Exam 11: Saving, Capital Accumulation and Output

Suppose two countries are identical in every way with the following exception. Economy A has a greater quantity of human capital than economy B. Given this information, we know with certainty that:

Which of the following is not a flow variable?

Suppose depreciation per worker is less than saving per worker. Given this situation, explain what will happen to each of the following variables over time: capital per worker, output per worker, saving per worker, and consumption per worker.

If the saving rate is 1 , we know that:

Suppose the economy is operating at the steady state. Which of the following is true given this information?

If endogenous growth models are correct, a lower rate of growth in the long run could occur as a result of which of the following?

When steady state capital per worker is below the golden- rule level, we know with certainty that an increase in the saving rate will:

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

Suppose the saving rate is greater than the golden rule saving rate (sG). First, explain what must happen to the saving rate in order to increase steady state consumption. Second, what are the advantages and disadvantages of this policy to increase steady state consumption.

Explain the difference between the Solow- Swan model and the endogenous growth model in terms of their views on the determinants of economic growth.

Suppose, due to the effects of a military conflict that has ended, that a country experiences a large decrease in its capital stock. Assume no other effects of this event on the economy. Which of the following will tend to occur as the economy adjusts to this situation?

Which of the following will cause a decrease in output per worker in the long run?

Suppose the economy is initially in the steady state. A decrease in the depreciation rate (6) will cause:

Which of the following represents the effects in period t of an increase in the saving rate in period t?

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

Suppose the economy is operating at the steady state and that there is no technological progress. Which of the following is true given this information?

Explain what human capital is and discuss how changes in human capital can affect output per worker.

Suppose there is an increase in the saving rate. Explain what effect this will have on output, output per worker, the rate of growth of output, and the rate of growth of output per worker.

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

Our model of long- run economic growth suggests that: