Question 1

How does population growth affect the steady state?

Accepted Answer

Population growth along with investment and depreciation affect the accumulation of capital per worker. The change in the capital stock per worker is $\Delta k = i - ( \delta + n ) k$ where n is the rate of population growth, d is the rate of depreciation, and ( $\delta$ + n)k is the break even investment. The equation shows that population growth reduces the accumulation of capital per worker much the way depreciation does. Depreciation reduces k by wearing out the capital stock, and population growth reduces k by spreading the capital stock more thinly among a larger population of workers.

Question 2

The formula for the steady-state ratio of capital to labor (k*), with no population growth or technological change, is s:

Accepted Answer

A)  divided by the depreciation rate. 
B)  multiplied by the depreciation rate. 
C)  divided by the product of f(k*) and the depreciation rate. 
D)  multiplied by f(k*) divided by the depreciation rate. 
A)  divided by the depreciation rate. 
B)  multiplied by the depreciation rate. 
C)  divided by the product of f(k*) and the depreciation rate. 
D)  multiplied by f(k*) divided by the depreciation rate. B

Question 3

The Solow growth model describes:

Accepted Answer

A)  how output is determined at a point in time. 
B)  how output is determined with fixed amounts of capital and labor. 
C)  how saving, population growth, and technological change affect output over time. 
D)  the static allocation, production, and distribution of the economy's output. 
A)  how output is determined at a point in time. 
B)  how output is determined with fixed amounts of capital and labor. 
C)  how saving, population growth, and technological change affect output over time. 
D)  the static allocation, production, and distribution of the economy's output. C

Question 4

Suppose an economy is initially in a steady state with capital per worker below the Golden Rule level. If the saving rate increases to a rate consistent with the Golden Rule, then in the transition to the new steady state consumption per worker will:

Accepted Answer

A)  always exceed the initial level. 
B)  first fall below then rise above the initial level. 
C)  first rise above then fall below the initial level. 
D)  always be lower than the initial level. 
A)  always exceed the initial level. 
B)  first fall below then rise above the initial level. 
C)  first rise above then fall below the initial level. 
D)  always be lower than the initial level.

Question 5

If the capital stock equals 200 units in year 1 and the depreciation rate is 5 percent per year, then in year 2, assuming no new or replacement investment, the capital stock would equal _____ units.

Accepted Answer

A)  210 
B)  200 
C)  195 
D)  190 
A)  210 
B)  200 
C)  195 
D)  190

Question 6

In the Solow model, it is assumed that a(n) ______ fraction of capital wears out as the capital-labor ratio increases.

Accepted Answer

A)  smaller 
B)  larger 
C)  constant 
D)  increasing 
A)  smaller 
B)  larger 
C)  constant 
D)  increasing

Question 7

Suppose that two countries are exactly alike in every respect except that the citizens of country A have a higher saving rate than the citizens of country B. a. Which country will have the higher level of output per worker in the steady state? Illustrate graphically.
b. Which country will have the faster rate of growth of output per worker in the steady state?

Accepted Answer

@#LAT-DLM& @#IMG-DLM& b. In the steady state the g

Question 8

Use the following to answer questions :
Exhibit: Steady-State Consumption II  
-(Exhibit: Steady-State Consumption II) The Golden Rule level of steady-state consumption per worker is:

Accepted Answer

A)  AC. 
B)  AB. 
C)  BC. 
D)  DE. 
A)  AC. 
B)  AB. 
C)  BC. 
D)  DE.

Question 9

In the Solow growth model of Chapter 8, the economy ends up with a steady-state level of capital:

Accepted Answer

A)  only if it starts from a level of capital below the steady-state level. 
B)  only if it starts from a level of capital above the steady-state level. 
C)  only if it starts from a steady-state level of capital. 
D)  regardless of the starting level of capital. 
A)  only if it starts from a level of capital below the steady-state level. 
B)  only if it starts from a level of capital above the steady-state level. 
C)  only if it starts from a steady-state level of capital. 
D)  regardless of the starting level of capital.

Question 10

Compare and contrast the impact of a faster rate of population growth on the standard of living (output per worker) in the models by Solow, Malthus, and Kremer.

Accepted Answer

In the Solow growth model a faster rate

Question 11

Use the following to answer questions  :
Exhibit: Steady-State Consumption II  
-(Exhibit: Steady-State Consumption II) The Golden Rule level of steady-state investment per worker is:

Accepted Answer

A)  AC. 
B)  AB. 
C)  BC. 
D)  DE. 
A)  AC. 
B)  AB. 
C)  BC. 
D)  DE.

Question 12

Two economies are identical except that the level of capital per worker is higher in Highland than in Lowland. The production functions in both economies exhibit diminishing marginal product of capital. An extra unit of capital per worker increases output per worker:

Accepted Answer

A)  more in Highland. 
B)  more in Lowland. 
C)  by the same amount in Highland and Lowland. 
D)  in Highland, but not in Lowland. 
A)  more in Highland. 
B)  more in Lowland. 
C)  by the same amount in Highland and Lowland. 
D)  in Highland, but not in Lowland.

Question 13

What is the marginal product of capital (MPK), as shown with the Solow model?

Accepted Answer

The slope of the production fu

Question 14

If a larger share of national output is devoted to investment, starting from an initial steady-state capital stock below the Golden Rule level, then productivity growth will:

Accepted Answer

A)  increase in the short run but not in the long run. 
B)  increase in the long run but not in the short run. 
C)  increase in both the short run and the long run. 
D)  not increase in either the short run or the long run. 
A)  increase in the short run but not in the long run. 
B)  increase in the long run but not in the short run. 
C)  increase in both the short run and the long run. 
D)  not increase in either the short run or the long run.

Question 15

A higher saving rate leads to a:

Accepted Answer

A)  higher rate of economic growth in both the short run and the long run. 
B)  higher rate of economic growth only in the long run. 
C)  higher rate of economic growth in the short run but a decline in the long run. 
D)  larger capital stock and a higher level of output in the long run. 
A)  higher rate of economic growth in both the short run and the long run. 
B)  higher rate of economic growth only in the long run. 
C)  higher rate of economic growth in the short run but a decline in the long run. 
D)  larger capital stock and a higher level of output in the long run.

Question 16

Explain the two uses of saving in the steady state in the Solow model with population growth, but no technological progress.

Accepted Answer

Saving supplies: (1) the investment to r

Question 17

When an economy begins above the Golden Rule, reaching the Golden Rule:

Accepted Answer

A)  produces lower consumption at all times in the future. 
B)  produces higher consumption at all times in the future. 
C)  requires initially reducing consumption to increase consumption in the future. 
D)  requires initially increasing consumption to decrease consumption in the future. 
A)  produces lower consumption at all times in the future. 
B)  produces higher consumption at all times in the future. 
C)  requires initially reducing consumption to increase consumption in the future. 
D)  requires initially increasing consumption to decrease consumption in the future.

Question 18

Unlike the long-run classical model in Chapter 3, the Solow growth model:

Accepted Answer

A)  assumes that the factors of production and technology are the sources of the economy's output. 
B)  describes changes in the economy over time. 
C)  is static. 
D)  assumes that the supply of goods determines how much output is produced. 
A)  assumes that the factors of production and technology are the sources of the economy's output. 
B)  describes changes in the economy over time. 
C)  is static. 
D)  assumes that the supply of goods determines how much output is produced.

Question 19

When f(k) is drawn on a graph with increases in k noted along the horizontal axis, the:

Accepted Answer

A)  graph is a straight line. 
B)  slope of the line eventually gets flatter and flatter. 
C)  slope of the line eventually becomes negative. 
D)  slope of the line eventually becomes steeper and steeper. 
A)  graph is a straight line. 
B)  slope of the line eventually gets flatter and flatter. 
C)  slope of the line eventually becomes negative. 
D)  slope of the line eventually becomes steeper and steeper.

Question 20

Investment per worker (i) as a function of the saving ratio (s) and output per worker (f(k)) may be expressed as:

Accepted Answer

A)  s + f(k). 
B)  s - f(k). 
C)  sf(k). 
D)  s/f(k). 
A)  s + f(k). 
B)  s - f(k). 
C)  sf(k). 
D)  s/f(k).

How does population growth affect the steady state?

The formula for the steady-state ratio of capital to labor (k*), with no population growth or technological change, is s:

The Solow growth model describes:

Suppose an economy is initially in a steady state with capital per worker below the Golden Rule level. If the saving rate increases to a rate consistent with the Golden Rule, then in the transition to the new steady state consumption per worker will:

If the capital stock equals 200 units in year 1 and the depreciation rate is 5 percent per year, then in year 2, assuming no new or replacement investment, the capital stock would equal _____ units.

In the Solow model, it is assumed that a(n) ______ fraction of capital wears out as the capital-labor ratio increases.

Use the following to answer questions : Exhibit: Steady-State Consumption II -(Exhibit: Steady-State Consumption II) The Golden Rule level of steady-state consumption per worker is:

In the Solow growth model of Chapter 8, the economy ends up with a steady-state level of capital:

Compare and contrast the impact of a faster rate of population growth on the standard of living (output per worker) in the models by Solow, Malthus, and Kremer.

Use the following to answer questions : Exhibit: Steady-State Consumption II -(Exhibit: Steady-State Consumption II) The Golden Rule level of steady-state investment per worker is:

Two economies are identical except that the level of capital per worker is higher in Highland than in Lowland. The production functions in both economies exhibit diminishing marginal product of capital. An extra unit of capital per worker increases output per worker:

What is the marginal product of capital (MPK), as shown with the Solow model?

If a larger share of national output is devoted to investment, starting from an initial steady-state capital stock below the Golden Rule level, then productivity growth will:

A higher saving rate leads to a:

Explain the two uses of saving in the steady state in the Solow model with population growth, but no technological progress.

When an economy begins above the Golden Rule, reaching the Golden Rule:

Unlike the long-run classical model in Chapter 3, the Solow growth model:

When f(k) is drawn on a graph with increases in k noted along the horizontal axis, the:

Investment per worker (i) as a function of the saving ratio (s) and output per worker (f(k)) may be expressed as:

The Science of Macroeconomics

The Data of Macroeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labor Market

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand Ii: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

A Dynamic Model of Economic Fluctuations

Understanding Consumer Behavior

The Theory of Investment

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

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Exam 8: Economic Growth I: Capital Accumulation and Population Growth

How does population growth affect the steady state?

The formula for the steady-state ratio of capital to labor (k*), with no population growth or technological change, is s:

The Solow growth model describes:

Suppose an economy is initially in a steady state with capital per worker below the Golden Rule level. If the saving rate increases to a rate consistent with the Golden Rule, then in the transition to the new steady state consumption per worker will:

If the capital stock equals 200 units in year 1 and the depreciation rate is 5 percent per year, then in year 2, assuming no new or replacement investment, the capital stock would equal _____ units.

In the Solow model, it is assumed that a(n) ______ fraction of capital wears out as the capital-labor ratio increases.

Use the following to answer questions : Exhibit: Steady-State Consumption II -(Exhibit: Steady-State Consumption II) The Golden Rule level of steady-state consumption per worker is:

In the Solow growth model of Chapter 8, the economy ends up with a steady-state level of capital:

Compare and contrast the impact of a faster rate of population growth on the standard of living (output per worker) in the models by Solow, Malthus, and Kremer.

Use the following to answer questions : Exhibit: Steady-State Consumption II -(Exhibit: Steady-State Consumption II) The Golden Rule level of steady-state investment per worker is:

Two economies are identical except that the level of capital per worker is higher in Highland than in Lowland. The production functions in both economies exhibit diminishing marginal product of capital. An extra unit of capital per worker increases output per worker:

What is the marginal product of capital (MPK), as shown with the Solow model?

If a larger share of national output is devoted to investment, starting from an initial steady-state capital stock below the Golden Rule level, then productivity growth will:

A higher saving rate leads to a:

Explain the two uses of saving in the steady state in the Solow model with population growth, but no technological progress.

When an economy begins above the Golden Rule, reaching the Golden Rule:

Unlike the long-run classical model in Chapter 3, the Solow growth model:

When f(k) is drawn on a graph with increases in k noted along the horizontal axis, the:

Investment per worker (i) as a function of the saving ratio (s) and output per worker (f(k)) may be expressed as:

The Science of Macroeconomics

The Data of Macroeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labor Market

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand Ii: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

A Dynamic Model of Economic Fluctuations

Understanding Consumer Behavior

The Theory of Investment

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

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