Exam 9: Economic Growth II: Technology, Empirics, and Policy

The efficiency of labor is a term that does not reflect the:

In the Solow model with technological change, the Golden Rule level of capital is the steady state that maximizes:

In the basic endogenous growth model, income can grow forever-even without exogenous technological progress-because:

Assume that a country's production function is Y = AK^0.3L^0.7. 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 situati on? (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 $M P K$ 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 $( \delta + n + g ) K$ , where $\delta$ 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?

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 $\delta$ ):

In the two-sector endogenous growth model, income growth persists because:

Suppose a government is able to impose controls that limit the number of children people can have. Use the Solow growth model of Chapter 9 to graphically illustrate the impact of the slower rate of population growth on the steady-state capital-labor ratio and the steady-state level of output per worker. Be sure to label the: a. axes; b. curves; c. initial steady-state levels; d. terminal steady-state levels; and e. the direction curves shift.

In the Solow growth model with population growth and technological change, the steady-state growth rate of income per person depends on:

Over the past 50 years in the United States:

If two economies are identical (including having the same saving rates, population growth rates, and efficiency of labor), but one economy has a smaller capital stock, then the steady-state level of income per worker in the economy with the smaller capital stock:

The Solow residual equals the percentage change in output:

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

If the per-worker production function is y = Ak, where A is a positive constant, in the steady state, a:

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

a. What is the Solow residual? b. Compare Prescott’s interpretation of the fluctuations of the Solow residual over the business cycle with more standard explanations of these fluctuations.

When capital increases by $\Delta$ K units and labor increases by $\Delta$ L units, output ( $\Delta$ Y) increases by:

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 a steady state with population growth and technological progress:

Explain how the Solow growth model differs from models of endogenous growth with respect to: a. the sources of technological progress. b. returns to capital.