Question 1

The Golden Rule level of capital accumulation is the steady state with the highest level of:

Accepted Answer

A)  output per worker. 
B)  capital per worker. 
C)  savings per worker. 
D)  consumption per worker. 
A)  output per worker. 
B)  capital per worker. 
C)  savings per worker. 
D)  consumption per worker.

Question 2

The initial steady-state level of capital per worker in Macroland is 5. The Golden Rule level of capital per worker in Macroland is 8. a. What must change in Macroland to achieve the Golden Rule steady state?
b. Why might the Golden Rule steady state be preferred to the initial steady state?
c. Why might some current workers in $M$ acroland prefer the initial steady state to the Golden Rule steady state?

Accepted Answer

a. The saving rate in Macrol and must be

Question 3

The change in capital stock per worker ($\Delta$k) may be expressed as a function of s = the saving ratio, f(k) = output per worker, k = capital per worker, and$\delta$ = the depreciation rate, by the equation:

Accepted Answer

A)  $\Delta$k = sf(k)/ $\delta$k. 
B)  $\Delta$k = sf(k) ×  $\delta$k. 
C)  $\Delta$k = sf(k) +  $\delta$k. 
D)  $\Delta$k = sf(k) -  $\delta$k. 
A)  $\Delta$k = sf(k)/ $\delta$k. 
B)  $\Delta$k = sf(k) ×  $\delta$k. 
C)  $\Delta$k = sf(k) +  $\delta$k. 
D)  $\Delta$k = sf(k) -  $\delta$k.

Question 4

An increase in the rate of population growth with no change in the saving rate:

Accepted Answer

A)  increases the steady-state level of capital per worker. 
B)  decreases the steady-state level of capital per worker. 
C)  does not affect the steady-state level of capital per worker. 
D)  decreases the rate of output growth in the short run. 
A)  increases the steady-state level of capital per worker. 
B)  decreases the steady-state level of capital per worker. 
C)  does not affect the steady-state level of capital per worker. 
D)  decreases the rate of output growth in the short run.

Question 5

What does the Solow model predict?

Accepted Answer

The Solow model predicts:
a. Increasing

Question 6

In the Solow growth model, if two countries are otherwise identical (with the same production function, same saving rate, same depreciation rate, and same rate of population growth) except that Country Large has a population of 1 billion workers and Country Small has a population of 10 million workers, then the steady-state level of output per worker will be _____ and the steady-state growth rate of output per worker will be _____.

Accepted Answer

A)  the same in both countries; the same in both countries 
B)  higher in Country Large; higher in Country Large 
C)  higher in Country Small; higher in Country Small 
D)  higher in Country Large; higher in Country Small 
A)  the same in both countries; the same in both countries 
B)  higher in Country Large; higher in Country Large 
C)  higher in Country Small; higher in Country Small 
D)  higher in Country Large; higher in Country Small

Question 7

How does population growth help explain why some countries are poor and some are rich?

Accepted Answer

An increase in the rate of population gr

Question 8

The production function y = f(k) means:

Accepted Answer

A)  labor is not a factor of production. 
B)  output per worker is a function of labor productivity. 
C)  output per worker is a function of capital per worker. 
D)  the production function exhibits increasing returns to scale. 
A)  labor is not a factor of production. 
B)  output per worker is a function of labor productivity. 
C)  output per worker is a function of capital per worker. 
D)  the production function exhibits increasing returns to scale.

Question 9

If an economy with no population growth or technological change has a steady-state MPK of 0.125, a depreciation rate of 0.1, and a saving rate of 0.225, then the steady-state capital stock:

Accepted Answer

A)  is greater than the Golden Rule level. 
B)  is less than the Golden Rule level. 
C)  equals the Golden Rule level. 
D)  could be either above or below the Golden Rule level. 
A)  is greater than the Golden Rule level. 
B)  is less than the Golden Rule level. 
C)  equals the Golden Rule level. 
D)  could be either above or below the Golden Rule level.

Question 10

In the steady state with no population growth or technological change, the capital stock does not change because investment equals:

Accepted Answer

A)  output per worker. 
B)  the marginal product of capital. 
C)  depreciation. 
D)  consumption. 
A)  output per worker. 
B)  the marginal product of capital. 
C)  depreciation. 
D)  consumption.

Question 11

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

Accepted Answer

A)  output per worker. 
B)  output per unit of capital. 
C)  the marginal product of labor. 
D)  the marginal product of capital. 
A)  output per worker. 
B)  output per unit of capital. 
C)  the marginal product of labor. 
D)  the marginal product of capital.

Question 12

Consider two countries that are otherwise identical (have the same saving rates and depreciation rates), but the population of Country Large is 100 million, while the population of Country Small is 10 million. Use the Solow model with no technological change to compare the steady-state levels of output per worker if: a. the population growth rates are the same in the two countries.
b. the population growth rate is higher in Country Large.

Accepted Answer

a. The steady-state levels of output per

Question 13

In the Solow growth model of an economy with population growth but no technological change, the break-even level of investment must do all of the following except:

Accepted Answer

A)  offset the depreciation of existing capital. 
B)  provide capital for new workers. 
C)  equal the marginal productivity of capital (MPK). 
D)  keep the level of capital per worker constant. 
A)  offset the depreciation of existing capital. 
B)  provide capital for new workers. 
C)  equal the marginal productivity of capital (MPK). 
D)  keep the level of capital per worker constant.

Question 14

According to Kremer, large populations:

Accepted Answer

A)  require the capital stock to be spread thinly, thereby reducing living standards. 
B)  place great strains on an economy's productive resources, resulting in perpetual poverty. 
C)  are a prerequisite for technological advances and higher living standards. 
D)  are not a factor in determining living standards. 
A)  require the capital stock to be spread thinly, thereby reducing living standards. 
B)  place great strains on an economy's productive resources, resulting in perpetual poverty. 
C)  are a prerequisite for technological advances and higher living standards. 
D)  are not a factor in determining living standards.

Question 15

The Golden Rule level of the steady-state capital stock:

Accepted Answer

A)  will be reached automatically if the saving rate remains constant over a long period of time. 
B)  will be reached automatically if each person saves enough to provide for his or her retirement. 
C)  implies a choice of a particular saving rate. 
D)  should be avoided by an enlightened government. 
A)  will be reached automatically if the saving rate remains constant over a long period of time. 
B)  will be reached automatically if each person saves enough to provide for his or her retirement. 
C)  implies a choice of a particular saving rate. 
D)  should be avoided by an enlightened government.

Question 16

It rains so much in the country of Tropicana that capital equipment rusts out (depreciates) at a much faster rate than it does in the country of Sahara. If the countries are otherwise identical, in which country will the Golden Rule level of capital per worker be higher? Illustrate graphically.

Accepted Answer

The Golden Rule leve

Question 17

______ cause(s) the capital stock to rise, while ______ cause(s) the capital stock to fall.

Accepted Answer

A)  Inflation; deflation 
B)  Interest rates; the discount rate 
C)  Investment; depreciation 
D)  International trade; depressions 
A)  Inflation; deflation 
B)  Interest rates; the discount rate 
C)  Investment; depreciation 
D)  International trade; depressions

Question 18

If all wage income is consumed, all capital income is saved, and all factors of production earn their marginal products, then:

Accepted Answer

A)  the economy will reach a steady-state level of capital stock below the Golden Rule level. 
B)  the economy will reach a steady-state level of capital stock above the Golden Rule level. 
C)  wherever the economy starts out, it will not grow. 
D)  wherever the economy starts out, it will reach a steady-state level of capital stock equal to the Golden Rule level. 
A)  the economy will reach a steady-state level of capital stock below the Golden Rule level. 
B)  the economy will reach a steady-state level of capital stock above the Golden Rule level. 
C)  wherever the economy starts out, it will not grow. 
D)  wherever the economy starts out, it will reach a steady-state level of capital stock equal to the Golden Rule level.

Question 19

If an economy is in a steady state with no population growth or technological change and the capital stock is below the Golden Rule:

Accepted Answer

A)  a policymaker should definitely take all possible steps to increase the saving rate. 
B)  if the saving rate is increased, output and consumption per capita will both rise, both in the short and long runs. 
C)  if the saving rate is increased, output per capita will at first decline and then rise above its initial level, and consumption per capita will rise both in the short and long runs. 
D)  if the saving rate is increased, output per capita will rise and consumption per capita will first decline and then rise above its initial level. 
A)  a policymaker should definitely take all possible steps to increase the saving rate. 
B)  if the saving rate is increased, output and consumption per capita will both rise, both in the short and long runs. 
C)  if the saving rate is increased, output per capita will at first decline and then rise above its initial level, and consumption per capita will rise both in the short and long runs. 
D)  if the saving rate is increased, output per capita will rise and consumption per capita will first decline and then rise above its initial level.

Question 20

In the Solow growth model of Chapter 8, for any given capital stock, the ______ determines how much output the economy produces and the ______ determines the allocation of output between consumption and investment.

Accepted Answer

A)  saving rate; production function 
B)  depreciation rate; population growth rate 
C)  production function; saving rate 
D)  population growth rate; saving rate 
A)  saving rate; production function 
B)  depreciation rate; population growth rate 
C)  production function; saving rate 
D)  population growth rate; saving rate

The Golden Rule level of capital accumulation is the steady state with the highest level of:

The change in capital stock per worker ( $\Delta$ k) may be expressed as a function of s = the saving ratio, f(k) = output per worker, k = capital per worker, and $\delta$ = the depreciation rate, by the equation:

An increase in the rate of population growth with no change in the saving rate:

What does the Solow model predict?

How does population growth help explain why some countries are poor and some are rich?

The production function y = f(k) means:

If an economy with no population growth or technological change has a steady-state MPK of 0.125, a depreciation rate of 0.1, and a saving rate of 0.225, then the steady-state capital stock:

In the steady state with no population growth or technological change, the capital stock does not change because investment equals:

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

In the Solow growth model of an economy with population growth but no technological change, the break-even level of investment must do all of the following except:

According to Kremer, large populations:

The Golden Rule level of the steady-state capital stock:

It rains so much in the country of Tropicana that capital equipment rusts out (depreciates) at a much faster rate than it does in the country of Sahara. If the countries are otherwise identical, in which country will the Golden Rule level of capital per worker be higher? Illustrate graphically.

cause(s) the capital stock to rise, while cause(s) the capital stock to fall.

If all wage income is consumed, all capital income is saved, and all factors of production earn their marginal products, then:

If an economy is in a steady state with no population growth or technological change and the capital stock is below the Golden Rule:

In the Solow growth model of Chapter 8, for any given capital stock, the determines how much output the economy produces and the determines the allocation of output between consumption and investment.

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

Filters

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

The Golden Rule level of capital accumulation is the steady state with the highest level of:

The change in capital stock per worker ( Δ\DeltaΔ k) may be expressed as a function of s = the saving ratio, f(k) = output per worker, k = capital per worker, and δ\deltaδ = the depreciation rate, by the equation:

An increase in the rate of population growth with no change in the saving rate:

What does the Solow model predict?

How does population growth help explain why some countries are poor and some are rich?

The production function y = f(k) means:

If an economy with no population growth or technological change has a steady-state MPK of 0.125, a depreciation rate of 0.1, and a saving rate of 0.225, then the steady-state capital stock:

In the steady state with no population growth or technological change, the capital stock does not change because investment equals:

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

In the Solow growth model of an economy with population growth but no technological change, the break-even level of investment must do all of the following except:

According to Kremer, large populations:

The Golden Rule level of the steady-state capital stock:

It rains so much in the country of Tropicana that capital equipment rusts out (depreciates) at a much faster rate than it does in the country of Sahara. If the countries are otherwise identical, in which country will the Golden Rule level of capital per worker be higher? Illustrate graphically.

______ cause(s) the capital stock to rise, while ______ cause(s) the capital stock to fall.

If all wage income is consumed, all capital income is saved, and all factors of production earn their marginal products, then:

If an economy is in a steady state with no population growth or technological change and the capital stock is below the Golden Rule:

In the Solow growth model of Chapter 8, for any given capital stock, the ______ determines how much output the economy produces and the ______ determines the allocation of output between consumption and investment.

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

Filters

The change in capital stock per worker ( $\Delta$ k) may be expressed as a function of s = the saving ratio, f(k) = output per worker, k = capital per worker, and $\delta$ = the depreciation rate, by the equation:

cause(s) the capital stock to rise, while cause(s) the capital stock to fall.

In the Solow growth model of Chapter 8, for any given capital stock, the determines how much output the economy produces and the determines the allocation of output between consumption and investment.