital stock but the saving rate is unchanged, the Solow model predicts that output will grow and that the new steady state will approach:

Accepted Answer

A)   a higher level of output per person than before.
B)   the same level of output per person as before.
C)   a lower level of output per person than before.
D)   the Golden Rule level of output per person.

Question 10

Among the four countries-the United States, the United Kingdom, Germany, and Japan-the one that experienced the most rapid growth rate of output per person between 1948 and 1972 was:

Accepted Answer

A)   the United States.
B)   the United Kingdom.
C)   Germany.
D)   Japan.

Question 11

Suppose that two countries are exactly alike in every respect except that population grows at a faster rate in country A than in country B. a. Which country will have the higher level of output per worker in the steady state? Illustrate graphically.
b. Which country will have the faster rate of growth of output per worker in the steady state?

Accepted Answer

b. In the steady state the g...

Question 12

When an economy begins below the Golden Rule, reaching the Golden Rule:

Accepted Answer

A)   produces lower consumption at all times in the future.
B)   produces higher consumption at all times in the future.
C)   requires initially reducing consumption to increase consumption in the future.
D)   requires initially increasing consumption to decrease consumption in the future.

Question 13

In the Solow growth model, the assumption of constant returns to scale means that:

Accepted Answer

A)   all economies have the same amount of capital per worker.
B)   the steady-state level of output is constant regardless of the number of workers.
C)   the saving rate equals the constant rate of depreciation.
D)   the number of workers in an economy does not affect the relationship between output per worker and capital per worker.

Question 14

Exhibit: Output, Consumption, and Investment  In this graph, when the capital-labor ratio is OA, AB represents:

Accepted Answer

A)   investment per worker, and AC represents consumption per worker.
B)   consumption per worker, and AC represents investment per worker.
C)   investment per worker, and BC represents consumption per worker.
D)   consumption per worker, and BC represents investment per worker.

Question 15

In the Solow growth model of Chapter 8, where s is the saving rate, y is output per worker, and i is investment per worker, consumption per worker (c)  equals:

Accepted Answer

A)   sy
B)   (1 - s) y
C)   (1 + s) y
D)   (1 - s) y - i

Question 16

If an economy is in a steady state with no population growth or technological change and the capital stock is above the Golden Rule level and the saving rate falls:

Accepted Answer

A)   output, consumption, investment, and depreciation will all decrease.
B)   output and investment will decrease, and consumption and depreciation will increase.
C)   output and investment will decrease, and consumption and depreciation will increase and then decrease but finally approach levels above their initial state.
D)   output, investment, and depreciation will decrease, and consumption will increase and then decrease but finally approach a level above its initial state.

Question 17

Starting from a steady-state situation, if the saving rate increases, the rate of growth of capital per worker will:

Accepted Answer

A)   increase and continue to increase unabated.
B)   increase until the new steady state is reached.
C)   decrease until the new steady state is reached.
D)   decrease and continue to decrease unabated.

Question 18

If an economy is in a steady state with a saving rate below the Golden Rule level, efforts to increase the saving rate result in:

Accepted Answer

A)   both higher per-capita output and higher per-capita depreciation, but the increase in per-capita output would be greater.
B)   both higher per-capita output and higher per-capita depreciation, but the increase in per-capita depreciation would be greater.
C)   higher per-capita output and lower per-capita depreciation.
D)   lower per-capita output and higher per-capita depreciation.

Question 19

In the Solow growth model with population growth but no technological progress, increases in capital have a positive impact on steady-state consumption per worker by _____, but have a negative impact on steady-state consumption per worker by _____.

Accepted Answer

A)   increasing the capital to worker ratio; reducing saving in the steady state.
B)   reducing investment required in the steady state; increasing saving in the steady state.
C)   increasing output; increasing output required to replace depreciating capital.
D)   decreasing the saving rate; increasing the depreciation rate.

Question 20

The economy of Alpha can be described by the Solow growth model. The following are some characteristics of the Alpha economy: $\begin{array}{lr}
\text { saving rate (s) } & 0.20 \
\text { depreciati on rate ( }) & 0.12 \
\text { steady-state capital per worker ( } k) & 4 \
\text { populati on growth rate (n) } & 0.02 \
\text { steady-state output per worker } & 20,000
\end{array}$

a. What is the steady-state growth rate of output per worker in Alpha?
b. What is the steadv-state growth rate of total output in } Alpha ?
c.What is the level of steady-state consumption per worker in Alpha? 
 d. What is the steady-state level of investment per worker in Alpha?

Accepted Answer

a. In the steady state, capital per work...

Exam 8: Economic Growth I: Capital Accumulation and Population Growth

Correct Answer
verified
a. In the steady state, capital per work...
View Answer

In the Solow growth model with no population growth and no technological progress, the higher the steady capital-per-worker ratio, the higher the steady-state:

Correct Answer
verified

When an economy begins below the Golden Rule, reaching the Golden Rule:

Correct Answer
verified

Among the four countries-the United States, the United Kingdom, Germany, and Japan-the one that experienced the most rapid growth rate of output per person between 1948 and 1972 was:

Correct Answer
verified

According to the Kremerian model, large populations improve living standards because:

Correct Answer
verified

Analysis of population growth around the world concludes that countries with high population growth tend to:

Correct Answer
verified

Correct Answer
verified
b. In the steady state the g...
View Answer

Exhibit: Steady-State Capital-Labor Ratio In this graph, the capital-labor ratio that represents the steady-state capital-ratio is:

Correct Answer
verified

In the Solow growth model, the assumption of constant returns to scale means that:

Correct Answer
verified

Starting from a steady-state situation, if the saving rate increases, the rate of growth of capital per worker will:

Correct Answer
verified

In the Solow growth model of Chapter 8, where s is the saving rate, y is output per worker, and i is investment per worker, consumption per worker (c) equals:

Correct Answer
verified

Exhibit: Output, Consumption, and Investment In this graph, when the capital-labor ratio is OA, AB represents:

Correct Answer
verified

If an economy is in a steady state with no population growth or technological change and the capital stock is above the Golden Rule level and the saving rate falls:

Correct Answer
verified

A reduction in the saving rate starting from a steady state with more capital than the Golden Rule causes investment to ______ in the transition to the new steady state.

Correct Answer
verified

In the Solow growth model with population growth but no technological progress, increases in capital have a positive impact on steady-state consumption per worker by _, but have a negative impact on steady-state consumption per worker by _.

Correct Answer
verified

Correct Answer
verified
a. When the economy begins with more cap...
View Answer

The Solow model with population growth but no technological change cannot explain persistent growth in standards of living because:

Correct Answer
verified

The Solow model shows that a key determinant of the steady-state ratio of capital to labor is the:

Correct Answer
verified

If a war destroys a large portion of a country's capital stock but the saving rate is unchanged, the Solow model predicts that output will grow and that the new steady state will approach:

Correct Answer
verified

If an economy is in a steady state with a saving rate below the Golden Rule level, efforts to increase the saving rate result in:

Correct Answer
verified

Exam 8: Economic Growth I: Capital Accumulation and Population Growth

Correct Answerverifieda. In the steady state, capital per work...View AnswerShow Answer

In the Solow growth model with no population growth and no technological progress, the higher the steady capital-per-worker ratio, the higher the steady-state:

Correct AnswerverifiedShow Answer

When an economy begins below the Golden Rule, reaching the Golden Rule:

Correct AnswerverifiedShow Answer

Among the four countries-the United States, the United Kingdom, Germany, and Japan-the one that experienced the most rapid growth rate of output per person between 1948 and 1972 was:

Correct AnswerverifiedShow Answer

According to the Kremerian model, large populations improve living standards because:

Correct AnswerverifiedShow Answer

Analysis of population growth around the world concludes that countries with high population growth tend to:

Correct AnswerverifiedShow Answer

Correct Answerverified b. In the steady state the g...View AnswerShow Answer

Exhibit: Steady-State Capital-Labor Ratio In this graph, the capital-labor ratio that represents the steady-state capital-ratio is:

Correct AnswerverifiedShow Answer

In the Solow growth model, the assumption of constant returns to scale means that:

Correct AnswerverifiedShow Answer

Starting from a steady-state situation, if the saving rate increases, the rate of growth of capital per worker will:

Correct AnswerverifiedShow Answer

In the Solow growth model of Chapter 8, where s is the saving rate, y is output per worker, and i is investment per worker, consumption per worker (c) equals:

Correct AnswerverifiedShow Answer

Exhibit: Output, Consumption, and Investment In this graph, when the capital-labor ratio is OA, AB represents:

Correct AnswerverifiedShow Answer

If an economy is in a steady state with no population growth or technological change and the capital stock is above the Golden Rule level and the saving rate falls:

Correct AnswerverifiedShow Answer

A reduction in the saving rate starting from a steady state with more capital than the Golden Rule causes investment to ______ in the transition to the new steady state.

Correct AnswerverifiedShow Answer

In the Solow growth model with population growth but no technological progress, increases in capital have a positive impact on steady-state consumption per worker by _____, but have a negative impact on steady-state consumption per worker by _____.

Correct AnswerverifiedShow Answer

Correct Answerverifieda. When the economy begins with more cap...View AnswerShow Answer

The Solow model with population growth but no technological change cannot explain persistent growth in standards of living because:

Correct AnswerverifiedShow Answer

The Solow model shows that a key determinant of the steady-state ratio of capital to labor is the:

Correct AnswerverifiedShow Answer

If a war destroys a large portion of a country's capital stock but the saving rate is unchanged, the Solow model predicts that output will grow and that the new steady state will approach:

Correct AnswerverifiedShow Answer

If an economy is in a steady state with a saving rate below the Golden Rule level, efforts to increase the saving rate result in:

Correct AnswerverifiedShow Answer

Correct Answer
verified
a. In the steady state, capital per work...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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b. In the steady state the g...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

In the Solow growth model with population growth but no technological progress, increases in capital have a positive impact on steady-state consumption per worker by _, but have a negative impact on steady-state consumption per worker by _.

Correct Answer
verified

Correct Answer
verified
a. When the economy begins with more cap...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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