Exogenous Growth Model

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

separately between changes in total factor productivity and changes in the supplies of factors of production

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

the marginal return of capital is decreasing

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

the production function has constant returns to scale

There is evidence that income per worker is converging in

the richest countries, but not the poorest countries

The Solow growth model can account for

why richer countries have higher investment rates

All of the following increase total factor productivity except A) new management techniques B) new inventions C) favorable changes in government regulations D) more capital

D

Malthus was wrong in what sense?

He did not predict the high rates of future growth in standards of living

The Malthusian model performs poorly in explaining economic growth after the

Industrial revolution

In a Malthusian world, why is misery recurrent?

Mortality depends on the standard of living

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

Thomas Malthus

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

Total savings is steady

A steady state is

a long-run equilibrium

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

an increase in violent crime

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

birth control

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

both the capital stock and the labor force

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

capital

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

higher population growth

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

increase the equilibrium size of the population and have no effect on the equilibrium level of consumption per worker

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

increases output per worker and increases capital per worker

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

increases output per worker and increases capital per worker

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

population growth rate plus the depreciation rate

In the Malthusian model, the population growth rate is

positively related to consumption per worker

Recent evidence suggests that output per worker is

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

Growth in the Solow residual was fastest in the

1960s

Since 1900, real GDP per capita in the United States has increased by

2% per year

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.

2.7

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

A constant marginal product of capital

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

consumption per worker

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

decrease death rates and also decrease birth rates

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

decrease the equilibrium size of the population and increase the equilibrium level of consumption per worker

In an exogenous growth model, growth is caused by

forces that are not explained by the model itself

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

has no effect on steady state per capita consumption, and increases the steady state population

In the Malthusian model, improvements in health care lead to

higher population and lower per-capita production

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

it is constant

It is useful to study the Solow growth model because

it is useful in understanding the sources of economic growth after 1800

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

marginal product of capital

Which of the following increases total factor productivity?

new production procedures

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

no change in the standard of living

If the savings rate falls in the Solow growth model

per worker output falls in the steady state

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

szf(k*) = (n + d)k*

In the Solow growth model, long run growth in the standard of living is propelled by

technological change

In the Malthusian model, population growth is endogenous because

the birth and death rates are endogenous

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

the constant returns to scale

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

the declining marginal product of capital

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

the direct contribution of labor and capital