Exam 26: Gdp and the Measurement of Progress

Catch-up growth can be differentiated from cutting-edge growth as follows:

When a country is at its steady state, I. capital is neither increasing nor decreasing. II. net investment is 0. III. economic growth is 0.

Which of the following choices represents the sources of growth identified by the Solow growth model Y = F(A, K, eL)?

Capital is output that is

In the long run, economic growth is driven by

The level of the capital stock determines the level of output but not its growth rate, at least not in the very long run.

Using a graph showing private marginal cost, private marginal benefit, and social marginal benefit, show how government subsidies of research and development might mitigate the limited idea creation effect of spillovers.

Institutions that are important to the development of knowledge and new ideas include a well-functioning market system, property rights, and a good educational system.

Which of the following is an example of an increase in technological knowledge?

An economy has a capital stock of 100. The economy's labor, technology, and education levels are constant, and the economy has a production function that can be described by . The depreciation rate can be described by the linear function depreciation = 0.02K. Suppose the initial investment rate is investment = 0.2 and then some foreign savings start flowing into the economy. This investment function then changes to 0.3. By how much does the steady state capital stock change? By how much does output change? Show all your calculations.

According to Robert Solow, better ideas are responsible for about _____ of our standard of living.

Suppose that a country has a depreciation rate of 3 percent, a national savings rate of 6 percent, and growth in net exports of -4 percent. Assume that the savings are efficiently transformed into investment, what is the investment rate for this country?

If the depreciation rate is .03 and the capital stock is 200, how many units will depreciate?

If the United States is slightly to the left of its steady-state level of capital stock, an increase in capital production is expected to lead to a higher level of real GDP than the increase in the level of real GDP gained from an improvement in technology.

As more countries gain wealth, private firms will increase R&D to anticipate a larger market.