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.
E) total factor productivity.

Answer 1

D

Question 2

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.
E) greatly over time, but was the same across countries.

Answer 2

D

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.
E) negatively related to the rate of investment and not related at all to the rate of population growth.

Answer 3

B

Question 4

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.
E) Robert Lucas.

Question 5

In the Malthusian model, population growth depends on

A) income per worker.
B) total factor productivity.
C) level of nutrition.
D) consumption per worker.
E) labour supply.

Question 6

On average, from 1870-2014, real GDP in Canada grew around

A) 2.0%.
B) 0.6%.
C) 8.7%.
D) 4.1%.
E) -1.2%.

Question 7

In Canada during the 1870-2014 period, the average annual growth in per capita income

A) fluctuated substantially.
B) remained steady at about 2%.
C) remained constant until World War II.
D) rose with total factor productivity.
E) rose with the population growth.

Question 8

In the Malthusian model, capital in the production function is replaced by

A) natural resources.
B) population growth.
C) land.
D) capital stock.
E) total factor productivity.

Question 9

The Solow model suggests that, to improve a country's standard of living in the long run,

A) people have to be more educated.
B) more natural resources must be found.
C) production technology must become more efficient.
D) standards of living must increase.
E) total factor productivity must decline.

Question 10

In an endogenous growth model, growth is caused by

A) forces determined by the model.
B) capital accumulation.
C) human capital accumulation.
D) forces that are not determined by the model itself.
E) total factor productivity.

Question 11

The Malthusian model emphasizes a fixed supply of which of the following factors of production?

A) labour
B) land
C) energy
D) natural resources
E) capital

Question 12

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
E) 4.2

Question 13

Countries in which a relatively small fraction of output is channeled into investment tend to have a

A) relatively high rate of consumption.
B) relatively low rate of population growth.
C) relatively low standard of living.
D) relatively high level of capital stock.
E) relatively high level of government spending.

Question 14

Recent evidence suggests that the level of output per worker is

A) positively correlated with the growth rate in output per worker.
B) negatively correlated with the rate of population growth.
C) positively correlated with the rate of population growth.
D) negatively correlated with growth rate in output per worker.
E) not correlated with the growth rate in output per worker.

Question 15

Rates of growth of real per capita income are most alike amongst

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.
E) the United States and in Africa.

Question 16

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

A) land
B) labour
C) capital
D) natural resources
E) education

Question 17

The Malthusian model performs poorly in explaining economic growth after the

A) French Revolution.
B) American Revolution.
C) Industrial Revolution.
D) Bio-technology Revolution.
E) Second World War.

Question 18

The Malthusian model has the property that

A) increased education levels leads to increased population growth.
B) increased consumption leads to increased population growth.
C) increased capital stock leads to increased total factor productivity.
D) improvements in technology for producing goods leads to increased population growth.
E) improvements in standards of living leads to population growth.

Question 19

In the Malthusian model of the economy,

A) there is no investment or government spending.
B) capital replaces land in the production function.
C) the model is static with only one period.
D) population growth depends on income per worker.
E) population growth is negatively correlated with consumption.

Question 20

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.
E) not related to consumption per worker.

Question 21

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.
E) have no effect on both the equilibrium size of the population and the equilibrium level of consumption per worker.

Question 22

In the Malthusian model, the long-run standard of living is determined entirely by the function g(c), which describes how

A) consumption per worker drives population growth.
B) technology affects the growth of output.
C) the death rate depends on technological change.
D) the birth rate depends on population growth.
E) consumption per worker drives production.

Question 23

According to the Solow growth model, in the long-run steady state, all real aggregate quantities grow

A) according to the savings rate in the economy, s.
B) at the rate n, the growth rate of the labour force.
C) at the same rate as per worker capital.
D) depending on how consumption affects population growth.
E) at the same rate as consumption per worker.

Question 24

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 labour.
B) the declining marginal product of capital.
C) limits in the ability of government policy makers.
D) too little savings.
E) not enough consumption per worker.

Question 25

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*
E) f(k*) = (n + d)k*.

Question 26

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.
E) total factor productivity.

Question 27

The per worker production function describes the relationship between

A) consumption per worker and income per worker.
B) capital per worker and total factor productivity.
C) output per worker and land per worker.
D) labour supply and land per worker.
E) government spending and total factor productivity.

Question 28

In the Malthusian model, when z increases, initially consumption

A) decreases and remains below the original steady state level forever.
B) decreases and then increases to its steady state level.
C) increases and then falls to its steady state level.
D) is unaffected by the change in z.
E) increases and remains above the original steady state level forever.

Question 29

In the Malthusian model, the steady state is

A) where total factor productivity is maximized.
B) the long-run equilibrium for the population.
C) the competitive equilibrium.
D) where consumption per worker is maximized.
E) where land replaces capital in the production function.

Question 30

Which of the following is not different between the Solow and Malthusian models?

A) The production function has decreasing marginal returns.
B) Households save.
C) Population growth is exogenous.
D) There is capital accumulation.
E) Advances in technology can sustain economic growth.

Question 31

A pessimistic long-run Malthusian result is

A) increases in land use lowers standards of living.
B) higher labour supply does not increase total factor productivity.
C) increases in capital stock does not achieve the steady state.
D) improvements in technology does not improve standards of living.
E) population control does not increase total factor productivity.

Question 32

The Solow growth model predicts that a country's standard of living can continue to increase in the long run only if

A) there is sustained increases in the capital stock.
B) there is sustained increases in the population.
C) there is sustained increases in the labour force.
D) there is sustained increases in government spending.
E) there is sustained increases in total factor productivity.

Question 33

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

A) the depreciation of old capital.
B) the residential nature of houses.
C) the mobility of capital.
D) the costs of shipping and installing capital.
E) the impact of consumption on population growth.

Question 34

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.
E) increase productivity of land.

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 the either equilibrium size of the population and the equilibrium level of consumption per worker.
E) have no effect on the equilibrium size of the population or the equilibrium level of consumption per worker.

Question 36

In the Malthusian model, the steady state effects of an increase in z are to

A) decrease the quantity of land per worker, increase the population, and leave consumption per worker unchanged.
B) increase the quantity of land per worker, increase the population, and leave consumption per worker unchanged.
C) decrease the quantity of land per worker, increase the population, and increase consumption per worker.
D) decrease the quantity of land per worker, decrease the population, and leave consumption per worker unchanged.
E) shift the production function upwards, but leave the steady state unchanged.

Question 37

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.
E) increases output per worker, reduces consumption per worker and decreases capital per worker.

Question 38

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.
E) increase death rates and have no effect on birth rates.

Question 39

An increase in savings can be brought about

A) by increased total factor productivity.
B) by increased consumption per worker.
C) in the short run only.
D) through government policy.
E) by increased labour supply.

Question 40

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

A) marginal product of capital.
B) marginal product of labour.
C) savings rate.
D) growth rate of the population.
E) capital stock.

Question 41

Long-run growth in the standard of living in the Solow growth model is explained by

A) growth in government.
B) a decline in the importance of the government sector.
C) consumption spending.
D) technological change.
E) growth in the capital stock.

Question 42

A)
B)
C)
D)
E)

Question 43

The golden rule savings rate is achieved when capital is accumulated at a rate that

A) maximizes consumption per worker in the steady state.
B) keeps consumption per worker constant in the steady state.
C) population growth exceeds the depreciation rate.
D) minimizes the effects of consumption growth on population growth.
E) minimizes consumption per worker in the steady state.

Question 44

Growth in real GDP per-capita in Canada is roughly consistent with which of the following predictions of the Solow model?

A) a constant growth rate in the growth rate of the labour force
B) a steady increase in the savings rate
C) a convergence with lower income countries
D) convergence to a steady state level of real GDP per-capita
E) exogenous TFP growth at a constant rate

Question 45

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

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

Question 46

If the savings rate increases in the Solow growth model

A) output per capita increases in the long run.
B) the growth rate in output per capita increases in the long run.
C) capital per worker grows at a higher rate in the long run.
D) the investment rate declines.
E) output per capita falls in the long run.

Question 47

The Golden Rule Quantity of capital per worker maximizes the steady-state level of

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

Question 48

When capital is accumulated at the rate that maximizes consumption per worker in the 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 labour.
E) consumption per worker plus the population growth rate.

Question 49

The Solow growth model accounts for

A) the level of research and development spending in an economy.
B) why richer countries have higher savings rates.
C) the patterns of international trade among countries.
D) why people consume too much.
E) business cycles.

Question 50

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.
E) separately between changes in total factor productivity and changes in government policy.

Question 51

Growth accounting attributes growth in real GDP to

A) growth in consumption expenditure, investment expenditure, and government expenditure.
B) growth in the capital and labour inputs to production, and growth in total factor productivity.
C) government programs that increase research and development.
D) the savings rate and population growth.
E) international trade.

Question 52

In the steady state of Solow's exogenous growth model, an increase in the population growth 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.
E) decreases output per worker and the marginal product of labour.

Question 53

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.
E) decreases in output per worker only.

Question 54

In the steady state of Solow's exogenous growth model, an increase in the growth rate of labour 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.
E) decreases output per worker and the marginal product of labour.

Question 55

Total factor productivity can be influenced by

A) new inventions.
B) less capital.
C) more labour.
D) increases in the price of inputs.
E) consumption per worker.

Question 56

Growth in the Solow residual was slowest in the

A) 1950s.
B) 1960s.
C) 1970s.
D) 1980s.
E) 1990s.

Question 57

Which feature of the data can the Solow growth model not replicate?

A) There is a widening gap between income levels across countries.
B) The investment rate is positively related to the income per worker.
C) The population growth rate is negatively related to the income per worker.
D) An increase in the savings rate causes an increase in income per worker.
E) In developed countries, there is steady growth in income per capita.

Question 58

Recent evidence shows that there is a

A) negative correlation between the population growth rate and income per worker across countries.
B) positive correlation between the population growth rate and income per worker across countries.
C) negative correlation between the savings rate and the quantity of income per worker.
D) positive correlation between labour force growth and the quantity of income per worker.
E) negative correlation between capital investment and quantity of income per worker.

Question 59

Growth in the Solow residual was fastest in the

A) 1950s.
B) 1960s.
C) 1970s.
D) 1980s.
E) 1990s.

Question 60

In the Solow growth model

A) higher total factor productivity implies no improvement in long-run standards of living.
B) higher total factor productivity spurs population growth.
C) higher population growth implies a lower standard of living.
D) higher total factor productivity reduces population growth.
E) the total population is constant.

Question 61

The biggest contribution to real Canadian GDP growth in the 1970s was due to growth in

A) total factor productivity.
B) the capital stock.
C) the labour force.
D) both the capital stock and the labour force.
E) the size of government.

Question 62

Percentage deviations from trend in the Solow residual are

A) unrelated to the business cycle.
B) procyclical and smaller than percentage deviations from trend in GDP.
C) procyclical and have about equal magnitude as percentage deviations from trend in GDP.
D) procyclical and larger than percentage deviations from trend in GDP.
E) related to changes in the labour force.

Question 63

After the 2008-2009 recession in Canada

A) growth in the labour input was historically low.
B) growth in output was historically high.
C) growth in productivity was historically high.
D) growth in real GDP was lower than in the period 2001-2009.
E) growth in real output ceased.

Question 64

The high growth rate in aggregate output in Canada during 1991-2001 was due to

A) an increase in the capital stock.
B) an increase in the labour force.
C) an increase in total factor productivity growth.
D) the higher prices of energy.
E) strong growth in the service sector.

Question 65

Growth in employment in Canada after 1961 was highest

A) during the 1960s.
B) during the 1970s.
C) during the 1980s.
D) from 2009-2014.
E) from 2001-2009.

Question 66

What are the key differences between the Malthusian and Solow models of economic growth?