Exam 26: Gdp and the Measurement of Progress

Why will growth in China slow down? I. The productivity of its capital will decline. II. There are problems within its systems of government, banking, and education. III. It has too many people to sustain this level of production.

The 2003 Iraqi war destroyed large amounts of capital. Later, insurgent activity continued to destroy capital and created instability in the government. Today, hostilities have waned and the government has become more stable. According to the Solow growth model, over the next few years we would expect to see growth rates in Iraq to be _____ those of high-income countries with similar institutions followed by growth rates that are _______ the growth rates in those countries.

Using a diagram of the Solow growth model, show how countries can achieve sustained long run economic growth.

The story of China and the United States illustrates which of the following concepts?

The production function expresses a relationship between

An increase in investment results in a higher level of steady- state output.

Over time, capital wears out. The official term for this is

Consider the following production function: . When capital stock is 144, output is

If all the countries of the world were underdeveloped with low levels of income except for the United States, we would expect that the growth rates of developing countries would be ______ than they are in the world today because ______ is important for long-term economic growth.

If government legislation requires businesses to switch to a different method of production that generates 50 percent fewer greenhouse gas emissions, compliance to this policy (assuming no other changes) can be illustrated in the Solow model by ______ the aggregate production function that leads to a ______ level of real GDP per person.

The increase in world population will lead to an increase in ideas for production.

Currently China is growing at a faster rate than the United States. Eventually, the rate of growth in China will slow down.

The simplest form of the Solow model predicts that economic growth will continue to take place in the long run.

The figure shows the depreciation function for an economy. The depreciation rate is

What is the tendency called for poorer countries to grow faster than richer countries with the same steady-state levels of output?

(Figure: Capital Depreciation) Figure: Capital Depreciation The figure shows the depreciation function for an economy. The depreciation rate is

A small country has an aggregate production function per hour of labor given by Y = K1/2. Its depreciation rate is 1 percent and its investment rate is 10 percent. What is its steady-state level of capital?

Considering the incentives for the private market to conduct research and development, we expect that the amount of research and development conducted by the private sector would be ____ the efficient level because of the ____ property of new knowledge.

The Solow model can be used to gain insight about deviations in real GDP from potential real GDP.

Which of the following is NOT shown in the Solow growth model?