Econ 100C Economic Growth 1

lower, the same

according to the solow model, if an economy increases its savings rate, then in the new steady state, compared with the old one, the marginal product of capital is ______ and the growth rate of income per person is ________

s

achieving golden rule steady state requires that policy makers adjust what?

set MPK equal to depreciation

how do you find the golden rule?

true

t or f? according to the solow model, as long as k< k* , investment will exceed depreciation and k will continue to grow toward K*

true

t or f? an increase in saving and investment would increase productivity per worker in the short run but it would only have a level effect in the long run.

true

t or f? economic growth raises living standards and reduces poverty

true

t or f? if an economy is below the golden rule steady state, then the increase in saving will decrease consumption. however in the long run consumption will be maximized

true

t or f? if the economy has less capital than the golden rule level, then increasing saving will increase consumption for future generations but reduce consumption for the present generation

true

t or f? if the economy has more capital than the golden rule level, then reducing saving will increase consumption at all points in time, making all generations better off

true

t or f? the economy does NOT have the tendency to move toward the golden rule steady state

true

t or f? the solow model predicts that countries with higher rates of saving and investment will have higher levels of capital and income per workers in the long run

higher, lower

the Solow growth model predicts that countries with ______ population growth rates will have _____levels of capital ad income per worker in the long run.

break even investment

the amount of investment necessary to keep k constant

k decreases, y decreases

Assume we're currently in a steady-state, then the population growth rate doubles. Which of the following is true about k* and y*?

yes

Country A and country B both have the production function. 𝑌=𝐹(𝐾,𝐿)=𝐾^.5 and L ^.5 does this production function have constant returns to scale?

y= k^.5

Country A and country B both have the production function. 𝑌=𝐹(𝐾,𝐿)=𝐾^.5 and L ^.5 what is the per worker production function y= f(k)?

decrese, reduce

If M P K < ( δ + n ) , you should ______ the savings rate to _____ k to the golden rule level

increase national saving, reduce population growth

a poor country can do two things to raise the standard of living, what are they?

slow down, increase

a slowdown in population growth will _______the growth of total output and ________the growth of output per worker

increase, lower

an increase in n causes a(n) ______ in break even investment, leading to a _____ steady state level of k.

increase in savings rate

an increase in this leads to higher output in the long run, faster growth temporarily, but not faster steady state growth

why growth matters

anything that impacts the long run rate of economic growth- even by a tiny amount - will have huge impacts on living standards in the long run

higher y*

does higher k* lead to higher or lower y*?

higher k*

does higher s lead to a higher or lower K*?

decrease, increase

if the economy has more capital than the golden rule steady state, reducing the savings rate will ________ steady state income but _____ steady state consumption

none of these

in the solow model, an increase in which of the following raises steady state growth in income per person? savings rate population growth rate depreciation rate none of these

lower, higher

in the steady state of the solow model, higher population growth leads to a ______ level of income per worker and a _______growth in total income

increases, reduces

investment ____ the capital stock and depreciation ______ it

savings rate, population growth rate

the solow growth model show that in the long run, a country's standard of living depends positively on its ______ and negatively on its ________

the rate of depreciation

this is the fraction of capital stock that wears out each period

Golden Rule level of capital

this is the value of K that maximizes consumption

Malthusian model

this model predicts population growth will outstrip the earth's ability to produce food, leading to the impoverishment of humanity. since this time, the world population has increased sixfold and yet living standards are higher than ever. he forgot to take into consideration the effects of technological progress

kremerian model

this posits that population growth contributes to economic growth. more people = more geniuses and scientitst and engineers therefore more tech progress.

20 %

what is the infant mortality rate in the poorest 1/5 of countries

.4%

what is the infant mortality rate in the riches 1/5 of countries

lower, zero

when the economy reaches a steady state, the total output will be _______ and the growth rate of output per worker will be ________

slope of the production function equals the slope of the depreciation line

where is c* the biggest?

Thomas Malthus

who believed that larger populations put a strain on an economy's food producing capacity