Question 1

Schumpeter's thesis of "creative destruction" is an explanation of economic progress resulting from: A

Accepted Answer

A) using up scarce natural resources to create new products. 
B) breaking down barriers to trade and development. 
C) new product producers driving incumbent producers out of business. 
D) creating new methods to destroy the environment. 
A) using up scarce natural resources to create new products. 
B) breaking down barriers to trade and development. 
C) new product producers driving incumbent producers out of business. 
D) creating new methods to destroy the environment. C

Question 2

International differences in income per person in accounting terms must be attributed to differences in either and/or .

Accepted Answer

A) factor accumulation; production efficiency. 
B) constant returns to scale; the marginal product of. 
C) capital unemployment rates; depreciation rates. 
D) consumption; interest rates. 
A) factor accumulation; production efficiency. 
B) constant returns to scale; the marginal product of. 
C) capital unemployment rates; depreciation rates. 
D) consumption; interest rates. A

Question 3

If the marginal product of capital net of depreciation equals 10 percent and the rate of population growth equals 2 percent, then this economy will be at the Golden Rule steady state if the rate of technological progress equals percent.

Accepted Answer

A) 0 
B) 2 
C) 8 
D) 10 
A) 0 
B) 2 
C) 8 
D) 10 C

Question 4

Assume that a country's production function is Y = AK0.3L0.7. The ratio of capital to output is 3, the growth rate of output is 3 percent, and the depreciation rate is 4 percent. Capital is paid its marginal product.
a. What is the marginal product of capital in this situation? (Hint: The marginal product of capital may be computed using calculus by differentiating the production function and using the capital-output ratio or by using the fact that capital's share equals MPK multiplied by K divided by Y.)
b. If the economy is in a steady state, what must be the saving rate? (Hint: The saving rate multiplied by Y
must provide for gross growth of (δ + n + g)K, where δ is the depreciation rate.)
c. If the economy decides to achieve the Golden Rule level of capital and actually reaches it, what will be the marginal product of capital?
d. What must the saving rate be to achieve the Golden Rule level of capital?

Accepted Answer

a. MPK = 0.10 
b. s

Question 5

What is the difference between convergence and conditional convergence with respect to predictions of the Solow growth model? Explain.

Accepted Answer

Convergence applies to economies with t

Question 6

The Solow model predicts that two economies will converge if the economies start with the same:

Accepted Answer

A) capital stocks. 
B) populations. 
C) steady states. 
D) production functions. 
A) capital stocks. 
B) populations. 
C) steady states. 
D) production functions.

Question 7

Income per person exceeds $25,000 in many countries, but it is below $1,000 per person in many other countries. Based on the Solow growth model, suggest at least four possible explanations for this gap in living standards.

Accepted Answer

Possible explanations include: richer c

Question 8

The type of legal system and the level of corruption in a country have been found to be:

Accepted Answer

A) unrelated to the rate of economic growth in a country. 
B) significant determinants of the rate of economic growth in a country. 
C) important topics for political discussion, but not economic explanations of 
D) growth. important variables explaining the Golden Rule level of capital. 
A) unrelated to the rate of economic growth in a country. 
B) significant determinants of the rate of economic growth in a country. 
C) important topics for political discussion, but not economic explanations of 
D) growth. important variables explaining the Golden Rule level of capital.

Question 9

The recent worldwide slowdown in economic growth began in the early:

Accepted Answer

A) 1960s. 
B) 1970s. 
C) 1980s. 
D) 1990s. 
A) 1960s. 
B) 1970s. 
C) 1980s. 
D) 1990s.

Question 10

With population growth at rate n and labor-augmenting technological progress at rate g, the Golden Rule steady state requires that the marginal product of capital (MPK):

Accepted Answer

A) net of depreciation be equal to n + g. 
B) net of depreciation be equal to the depreciation rate plus n + g. 
C) plus n be equal to the depreciation rate plus g. 
D) plus g be equal to the depreciation rate plus n. 
A) net of depreciation be equal to n + g. 
B) net of depreciation be equal to the depreciation rate plus n + g. 
C) plus n be equal to the depreciation rate plus g. 
D) plus g be equal to the depreciation rate plus n.

Question 11

International data suggest that economies of countries with different steady states will converge to:

Accepted Answer

A) Athe same steady state. 
B) their own steady state. 
C) the Golden Rule steady state. 
D) steady states below the Golden Rule level. 
A) Athe same steady state. 
B) their own steady state. 
C) the Golden Rule steady state. 
D) steady states below the Golden Rule level.

Question 12

Two countries, Highland and Lowland, are described by the Solow growth model. Both countries are identical, except that the rate of labor-augmenting technological progress is higher in Highland than in Lowland.
a. In which country is the steady-state growth rate of output per effective worker higher?
b. In which country is the steady-state growth rate of total output higher?
c. Does the Solow growth model predict that the two economies will converge to the same steady state?

Accepted Answer

a. The steady-state growth rate of outp

Question 13

If the marginal product of capital net depreciation equals 8 percent, the rate of growth of population equals 2 percent, and the rate of labor-augmenting technical progress equals 2 percent, to reach the Golden Rule level of the capital stock, the rate in this economy must be .

Accepted Answer

A) saving; increased. 
B) population growth; decreased 
C) depreciation; decreased 
D) total output growth; decreased 
A) saving; increased. 
B) population growth; decreased 
C) depreciation; decreased 
D) total output growth; decreased

Question 14

English-style legal systems give protections to shareholders and creditors than French Napoleonic Codes, typically resulting in capital markets and faster rates of economic growth.

Accepted Answer

A) greater; more. 
B) developed greater; more. 
C) corrupt less; more 
D) developed less; less corrupt 
A) greater; more. 
B) developed greater; more. 
C) corrupt less; more 
D) developed less; less corrupt

Question 15

The Solow model with population growth and labor-augmenting technological progress predicts balanced growth in the steady state. Growth rates of which variables are predicted to be balanced (i.e., will be equal) in the steady state?

Accepted Answer

Output per worker, capital per worker,

Question 16

In a steady-state economy with a saving rate s, population growth n, and labor-augmenting technological progress g, the formula for the steady-state ratio of capital per effective worker (k*), in terms of output per effective worker (f(k*)), is (denoting the depreciation rate by δ):

Accepted Answer

A) sf(k)/(δ + n + g). 
B) s/((f(k))( δ + n + g)). 
C) f(k)/((s)( δ + n + g)). 
D) (s - f(k))/( δ + n + g). 
A) sf(k)/(δ + n + g). 
B) s/((f(k))( δ + n + g)). 
C) f(k)/((s)( δ + n + g)). 
D) (s - f(k))/( δ + n + g).

Question 17

In the two-sector endogenous growth model, the fraction of labor in universities (u) affects the steady-state:

Accepted Answer

A) level of income. 
B) growth rate of income. 
C) level of income and growth rate of income. 
D) level of income, growth rate of income, and growth rate of the stock of knowledge. 
A) level of income. 
B) growth rate of income. 
C) level of income and growth rate of income. 
D) level of income, growth rate of income, and growth rate of the stock of knowledge.

Question 18

The productivity slowdown that began in the 1970s has been attributed, at least partly, to each of the following except:

Accepted Answer

A) running out of new ideas about how to produce. 
B) a deterioration in the quality of education. 
C) a decline in the number of workers in the labor force. 
D) a lower average level of experience among workers. 
A) running out of new ideas about how to produce. 
B) a deterioration in the quality of education. 
C) a decline in the number of workers in the labor force. 
D) a lower average level of experience among workers.

Question 19

In the Solow model with technological progress, the steady-state growth rate of total output is:

Accepted Answer

A) 0. 
B) g. 
C) n. 
D) n + g. 
A) 0. 
B) g. 
C) n. 
D) n + g.

Question 20

Empirical results justify substantial government subsidies to research based on the finding that the:

Accepted Answer

A) the private return to research is greater than the social return to research. 
B) the private return to research is approximately equal to the social return to research. 
C) the private return to research is less than the social return to research. 
D) the private return to research is positive, but the social return to research is negative. 
A) the private return to research is greater than the social return to research. 
B) the private return to research is approximately equal to the social return to research. 
C) the private return to research is less than the social return to research. 
D) the private return to research is positive, but the social return to research is negative.

Schumpeter's thesis of "creative destruction" is an explanation of economic progress resulting from: A

International differences in income per person in accounting terms must be attributed to differences in either and/or .

If the marginal product of capital net of depreciation equals 10 percent and the rate of population growth equals 2 percent, then this economy will be at the Golden Rule steady state if the rate of technological progress equals percent.

What is the difference between convergence and conditional convergence with respect to predictions of the Solow growth model? Explain.

The Solow model predicts that two economies will converge if the economies start with the same:

Income per person exceeds $25,000 in many countries, but it is below $1,000 per person in many other countries. Based on the Solow growth model, suggest at least four possible explanations for this gap in living standards.

The type of legal system and the level of corruption in a country have been found to be:

The recent worldwide slowdown in economic growth began in the early:

With population growth at rate n and labor-augmenting technological progress at rate g, the Golden Rule steady state requires that the marginal product of capital (MPK):

International data suggest that economies of countries with different steady states will converge to:

If the marginal product of capital net depreciation equals 8 percent, the rate of growth of population equals 2 percent, and the rate of labor-augmenting technical progress equals 2 percent, to reach the Golden Rule level of the capital stock, the rate in this economy must be .

English-style legal systems give protections to shareholders and creditors than French Napoleonic Codes, typically resulting in capital markets and faster rates of economic growth.

The Solow model with population growth and labor-augmenting technological progress predicts balanced growth in the steady state. Growth rates of which variables are predicted to be balanced (i.e., will be equal) in the steady state?

In a steady-state economy with a saving rate s, population growth n, and labor-augmenting technological progress g, the formula for the steady-state ratio of capital per effective worker (k), in terms of output per effective worker (f(k)), is (denoting the depreciation rate by δ):

In the two-sector endogenous growth model, the fraction of labor in universities (u) affects the steady-state:

The productivity slowdown that began in the 1970s has been attributed, at least partly, to each of the following except:

In the Solow model with technological progress, the steady-state growth rate of total output is:

Empirical results justify substantial government subsidies to research based on the finding that the:

The Science of Macroeconomics

The Data of Macroeconomics

National Income Where It Comes From and Where It Goes

Money and Inflation

The Open Economy

Unemployment

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand II: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

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Exam 9: Introduction to Economic Fluctuations

Schumpeter's thesis of "creative destruction" is an explanation of economic progress resulting from: A

International differences in income per person in accounting terms must be attributed to differences in either and/or .

If the marginal product of capital net of depreciation equals 10 percent and the rate of population growth equals 2 percent, then this economy will be at the Golden Rule steady state if the rate of technological progress equals percent.

What is the difference between convergence and conditional convergence with respect to predictions of the Solow growth model? Explain.

The Solow model predicts that two economies will converge if the economies start with the same:

Income per person exceeds $25,000 in many countries, but it is below $1,000 per person in many other countries. Based on the Solow growth model, suggest at least four possible explanations for this gap in living standards.

The type of legal system and the level of corruption in a country have been found to be:

The recent worldwide slowdown in economic growth began in the early:

With population growth at rate n and labor-augmenting technological progress at rate g, the Golden Rule steady state requires that the marginal product of capital (MPK):

International data suggest that economies of countries with different steady states will converge to:

If the marginal product of capital net depreciation equals 8 percent, the rate of growth of population equals 2 percent, and the rate of labor-augmenting technical progress equals 2 percent, to reach the Golden Rule level of the capital stock, the rate in this economy must be .

English-style legal systems give protections to shareholders and creditors than French Napoleonic Codes, typically resulting in capital markets and faster rates of economic growth.

The Solow model with population growth and labor-augmenting technological progress predicts balanced growth in the steady state. Growth rates of which variables are predicted to be balanced (i.e., will be equal) in the steady state?

In a steady-state economy with a saving rate s, population growth n, and labor-augmenting technological progress g, the formula for the steady-state ratio of capital per effective worker (k*), in terms of output per effective worker (f(k*)), is (denoting the depreciation rate by δ):

In the two-sector endogenous growth model, the fraction of labor in universities (u) affects the steady-state:

The productivity slowdown that began in the 1970s has been attributed, at least partly, to each of the following except:

In the Solow model with technological progress, the steady-state growth rate of total output is:

Empirical results justify substantial government subsidies to research based on the finding that the:

The Science of Macroeconomics

The Data of Macroeconomics

National Income Where It Comes From and Where It Goes

Money and Inflation

The Open Economy

Unemployment

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand II: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

Filters

In a steady-state economy with a saving rate s, population growth n, and labor-augmenting technological progress g, the formula for the steady-state ratio of capital per effective worker (k), in terms of output per effective worker (f(k)), is (denoting the depreciation rate by δ):