8-9 Econ
An increase in the savings rate starting from a steady state with less capital than the Golden rule causes investment to ____ in the transition to the new steady state
increase
In the Solow growth model, an economy in the steady state with a population growth rate of n but no technological growth will exhibit a growth rate of capital per worker at rate:
0
In the Solow growth model, an economy in the steady state with a population growth rate of n but no technological growth will exhibit a growth rate of output per effective worker at rate:
0
In the Solow growth model, an economy in the steady state with a population growth rate of n but no technological growth will exhibit a growth rate of output per worker at rate:
0
Suppose an economy has 100 units of capital, 100 units of labor, and the efficiency of each worker is equal to 2. the effective number of workers for this economy is ____ and the capital per effective worker is _____
200;.5
If the labor force is growing by 3 percent and the efficiency of a unit of labor is growing at a 2 percent rate, then the number of effective workers is growth at a rate of:
5 percent
To determine whether an economy is operating at its Golden Rule level of capital stock, a policymaker must determine the steady-state saving rate that produces the:
largest consumption per worker
If an economy has a steady state MPK of .15 and a depreciation rate of .10, then the economy has ____ capital than the golden rule level and a(n) _____ in saving rate will lead to an increase in the consumption per worker in the long run.
less; increase
When an economy's capital is below the Golden Rule level, reaching the Golden Rule level:
requires initially reducing consumption to increase consumption in the future
In the Solow model, the assumption of constant returns to scale implies that the output per worker is a function of only the:
stock of capital per worker
If the per-worker production function is given by y = k1/2, the saving rate (s) is 0.2, and the depreciation rate is 0.1, then the steady-state ratio of capital to labor is:
.1K = .2K^1/2, K/K^1/2 = .2/.1, K^1/2=2, (K^1/2=2)^2, K=4
In an economy with no population growth and no technological change, steady-state consumption is at its greatest possible level when the marginal product of:
capital equals the depreciation rate
Suppose the economy is originally at a steady state where the marginal product of capital is equal to the depreciation rate. If the saving rate of the economy increases, then at the new steady state:
consumption per worker will be lower compared to the original steady state.
A reduction in the savings rate starting from a steady state with more capital than the Golden Rule causes investment to ____ in the transition to the new steady state.
decrease
An increase in the rate of population growth with no change in the saving rate:
decreases the steady-state level of capital per worker
Assume that two economies are identical in every way except that one has a higher population growth rate. According to the Solow growth model, in the steady state, the country with the higher population growth rate will have a ____ level of output per person and _____ rate of growth of output per worker compared to the country with the lower population growth rate.
lower; the same
In the Solow growth model, an economy in the steady state with a population growth rate of n but no technological growth will exhibit a growth rate of total output at rate:
n
A permanent increase in the saving rate of an economy has:
no growth effect but a level effect
According to Thomas Malthus, large populations:
place great stains on an economy's productive resources, resulting in perpetual poverty
When an economy's capital is above the Golden Rule level, reaching the Golden Rule level:
requires a fall in savings
The Golden Rule level of the capital-labor ratio is:
slope of the MPK
If a war destroys a large portion of a country's capital stock but the saving rate is unchanged, the Solow model predicts that output will grow and that the new steady state will approach:
the same level of output per person as before
If Y = K0.3L0.7, then the per-worker production function is:
times both sides by L^-1, Y/L = (K/L)^.3
Which of these statements is NOT true about the steady state in the Solow Model with population growth and technological progress:
total capital stock and total output grow at the rate of population growth.
Assume that two countries have the same per-worker production function y=k^1/2, neither has population growth nor technological progress, deprecation is 5 percent of capital in both countries, and country A saves 10 percent of output whereas country B saves 20 percent. If country A starts out with a capital-labor ratio of 4 and country B starts out with a capital-labor ratio of 2, in the long run:
A = .05k = .1k^1/2, k^1/2 =2, k =4. B= .05k = .2k^1/2, k^1/2=4, k=16
In an economy with population growth rate at n, the change in capital stock per worker is given by the equation:
delta k = sf(k)-(δ+n) k
In the Solow growth model with population growth and labor-augmenting technological change, the break-even level of investment must cover
depreciating capital, capital for new workers, and capital for new effective workers
the number of effective workers takes into account the number of workers and the:
efficiency of each worker
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 these except:
equal the marginal productivity of capital (MPK). Must offset the depreciation of existing capital, provide capital for new workers, and keep the level of capital per worker constant.
If the per worker production function for an economy is given by y=k^1/2, the savings rate is .3, and the economy has 25 units of capital per worker, then the total consumption per worker is ____ units and the total investment per worker is ____ units.
y=25^1/2=5, C= (1-.3)Y = 3.5, I = s*5 = 1.5
