Question 1

In the steady state, output per person is growing.

Accepted Answer

A) True 
 B)False

Question 2

Refer to the following figure when answering

Figure 5.1: Solow Diagram  
-In Figure 5.1, at K1, net investment is ________ and the economy ________.

Accepted Answer

A)  negative; will grow 
B)  positive; is in its steady state 
C)  zero; is in its steady state 
D)  positive; will grow 
E)  negative; will contract 
A)  negative; will grow 
B)  positive; is in its steady state 
C)  zero; is in its steady state 
D)  positive; will grow 
E)  negative; will contract

Question 3

An implication of the Solow model is that once an economy reaches the steady state,

Accepted Answer

A)  long-term growth continues indefinitely 
B)  long-term growth does not continue 
C)  long-term growth accelerates 
D)  long-term growth decelerates 
E)  None of these answers are correct. 
A)  long-term growth continues indefinitely 
B)  long-term growth does not continue 
C)  long-term growth accelerates 
D)  long-term growth decelerates 
E)  None of these answers are correct.

Question 4

If we define the saving rate as $\bar { s }$ , output as $F \left( K _ { t } , \bar { L } \right)$
, and the depreciation rate as $\bar { d }$
, and if $\bar { s }  { F } \left( K _ { t } , \bar { L } \right) > \bar { d } K _ { t }$
, the economy is:

Accepted Answer

A)  contracting 
B)  at the steady state 
C)  growing 
D)  in its short-run equilibrium 
E)  None of these answers are correct. 
A)  contracting 
B)  at the steady state 
C)  growing 
D)  in its short-run equilibrium 
E)  None of these answers are correct.

Question 5

In the Solow model, the equation of capital accumulation is:

Accepted Answer

A)  $\Delta K _ { t } = I _ { t } - \bar { d } K _ { t }$ 
B)  $K _ { t + 1 } = K _ { t } + I _ { t } - \bar { d } K _ { t }$ 
C)  $K _ { t + 1 } = K _ { t } + I _ { t } + \bar { d } K _ { t }$ 
D)  $K _ { t + 1 } = K _ { t } + d K _ { t } - I _ { t }$ 
E)  $K _ { t } + I _ { t } = K _ { t + 1 }$ 
A)  $\Delta K _ { t } = I _ { t } - \bar { d } K _ { t }$ 
B)  $K _ { t + 1 } = K _ { t } + I _ { t } - \bar { d } K _ { t }$ 
C)  $K _ { t + 1 } = K _ { t } + I _ { t } + \bar { d } K _ { t }$ 
D)  $K _ { t + 1 } = K _ { t } + d K _ { t } - I _ { t }$ 
E)  $K _ { t } + I _ { t } = K _ { t + 1 }$

Question 6

Assume a production function is given by $Y = \bar { A } K _ { t } ^ { 1 / 3 } \bar { L } ^ { 2 / 3 }$ . If $\bar { A } = \bar { L } = 1$
, the depreciation rate is $\bar { d } = 0.05$
, and the saving rate is $\bar { s } = 0.1 ,$
The steady-state level of capital is about:

Accepted Answer

A)  0.3 
B)  1.3 
C)  2.8 
D)  0.8 
E)  1.6 
A)  0.3 
B)  1.3 
C)  2.8 
D)  0.8 
E)  1.6

Question 7

Refer to the following figure when answering

Figure 5.1: Solow Diagram  
-In Figure 5.1, if the economy begins with the initial capital stock at K3, the capital stock will ________ and the economy will ________.

Accepted Answer

A)  increase; grow 
B)  decrease; shrink 
C)  stay constant; be in its steady state 
D)  decrease; be in its steady state 
E)  stay constant; shrink 
A)  increase; grow 
B)  decrease; shrink 
C)  stay constant; be in its steady state 
D)  decrease; be in its steady state 
E)  stay constant; shrink

Question 8

On average, if both rich and poor countries grow at the same rate, this suggests that:

Accepted Answer

A)  most countries are contracting 
B)  most countries still are growing 
C)  no countries have reached their steady state 
D)  most countries have reached their steady state 
E)  most countries are unproductive 
A)  most countries are contracting 
B)  most countries still are growing 
C)  no countries have reached their steady state 
D)  most countries have reached their steady state 
E)  most countries are unproductive

Question 9

The Solow model assumes the saving rate decreases as income increases.

Accepted Answer

A) True 
 B)False

Question 10

The endogenous variables in the Solow model are:

Accepted Answer

A)  the capital stock, labor, and output 
B)  consumption, investment, the capital stock, labor, and the saving rate 
C)  consumption, investment, the capital stock, labor, and output 
D)  productivity and the depreciation and saving rates 
E)  the capital stock, labor, output, and the saving rate 
A)  the capital stock, labor, and output 
B)  consumption, investment, the capital stock, labor, and the saving rate 
C)  consumption, investment, the capital stock, labor, and output 
D)  productivity and the depreciation and saving rates 
E)  the capital stock, labor, output, and the saving rate

Question 11

A decline in the saving rate will cause the steady state level of output and capital to rise.

Accepted Answer

A) True 
 B)False

Question 12

Using the Solow model, if, in time t = 50, the capital stock is K50 = 150, investment is I50 = 15, and $\bar { d } = 0.1$ is the depreciation rate, capital accumulation is:

Accepted Answer

A)  $\Delta K _ { 50 } = 5$ 
B)  $\Delta K _ { 50 } = - 15$ 
C)  $\Delta K _ { 50 } = 15$ 
D)  $\Delta K _ { 50 } = 120$ 
E)  $\Delta K _ { S 0 } = 0$ 
A)  $\Delta K _ { 50 } = 5$ 
B)  $\Delta K _ { 50 } = - 15$ 
C)  $\Delta K _ { 50 } = 15$ 
D)  $\Delta K _ { 50 } = 120$ 
E)  $\Delta K _ { S 0 } = 0$

Question 13

Which of the following is an exogenous variable in the Solow model?

Accepted Answer

A)  productivity 
B)  depreciation rate 
C)  saving rate 
D)  the initial capital stock 
E)  All of these answers are correct. 
A)  productivity 
B)  depreciation rate 
C)  saving rate 
D)  the initial capital stock 
E)  All of these answers are correct.

Question 14

If a natural disaster destroys a large portion of a country's capital stock but the saving and depreciation rates are unchanged, the Solow model predicts that the economy will grow and eventually reach:

Accepted Answer

A)  the same steady-state level of output as it would have before the disaster 
B)  a higher steady-state level of output than it would have before the disaster 
C)  a lower steady-state level of output than it would have before the disaster 
D)  Not enough information is given. 
E)  None of these answers are correct. 
A)  the same steady-state level of output as it would have before the disaster 
B)  a higher steady-state level of output than it would have before the disaster 
C)  a lower steady-state level of output than it would have before the disaster 
D)  Not enough information is given. 
E)  None of these answers are correct.

Question 15

If we include population growth in the Solow model, we can model this concept by thinking of population growth as capital depreciation per person.

Accepted Answer

A) True 
 B)False

Question 16

In the Solow model, if gross investment is equal to capital depreciation, the economy accumulates new capital.

Accepted Answer

A) True 
 B)False

Question 17

In the corn farm example, corn can be used as:

Accepted Answer

A)  only investment 
B)  either saving or depreciation 
C)  only consumption 
D)  either consumption or investment 
E)  tax revenue 
A)  only investment 
B)  either saving or depreciation 
C)  only consumption 
D)  either consumption or investment 
E)  tax revenue

Question 18

In the Solow model, it is assumed that a constant fraction of capital depreciates in each period.

Accepted Answer

A) True 
 B)False

Question 19

A change in the capital stock, $\Delta K _ { t + 1 }$  , can be expressed as a function of the saving rate, $\bar { s }$  , output $F \left( K _ { t } \bar { L } \right)$  , the capital stock, Kt, and the depreciation rate by $\bar d$  , as $\Delta K _ { t + 1 } = \bar { d } F \left( K _ { t } , \bar { L } \right) - \bar { s } K _ { t }$  .

Accepted Answer

A) True 
 B)False

Question 20

Refer to the following figure when answering  
Figure 5.2  
-In Figure 5.2, steady state consumption is represented by:

Accepted Answer

A)  a $\rightarrow$ b 
B)  c $\rightarrow$ a 
C)  Consumption is not represented. 
D)  b 
E)  a $\rightarrow$ d 
A)  a $\rightarrow$ b 
B)  c $\rightarrow$ a 
C)  Consumption is not represented. 
D)  b 
E)  a $\rightarrow$ d

In the steady state, output per person is growing.

Refer to the following figure when answering Figure 5.1: Solow Diagram -In Figure 5.1, at K₁, net investment is and the economy .

An implication of the Solow model is that once an economy reaches the steady state,

If we define the saving rate as $\bar { s }$ , output as $F \left( K _ { t } , \bar { L } \right)$ , and the depreciation rate as $\bar { d }$ , and if $\bar { s } { F } \left( K _ { t } , \bar { L } \right) > \bar { d } K _ { t }$ , the economy is:

In the Solow model, the equation of capital accumulation is:

Assume a production function is given by $Y = \bar { A } K _ { t } ^ { 1 / 3 } \bar { L } ^ { 2 / 3 }$ . If $\bar { A } = \bar { L } = 1$ , the depreciation rate is $\bar { d } = 0.05$ , and the saving rate is $\bar { s } = 0.1 ,$ The steady-state level of capital is about:

Refer to the following figure when answering Figure 5.1: Solow Diagram -In Figure 5.1, if the economy begins with the initial capital stock at K₃, the capital stock will and the economy will .

On average, if both rich and poor countries grow at the same rate, this suggests that:

The Solow model assumes the saving rate decreases as income increases.

The endogenous variables in the Solow model are:

A decline in the saving rate will cause the steady state level of output and capital to rise.

Using the Solow model, if, in time t = 50, the capital stock is K₅₀ = 150, investment is I₅₀ = 15, and $\bar { d } = 0.1$ is the depreciation rate, capital accumulation is:

Which of the following is an exogenous variable in the Solow model?

If a natural disaster destroys a large portion of a country's capital stock but the saving and depreciation rates are unchanged, the Solow model predicts that the economy will grow and eventually reach:

If we include population growth in the Solow model, we can model this concept by thinking of population growth as capital depreciation per person.

In the Solow model, if gross investment is equal to capital depreciation, the economy accumulates new capital.

In the corn farm example, corn can be used as:

In the Solow model, it is assumed that a constant fraction of capital depreciates in each period.

Refer to the following figure when answering Figure 5.2 -In Figure 5.2, steady state consumption is represented by:

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long-Run Economic Growth

A Model of Production

Growth and Ideas

The Labor Market, Wages, and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Exam 5: The Solow Growth Model

In the steady state, output per person is growing.

Refer to the following figure when answering Figure 5.1: Solow Diagram -In Figure 5.1, at K1, net investment is ________ and the economy ________.

An implication of the Solow model is that once an economy reaches the steady state,

In the Solow model, the equation of capital accumulation is:

Refer to the following figure when answering Figure 5.1: Solow Diagram -In Figure 5.1, if the economy begins with the initial capital stock at K3, the capital stock will ________ and the economy will ________.

On average, if both rich and poor countries grow at the same rate, this suggests that:

The Solow model assumes the saving rate decreases as income increases.

The endogenous variables in the Solow model are:

A decline in the saving rate will cause the steady state level of output and capital to rise.

Using the Solow model, if, in time t = 50, the capital stock is K50 = 150, investment is I50 = 15, and dˉ=0.1\bar { d } = 0.1dˉ=0.1 is the depreciation rate, capital accumulation is:

Which of the following is an exogenous variable in the Solow model?

If a natural disaster destroys a large portion of a country's capital stock but the saving and depreciation rates are unchanged, the Solow model predicts that the economy will grow and eventually reach:

If we include population growth in the Solow model, we can model this concept by thinking of population growth as capital depreciation per person.

In the Solow model, if gross investment is equal to capital depreciation, the economy accumulates new capital.

In the corn farm example, corn can be used as:

In the Solow model, it is assumed that a constant fraction of capital depreciates in each period.

Refer to the following figure when answering Figure 5.2 -In Figure 5.2, steady state consumption is represented by:

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long-Run Economic Growth

A Model of Production

Growth and Ideas

The Labor Market, Wages, and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Refer to the following figure when answering Figure 5.1: Solow Diagram -In Figure 5.1, at K₁, net investment is and the economy .

Refer to the following figure when answering Figure 5.1: Solow Diagram -In Figure 5.1, if the economy begins with the initial capital stock at K₃, the capital stock will and the economy will .

Using the Solow model, if, in time t = 50, the capital stock is K₅₀ = 150, investment is I₅₀ = 15, and $\bar { d } = 0.1$ is the depreciation rate, capital accumulation is: