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

What does the Solow model predict about convergence? Why does conditional convergence occur?

In year 1, capital stock was 6, labor input was 3, and output was 12. In year 2, capital was 7, labor was 4, and output was 14. If shares of labor and capital were each 1/2, between the two years, total factor productivity:

Suppose a government is able to permanently reduce its budget deficit. Use the Solow growth model of Chapter 9 to graphically illustrate the impact of a permanent government deficit reduction 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.

Suppose Congress passes significant tax cuts on household income but does not reduce spending, so that the government budget deficit is larger. Use the Solow growth model of Chapter 9 to graphically illustrate the impact of the tax cut 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 a steady state with population growth and technological progress:

An alternative to Prescott's explanation of the cyclical behavior of the Solow residual is that it is the result of:

If two economies are identical (with the same population growth rates and rates of technological progress), but one economy has a lower saving rate, then the steady-state level of income per worker in the economy with the lower saving rate:

If capital grows at 3 percent per year and labor grows at 1 percent per year, and capital's share is 1/3 while labor's share is 2/3, if there is no technological progress and the neoclassical assumptions hold, the growth rate of output will be:

Labor hoarding refers to:

International data suggest that economies of countries with different steady states will converge to:

Differences in factor accumulation and/or differences in production efficiency must account for all international differences in:

Who propounded the concept of "creative destruction"? What does this concept mean?

With technological progress, how is the Golden Rule of capital defined in steady state?

Increases in the rate of growth of income per person in the United States in the mid-1990s is mostly likely the result of:

In the Solow growth model, capital exhibits ______ returns. In the basic endogenous growth model, capital exhibits ______ returns.

The rate of growth of labor productivity (Y/L) may be expressed as the rate of growth of total factor productivity:

The preponderance of empirical evidence supports the hypothesis that economies that are open to trade _____ than comparable closed economies.

What is balanced growth? Give an example.

In comparing two countries with different levels of education but the same saving rate, same rate of population growth, and same rate of technological progress, one would expect the more highly educated country to have:

Two countries, Highland and Lowland, are described by the Solow growth model. Both countries are identical, except that the rate of labor-augmenting technological progress is higher in Highland than in Lowland. a. In which country is the steady-state growth rate of output per effective worker higher? b. In which country is the steady-state growth rate of total output higher? c. Does the Solow growth model predict that the two economies will converge to the same steady state?