Deck 7: Economic Growth: Malthus and Solow

Question 1

In an exogenous growth model,growth is caused by

A) capital accumulation.
B) government policies.
C) human capital accumulation.
D) forces that are not explained by the model itself.

Answer 1

forces that are not explained by the model itself.

Question 2

There is evidence that income per worker is converging in

A) the richest countries and the poorest countries.
B) the richest countries, but not the poorest countries.
C) the poorest countries, but not the richest countries.
D) neither the richest nor the poorest countries.

Answer 2

the richest countries, but not the poorest countries.

Question 3

Recent evidence suggests that output per worker is

A) positively related to both the rate of investment and to the rate of population growth.
B) positively related to the rate of investment and negatively related to the rate of population growth.
C) negatively related to the rate of investment and positively related to the rate of population growth.
D) negatively related to both the rate of investment and to the rate of population growth.

Answer 3

positively related to the rate of investment and negatively related to the rate of population growth.

Question 4

On average,for the last 100 years or more,real GDP per capita in the United States has increased by

A) 0.5% per year.
B) 1% per year.
C) 2% per year.
D) 4% per year.

Question 5

The Malthusian model emphasizes fixity in which of the following factors of production?

A) labor
B) land
C) energy
D) none of the above

Question 6

If changes in economic policy could cause the growth rate of real GDP to increase by 1% per year for 100 years,then GDP would be ________ % higher after 100 years than it would have been otherwise.

A) 1.3
B) 2.0
C) 2.7
D) 3.8

Question 7

The Solow model emphasizes the role of which of the following factors of production?

A) land
B) labor
C) capital
D) natural resources

Question 8

In the Malthusian model,population growth is endogenous because

A) the birth rate is endogenous.
B) the death rate is endogenous.
C) the birth and death rates are endogenous.
D) neither is endogenous.

Question 9

Why do we analyze the steady state in the Malthusian model?

A) Because that is all we know how to do.
B) Because there is a non-steady state that is not interesting.
C) Because this is the Pareto optimum.
D) Because the long run equilibrium of the model is the steady state.

Question 10

The Malthusian model performs poorly in explaining economic growth after the

A) French Revolution.
B) American Revolution.
C) Industrial Revolution.
D) Bio-technology Revolution.

Question 11

A steady state is

A) a temporary equilibrium.
B) a Pareto Optimum.
C) a long-run equilibrium.
D) an economy with ongoing fluctuations.

Question 12

In the Malthusian model,the population growth rate is

A) exogenous.
B) positively related to consumption per worker.
C) negatively related to consumption per worker.
D) assumed to be constant.

Question 13

The idea that an improvement in technology causes an increase in population but causes no increase in the average standard of living is attributed to

A) Adam Smith.
B) Thomas Malthus.
C) Robert Solow.
D) Milton Friedman.

Question 14

When we compare poor and rich countries in the world

A) There is much greater dispersion in growth rates in per capita income for the poor countries than for the rich countries.
B) The investment rate is higher for poor countries than for rich countries.
C) There is much greater dispersion in growth rates in per capita income for the rich countries than for the poor countries.
D) Population growth rates are higher in rich countries than in poor countries.

Question 15

In the Malthusian model,an improvement in the technology of growing food is likely to

A) increase the equilibrium size of the population and increase the equilibrium level of consumption per worker.
B) increase the equilibrium size of the population and decrease the equilibrium level of consumption per worker.
C) increase the equilibrium size of the population and have no effect on the equilibrium level of consumption per worker.
D) have no effect on the equilibrium size of the population and increase the equilibrium level of consumption per worker.

Question 16

In the Malthusian model of economic growth,an increase in the quantity of land

A) increases steady state per capita consumption, and increases the steady state population.
B) has no effect on steady state per capita consumption or on steady state population.
C) has no effect on steady state per capita consumption, and increases the steady state population.
D) increases per capita consumption, and reduces the steady state population.

Question 17

The Malthusian model predicts that

A) population will keep increasing.
B) the standard of living will keep increasing.
C) health improvements increase the standard of living.
D) population control improves the standard of living.

Question 18

In the Malthusian model of economic growth

A) Per capita consumption affects birth rates and death rates.
B) Per capita consumption affects birth rates but not death rates.
C) Per capita consumption affects death rates but not birth rates.
D) Per capita consumption is always constant.

Question 19

Before the Industrial Revolution,standards of living differed

A) greatly over time and across countries.
B) little over time, but differed greatly across countries.
C) greatly over time, but differed little across countries.
D) little over time and across countries.

Question 20

We can use a per-worker production function in the Malthusian model because

A) there is a representative worker.
B) firms are competitive.
C) there is a steady state.
D) the production function has constant returns to scale.

Question 21

Growth accounting,popularized by Robert Solow,attempts to attribute a change in aggregate output

A) to its most important single cause.
B) separately between changes in government policy and changes in total factor productivity.
C) separately between changes in total factor productivity and changes in the supplies of factors of production.
D) separately between changes in the supplies of factors of production and changes in government policy.

Question 22

Malthus was too pessimistic because he did not foresee the effects of

A) ever increasing amounts of land for cultivation.
B) increases in the capital stock and the effects of such increases on production.
C) improved nutrition and health care.
D) improved family planning practices.

Question 23

One plausible explanation of the U.S. productivity slowdown starting in 1973 is that it is an artifact of mismeasurement. This explanation would require that production of

A) goods is underestimated.
B) goods is overestimated.
C) services is underestimated.
D) services is overestimated.

Question 24

The Solow residual attempts to measure the amount of output not explained by

A) technological progress.
B) the direct contribution of labor and capital.
C) economic projections.
D) the amount of a nation's human capital.

Question 25

Growth in the Solow residual was slowest in the

A) 1950s.
B) 1960s.
C) 1970s.
D) 1980s.

Question 26

In a Malthusian world,what events would improve permanently the standard of living,as measured by output per capita?

A) a peace keeping mission
B) an increase in violent crime
C) a new mutation of germs
D) a new sewer system

Question 27

All of the following increase total factor productivity except

A) new inventions.
B) more capital.
C) new management techniques.
D) favorable changes in government regulations.

Question 28

Growth in the Solow residual was fastest in the

A) 1950s.
B) 1960s.
C) 1970s.
D) 1980s.

Question 29

One plausible explanation of the U.S. productivity slowdown starting in 1973 is that it was a result of the increase in the relative price of energy. This explanation would require that,in light of higher energy costs,the

A) capital stock is overestimated.
B) capital stock is underestimated.
C) labor force is overestimated.
D) labor force is underestimated.

Question 30

In a Malthusian world,what event would improve temporarily the standard of living,as measured by output per capita?

A) a peace keeping mission
B) an increase in violent crime
C) a new mutation of germs
D) a new sewer system

Question 31

In more modern times as opposed to the times of Malthus,higher standards of living appear to

A) decrease death rates and increase birth rates.
B) decrease death rates and also decrease birth rates.
C) decrease death rates and have no effect on birth rates.
D) have had effects on neither death rates nor birth rates.

Question 32

For the production function,Y = zK0.36N0.64,if measured output is Y ,measured capital inputK is ,and measured labor input is N ,then the Solow residual would be equal to

A)
B)
C)
D)

Question 33

In a Malthusian world,what would improve the standard of living temporarily?

A) a war
B) a new virus
C) birth control
D) democracy

Question 34

If an epidemic hits a Malthusian economy,the immediate consequence is

A) an increase in the standard of living.
B) a reduction in the standard of living.
C) no change in the standard of living.
D) dependent on the population growth rate.

Question 35

In the Malthusian model,state-mandated population control policies are likely to

A) decrease the equilibrium size of the population and increase the equilibrium level of consumption per worker.
B) decrease the equilibrium size of the population and have no effect on the equilibrium level of consumption per worker.
C) have no effect on the equilibrium size of the population and increase the equilibrium level of consumption per worker.
D) have no effect on either the equilibrium size of the population or the equilibrium level of consumption per worker.

Question 36

Which of the following increases total factor productivity?

A) investment in machinery
B) a harsh winter
C) better access to credit
D) new production procedures

Question 37

In the Malthusian model,improvements in health care lead to

A) higher population and higher per-capita production.
B) higher population and lower per-capita production.
C) lower population and higher per-capita production.
D) lower population and lower per-capita production.

Question 38

In a Malthusian world,why is misery recurrent?

A) The marginal returns of capital are decreasing.
B) Fertility is endogenous.
C) Output is increasing in labor.
D) Mortality depends on the standard of living.

Question 39

If an epidemic hits a Malthusian economy,the long-term consequence is

A) an increase in the standard of living.
B) a reduction in the standard of living.
C) no change in the standard of living.
D) dependent on the population growth rate.

Question 40

In a Malthusian world,what would improve the standard of living permanently?

A) a war
B) a new medical drug
C) birth control
D) democracy

Question 41

In the steady state of the Solow growth model

A) consumption equals depreciation.
B) per capita variables grow at the rate of population growth.
C) aggregate consumption grows at a constant rate.
D) aggregate output is constant.

Question 42

One plausible explanation of the U.S. productivity slowdown starting in 1973 is that it was the result of the time needed to adapt to new technology. This explanation would require that

A) workers withdraw from the labor force to learn about the new technology.
B) a large number of new entrants be attracted to the labor force.
C) managers be reluctant to adopt changes.
D) workers time at their jobs be diverted from production to learning the technology.

Question 43

We can express the per-worker production function as a function of only per-worker capital thanks to

A) the decreasing marginal return of capital.
B) the decreasing marginal return of labor.
C) the constant returns to scale.
D) the impatience of households.

Question 44

In Solow's exogenous growth model,the steady-state growth rate of capital can be increased by

A) higher population growth.
B) higher depreciation rate.
C) higher saving rate.
D) higher interest rate.

Question 45

The slope of the output per worker function is equal to the

A) marginal product of capital.
B) marginal product of labor.
C) savings rate.
D) growth rate of the population.

Question 46

In the Solow growth model,an increase in the savings rate

A) raises steady state per capita output.
B) raises the growth rate in aggregate output.
C) must reduce per capita consumption.
D) must reduce the standard of living.

Question 47

It is useful to study the Solow growth model because

A) it provides a useful account of the reasons for population growth.
B) it is useful in understanding the sources of economic growth after 1800.
C) it has a steady state.
D) it can help us understand the reasons for population control.

Question 48

Which of the following,if implemented in the Solow growth model,would not lead to a steady state?

A) A higher savings rate.
B) A higher depreciation rate.
C) A savings rate that increases as income increases.
D) A population growth rate that increases as income increases.

Question 49

In Solow's exogenous growth model,the economy reaches a stable steady state because

A) the marginal return of capital is decreasing.
B) capital is growing at a constant rate.
C) the substitution effect is stronger than the income effect.
D) conditional convergence holds.

Question 50

In the Solow growth model,the law of motion of capital takes into account

A) the residential nature of houses.
B) the mobility of capital.
C) the depreciation of old capital.
D) the cost of shipping and installing capital.

Question 51

Which of the following is not a feature of the steady state in Solow's exogenous growth model?

A) The capital/output ratio is steady.
B) Capital grows continuously.
C) Consumption per worker is steady.
D) Total saving is steady.

Question 52

The period from 2000 to 2010

A) was a period of high productivity growth.
B) was a period with negative productivity growth, because of the Great Recession.
C) was a period of zero productivity growth.
D) was a period of low productivity growth, almost as bad as the period 1970-1980.

Question 53

The biggest contribution to real U.S. GDP growth in the 1970s was due to growth in

A) total factor productivity.
B) the capital stock.
C) the labor force.
D) both the capital stock and the labor force.

Question 54

In the steady state of Solow's exogenous growth model,an increase in the savings rate

A) increases output per worker and increases capital per worker.
B) increases output per worker and decreases capital per worker.
C) decreases output per worker and increases capital per worker.
D) decreases output per worker and decreases capital per worker.

Question 55

In Solow's exogenous growth model,the principal obstacle to continuous growth in output per capita is due to

A) the declining marginal product of labor.
B) the declining marginal product of capital.
C) limits in the ability of government policymakers.
D) too little savings.

Question 56

The per-worker production function relates output per worker

A) to capital per worker.
B) to the participation rate.
C) to production per worker.
D) in different countries.

Question 57

In Solow's model of economic growth,suppose that s represents the savings rate,z represents total factor productivity,k represents the level of capital per worker,and f(k)represents the per-worker production function. Also suppose that n represents the population growth rate and d represents the depreciation rate of capital. The equilibrium level of capital per worker,k*,will satisfy the equation

A) szf(k*) = (n + d)k*.
B) szk* = (n + d)f(k*).
C) nf(k*) = .
D) f(k*) = k*.

Question 58

The Golden Rule of capital accumulation maximizes the steady-state level of

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

Question 59

The saving rate has the following characteristic in Solow's exogenous growth model

A) it increases with output.
B) it first decreases, then increases with output.
C) it first increases, then decreases with output.
D) it is constant.

Question 60

Which of the following,if implemented in the Solow growth model,would not lead to a steady state?

A) A higher population growth rate.
B) Decreasing returns to scale in production.
C) A savings rate that decreases as income increases.
D) A constant marginal product of capital.

Question 61

In the Golden Rule steady state,the marginal product of capital is equal to the

A) savings rate plus the population growth rate.
B) population growth rate plus the depreciation rate.
C) depreciation rate plus the savings rate.
D) savings rate divided by the marginal product of labor.

Question 62

In the steady state of Solow's exogenous growth model,an increase in total factor productivity

A) increases output per worker and increases capital per worker.
B) increases output per worker and decreases capital per worker.
C) decreases output per worker and increases capital per worker.
D) decreases output per worker and decreases capital per worker.

Question 63

In the steady state of Solow's exogenous growth model,an increase in the growth rate of labor force

A) increases output per worker and increases capital per worker.
B) increases output per worker and decreases capital per worker.
C) decreases output per worker and increases capital per worker.
D) decreases output per worker and decreases capital per worker.

Question 64

With an increase in total factor productivity in the Solow growth model,

A) output decreases temporarily and returns to the previous steady state.
B) output increases temporarily and returns to the previous steady state.
C) the economy reaches a steady state with higher output.
D) the economy reaches a steady state with lower output.