Question 1

Suppose the following situation exists for an economy: Kt+1/N = Kt/N. Given this information, we know that:

Accepted Answer

A)  saving per worker is greater than depreciation per worker in period t. 
B)  the saving rate fell in period t. 
C)  saving per worker is less than depreciation per worker in period t. 
D)  saving state consumption is equal to the golden rule level of steady state consumption. 
E)  saving per worker equals depreciation per worker in period t. 
A)  saving per worker is greater than depreciation per worker in period t. 
B)  the saving rate fell in period t. 
C)  saving per worker is less than depreciation per worker in period t. 
D)  saving state consumption is equal to the golden rule level of steady state consumption. 
E)  saving per worker equals depreciation per worker in period t. E

Question 2

In the richer countries, over the past two centuries:

Accepted Answer

A)  physical capital has increased significantly, but not human capital. 
B)  physical capital has steadily increased, while human capital first increased and then decreased. 
C)  human capital has increased significantly, but not physical capital. 
D)  physical and human capital have both increased significantly. 
E)  physical and human capital have both increased significantly, but the increase in physical capital has caused almost all of the growth in output. 
A)  physical capital has increased significantly, but not human capital. 
B)  physical capital has steadily increased, while human capital first increased and then decreased. 
C)  human capital has increased significantly, but not physical capital. 
D)  physical and human capital have both increased significantly. 
E)  physical and human capital have both increased significantly, but the increase in physical capital has caused almost all of the growth in output. D

Question 3

Suppose an economy experiences a decrease in the saving rate. As the economy adjusts to this, we would expect output per worker:

Accepted Answer

A)  to decrease at a permanently higher rate. 
B)  to decrease at a high rate temporarily and the rate of decrease goes to zero in the steady state. 
C)  to decrease slower at the beginning, then faster, and then at a constant rate in the steady state. 
D)  to decrease at a constant rate and continue increasing at that rate in the steady state. 
E)  to first increase, then decrease at an increasing rate, then increase at a constant rate in the steady state. 
A)  to decrease at a permanently higher rate. 
B)  to decrease at a high rate temporarily and the rate of decrease goes to zero in the steady state. 
C)  to decrease slower at the beginning, then faster, and then at a constant rate in the steady state. 
D)  to decrease at a constant rate and continue increasing at that rate in the steady state. 
E)  to first increase, then decrease at an increasing rate, then increase at a constant rate in the steady state. B

Question 4

Suppose there is a decrease in the rate of saving. This decrease in the saving rate must cause a decrease in consumption per person in the long run when:

Accepted Answer

A)  the rate of saving exceeds the rate of depreciation. 
B)  technological progress depends on human capital. 
C)  the saving is used for education rather than physical capital. 
D)  capital per worker is already less than the golden- rule level. 
E)  there is no technological progress. 
A)  the rate of saving exceeds the rate of depreciation. 
B)  technological progress depends on human capital. 
C)  the saving is used for education rather than physical capital. 
D)  capital per worker is already less than the golden- rule level. 
E)  there is no technological progress.

Question 5

Assume zero population growth and zero technical change. If an outbreak of war destroys a large portion of a country's capital stock but the saving rate and the rate of depreciation are unchanged, the growth model predicts that output will:

Accepted Answer

A)  cease to grow. 
B)  grow but the new steady state will be at a higher output level than before. 
C)  grow but the new steady state will be at a lower output level than before. 
D)  decrease to a new steady state. 
E)  grow and the new steady state will be at the same output level as before. 
A)  cease to grow. 
B)  grow but the new steady state will be at a higher output level than before. 
C)  grow but the new steady state will be at a lower output level than before. 
D)  decrease to a new steady state. 
E)  grow and the new steady state will be at the same output level as before.

Question 6

Which of the following statements is always true?

Accepted Answer

A)  The increase in investment is equal to the capital stock minus depreciation. 
B)  Investment equals depreciation. 
C)  Any change in the capital stock is equal to investment minus depreciation. 
D)  The capital stock is equal to investment minus depreciation. 
E)  Investment equals the capital stock minus depreciation. 
A)  The increase in investment is equal to the capital stock minus depreciation. 
B)  Investment equals depreciation. 
C)  Any change in the capital stock is equal to investment minus depreciation. 
D)  The capital stock is equal to investment minus depreciation. 
E)  Investment equals the capital stock minus depreciation.

Question 7

When the economy is in the steady state, we know with certainty that:

Accepted Answer

A)  consumption per worker is maximised. 
B)  output per worker is maximised. 
C)  the saving rate is maximised. 
D)  the growth rate is maximised. 
E)  investment per worker equals depreciation per worker. 
A)  consumption per worker is maximised. 
B)  output per worker is maximised. 
C)  the saving rate is maximised. 
D)  the growth rate is maximised. 
E)  investment per worker equals depreciation per worker.

Question 8

Suppose the following situation exists for an economy: Kt+1/N < Kt/N. Given this information, we know that:

Accepted Answer

A)  consumption per worker will tend to fall as the economy adjusts to this situation. 
B)  saving per worker equals depreciation per worker in period t. 
C)  The saving rate increased in period t. 
D)  saving per worker is greater than depreciation per worker in period t. 
E)  saving per worker is less than depreciation per worker in period t. 
A)  consumption per worker will tend to fall as the economy adjusts to this situation. 
B)  saving per worker equals depreciation per worker in period t. 
C)  The saving rate increased in period t. 
D)  saving per worker is greater than depreciation per worker in period t. 
E)  saving per worker is less than depreciation per worker in period t.

Question 9

The main macroeconomic implication of a pay- as- you- go social securtiy system is:

Accepted Answer

A)  total saving decreases and capital accumulation decreases. 
B)  no effect on total saving and capital accumulation decreases. 
C)  no effect on total saving and no effect on capital accumulation. 
D)  total saving increases and capital accumulation increases. 
E)  no effect on total saving and capital accumulation increases. 
A)  total saving decreases and capital accumulation decreases. 
B)  no effect on total saving and capital accumulation decreases. 
C)  no effect on total saving and no effect on capital accumulation. 
D)  total saving increases and capital accumulation increases. 
E)  no effect on total saving and capital accumulation increases.

Question 10

The main macroeconomic implication of a fully funded social security system is:

Accepted Answer

A)  no effect on total saving and capital accumulation increases. 
B)  no effect on total saving and capital accumulation decreases. 
C)  no effect on total saving and no effect on capital accumulation. 
D)  total saving increases and no effect on capital accumulation. 
E)  total saving decreases and no effect on capital accumulation. 
A)  no effect on total saving and capital accumulation increases. 
B)  no effect on total saving and capital accumulation decreases. 
C)  no effect on total saving and no effect on capital accumulation. 
D)  total saving increases and no effect on capital accumulation. 
E)  total saving decreases and no effect on capital accumulation.

Question 11

Which of the following will likely cause an increase in output per worker?

Accepted Answer

A)  An increase in education expenditures. 
B)  An increase in on- the- job training. 
C)  An increase in capital accumulation. 
D)  An increase in the saving rate. 
E)  All of the above. 
A)  An increase in education expenditures. 
B)  An increase in on- the- job training. 
C)  An increase in capital accumulation. 
D)  An increase in the saving rate. 
E)  All of the above.

Question 12

Suppose two countries are identical in every way with the following exception. Economy A has a higher rate of depreciation (6) than economy B. Given this information, we know with certainty that:

Accepted Answer

A)  steady state consumption in A and B are the same. 
B)  steady state growth of output per worker is higher in B than in A. 
C)  steady state growth of output per worker is higher in A than in B. 
D)  steady state consumption in A is lower than in B. 
E)  steady state consumption in A is higher than in B. 
A)  steady state consumption in A and B are the same. 
B)  steady state growth of output per worker is higher in B than in A. 
C)  steady state growth of output per worker is higher in A than in B. 
D)  steady state consumption in A is lower than in B. 
E)  steady state consumption in A is higher than in B.

Question 13

Suppose there are two countries that are identical in every way with the following exception: Country A has a higher stock of human capital than country B. Given this information, we know with certainty that:

Accepted Answer

A)  output per worker will be the same in the two countries. 
B)  the growth rate will be the same in the two countries. 
C)  the growth rate will be higher in A than in B. 
D)  the growth rate will be higher in B than in A. 
E)  capital per worker will be the same in the two countries. 
A)  output per worker will be the same in the two countries. 
B)  the growth rate will be the same in the two countries. 
C)  the growth rate will be higher in A than in B. 
D)  the growth rate will be higher in B than in A. 
E)  capital per worker will be the same in the two countries.

Question 14

In the model where it is assumed that the state of technology does not change, what parameters and/or variables cause changes in steady state output per worker.

Accepted Answer

In general, output per worker will depen

Question 15

A decrease in the saving rate will not affect which of the following variables in the long run?

Accepted Answer

A)  Output per worker. 
B)  The level of investment. 
C)  The growth rate of output. 
D)  The total stock of capital in the economy. 
E)  Capital per worker. 
A)  Output per worker. 
B)  The level of investment. 
C)  The growth rate of output. 
D)  The total stock of capital in the economy. 
E)  Capital per worker.

Question 16

Suppose a recent budgetary policy results in an increase in the national saving rate. Such a change in the saving rate will not affect which of the following variables in the long run?

Accepted Answer

A)  The rate of growth of capital per worker. 
B)  The level of output. 
C)  The level of investment. 
D)  Capital per worker. 
E)  Output per worker. 
A)  The rate of growth of capital per worker. 
B)  The level of output. 
C)  The level of investment. 
D)  Capital per worker. 
E)  Output per worker.

Question 17

Suppose the following situation exists for an economy: Kt+1/N > Kt/N. Given this information, we know that:

Accepted Answer

A)  saving per worker equals depreciation per worker in period t. 
B)  the saving rate fell in period t. 
C)  saving per worker is greater than depreciation per worker in period t. 
D)  the saving rate rose in period t. 
E)  saving per worker is less than depreciation per worker in period t. 
A)  saving per worker equals depreciation per worker in period t. 
B)  the saving rate fell in period t. 
C)  saving per worker is greater than depreciation per worker in period t. 
D)  the saving rate rose in period t. 
E)  saving per worker is less than depreciation per worker in period t.

Question 18

Which of the following situations will result in an increase in the capital- labour ratio?

Accepted Answer

A)  Investment per worker equals saving per worker. 
B)  Saving per worker equals depreciation per worker. 
C)  Output per worker exceeds capital per worker. 
D)  Investment per worker exceeds depreciation per worker. 
E)  Investment per worker is less than depreciation per worker. 
A)  Investment per worker equals saving per worker. 
B)  Saving per worker equals depreciation per worker. 
C)  Output per worker exceeds capital per worker. 
D)  Investment per worker exceeds depreciation per worker. 
E)  Investment per worker is less than depreciation per worker.

Question 19

Which of the following represents the change in the capital stock?

Accepted Answer

A)  Output minus depreciation. 
B)  Capital minus depreciation. 
C)  Investment minus depreciation. 
D)  Consumption minus depreciation. 
E)  Investment minus saving. 
A)  Output minus depreciation. 
B)  Capital minus depreciation. 
C)  Investment minus depreciation. 
D)  Consumption minus depreciation. 
E)  Investment minus saving.

Question 20

Graphically illustrate and explain the effects of an increase in the saving rate on the Solow- Swan growth model. In your graph, clearly label all curves and equilibria.

Accepted Answer

For the graph, refer to Figure 11.3 on p

Exam 11: Saving, Capital Accumulation and Output

Suppose the following situation exists for an economy: Kt+1/N = Kt/N. Given this information, we know that:

In the richer countries, over the past two centuries:

Suppose an economy experiences a decrease in the saving rate. As the economy adjusts to this, we would expect output per worker:

Suppose there is a decrease in the rate of saving. This decrease in the saving rate must cause a decrease in consumption per person in the long run when:

Assume zero population growth and zero technical change. If an outbreak of war destroys a large portion of a country's capital stock but the saving rate and the rate of depreciation are unchanged, the growth model predicts that output will:

Which of the following statements is always true?

When the economy is in the steady state, we know with certainty that:

Suppose the following situation exists for an economy: Kt+1/N < Kt/N. Given this information, we know that:

The main macroeconomic implication of a pay- as- you- go social securtiy system is:

The main macroeconomic implication of a fully funded social security system is:

Which of the following will likely cause an increase in output per worker?

Suppose two countries are identical in every way with the following exception. Economy A has a higher rate of depreciation (6) than economy B. Given this information, we know with certainty that:

Suppose there are two countries that are identical in every way with the following exception: Country A has a higher stock of human capital than country B. Given this information, we know with certainty that:

In the model where it is assumed that the state of technology does not change, what parameters and/or variables cause changes in steady state output per worker.

A decrease in the saving rate will not affect which of the following variables in the long run?

Suppose a recent budgetary policy results in an increase in the national saving rate. Such a change in the saving rate will not affect which of the following variables in the long run?

Suppose the following situation exists for an economy: Kt+1/N > Kt/N. Given this information, we know that:

Which of the following situations will result in an increase in the capital- labour ratio?

Which of the following represents the change in the capital stock?

Graphically illustrate and explain the effects of an increase in the saving rate on the Solow- Swan growth model. In your graph, clearly label all curves and equilibria.

A Tour of the World

A Tour of the Book

The Goods Market

Financial Markets

Goods and Financial Markets: the Islm Model

The Labour Market

Putting All Markets Together: the Asad Model

The Phillips Curve, the Natural Rate of Unemployment and Inflation

The Crisis

The Facts of Growth

Technological Progress and Growth

Technological Progress: the Short, the Medium and the Long Run

Expectations: the Basic Tools

Financial Markets and Expectations

Expectations, Consumption and Investment

Expectations, Output and Policy

Openness in Goods and Financial Markets

The Goods Market

Output, the Interest Rate and the Exchange Rate

Exchange Rate Regimes

Should Policy-Makers Be Restrained

Fiscal Policy: a Summing up

Monetary Policy: a Summing up

Epilogue: the Story of Macroeconomics

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