Exam 6: Long-Run Economic Growth

Suppose the rate of economic growth in Mainland was 25 percent, Capital growth 30 percent, and labour growth 20 percent. If the elasticities output with respect to capital and labour are 0.3 and 0.7 respectively, how much is the productivity growth?

The idea that saving equals investment in the Solow model means that a steady state can be reached only when

If the saving rate in Canada increases, the steady-state level of output

In the past ten years, Patagonia's total output has increased from 2000 to 3000, the capital stock has risen from 4000 to 5200, and the labour force has increased from 400 to 580. Suppose a_K = 0.4 and a_N = 0.6. a. How much did capital contribute to economic growth over the decade? b. How much did labour contribute to economic growth over the decade? c. How much did productivity contribute to economic growth over the decade?

All of the following are explanations for the post-1973 productivity slowdown except

In the long run, an increase in the saving rate in a steady-state economy will cause

Country A has a capital-labour ratio that is initially twice as big as that of country B, but neither is yet in a steady state. Both countries have the same production function, f(k) = 6 k^1/2. Country A has a 10% saving rate, 10% population growth rate, and 5% depreciation rate, while country B has a 20% saving rate, 10% population growth rate, and 20% depreciation rate. a. Calculate the steady-state capital- labour ratio for each country. Does the initial capital-labour ratio affect your results? b. Calculate output per worker and consumption per worker for each country. Which country has the highest output per worker? The highest consumption per worker? c. In general, do all the fundamental characteristics of different countries need to be identical for convergence of output per worker?

Conditional convergence means that in the long run,

Which of the following changes would lead to a higher living standards?

Which of the following would cause an increase in consumption per worker in a steady state?

The major source of economic growth is

In the very long run, the level of consumption per worker can grow continually if

How would each of the following changes affect the steady-state values of the capital-labour ratio, output per worker, and consumption per worker? a. A change in the composition of the capital stock raises the depreciation rate. b. A change in social norms lowers the population growth rate. c. Government tax policies change to encourage a higher saving rate. d. A supply shock reduces productivity sharply.

A productivity improvement will cause

a. Draw figures showing the relationship in the Solow model between the capital-labour ratio and (1) output per worker and steady-state investment per worker, (2) consumption per worker, and (3) steady-state investment per worker and saving per worker b. Show what happens to each of your figures in part (a) when each of the following changes occur, and explain what happens to the capital-labour ratio, output per worker, and consumption per worker. (1) population growth rises (2) the depreciation rate falls (3) the saving rate rises (4) productivity declines

If there is international trade and finance, output per worker will converge in rich and poor countries. Will consumption per worker converge?

The oil price explanation of the slowdown in economic growth after 1973 is inconsistent with which of the following facts?

An increase in pollution has caused a permanent increase in the rate of capital depreciation. This would cause

You support an industrial policy for Canada. Which of the following would be the weakest argument for an industrial policy?

Suppose the current level of output is 5000, and the elasticity of output with respect to capital is 0.4. A 10% increase in capital would increase the current level of output to