Intermediate Macroeconomics Ch 8-9 Learning Curve
In the Solow model with technological progress, the steady state growth rate of capital per effective worker is
0
The steady state level of capital occurs when a change in the capital stock per worker equals
0
Consider the production function y = k0.5. The marginal product of capital MPK = f(k + 1) − f(k) for k = 25 is:
0.1
Assume that the per-worker production function y = f(k) = k0.5 and that the saving rate is s = 0.2. If k = 49, then investment per worker is:
1.4
Suppose that the per-worker production function y = f(k) = k1/3 and that the saving rate is s = 0.2. If k = 125,000, investment per worker is i equals:
10
If y=k^1/2, there is no population growth or technological progress, 5% of capital depreciates each year, and a country saves 20% of output each year, then the steady stare level of capital per worker is:
16
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; 1/2
If the production function is y = k1/2, and δ = 0.2, then the Golden Rule level is reached when k is:
25
What are the two ways to determine the Golden Rule level of the capital stock?
Find the capital stock at which steady-state consumption is maximized, and find the capital stock at which the net marginal product of capital equals zero
An economy without population growth or technological progress has a production function y=20k^1/2. The current capital stock is 100, the depreciation rate is 10%, and the population growth rate is 2%.
For income per person to grow, the saving rate must exceed: 6%
At the steady-state level of capital, which maximizes consumption:
MPK = δ
which of the following production functions has constant returns to scale
Y = K + L
An economy will _____ move to a steady state but _____ to the Golden Rule steady state.
always; not necessarily
The supply of goods and services can grow for all of these reasons EXCEPT:
an increase in the interest rate
The formula for steady-state consumption per worker (c*) as a function of output per worker and investment per worker is:
c* = f(k*) - δk*
in the solow growth model with population growth but no technological progress, the steady state amount of investment can be thought of as a break even amount of investment because the quantity of investment just equals the amount of
capital needed to replace depreciated capital and to equip new workers.
The Solow growth model assumes a production function with
constant returns to scale and a diminishing marginal product of capital
If the economy has more capital than in the Golden Rule steady state, reducing the saving rate will __________ steady state income and _________ steady state consumption
decrease, increase
In the Solow model with population growth and no technological progress, and increase in the population growth rate leads to a ______ in the effective investment rate leading to a ________ in the steady state income per worker
decrease; decrease
The efficiency of labor
depends on the knowledge, health, and skills of labor.
In the basic Solow model, at the Golden Rule steady state, the marginal product of capital equals
depreciation rate
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).
If the per-worker production function is given by y = k1/2, the saving rate (s) is 0.3, and the depreciation rate is 10%, and the economy starts off with 25 units of capital per worker, then the capital per worker will ________ and output per worker will _______ as the economy approaches the steady state
fall; fall
In the Solow Model, if the economy starts with more capital per worker than the steady state level of capital per worker, then the capital per worker will _______ and the output per worker will ________ as the economy approaches steady state
fall; fall
Suppose an economy is at its steady state equilibrium and there is a permanent reduction in the saving rate of the economy. In this case, as the economy approaches its new steady state, capital per worker will ________ and output per worker will _______.
fall; fall
If the production function is y = k1/4, δ = 0.05, and k = 20, then the saving rate is _____ the Golden Rule level.
greater than why?
If the production function is y = k1/4, δ = 0.1, and k = 5, then the saving rate is _____ the Golden Rule level.
greater than why?
Analysis of population growth around the world concludes that countries with high population growth tend to:
have a lower level of income per worker than countries with low population growth.
In this graph, starting from capital labor ratio k1, the capital labor ratio will:
increase
If an economy begins with more capital than the Golden Rule level of capital, and the saving rate decreases, then initially consumption MOST likely will:
increase why?
Suppose that the per-worker production function y = f(k) = k0.5, that the saving rate is s = 0.2, and that the depreciation rate is δ = 0.02. If k = 49, then the capital stock per worker will:
increase why?
______ cause(s) the capital stock to rise, while ______ cause(s) the capital stock to fall.
investment; depreciation
Two countries, Anastasia and Beersheba, have identical production functions y = f(k), but Anastasia has a higher saving rate than Beersheba. This implies that, for identical levels of capital per worker, Anastasia has:
lower consumption per worker than Beersheba
Two countries, Agora and Bensalem, have identical production functions f(k) and saving rates s, but Agora has a higher capital-labor ratio k than Bensalem. This implies all of these EXCEPT that:
output is higher in bensalem than in Agora
in the solow growth model with population growth but no technological progress, when the economy finds itself at the Golden Rule steady state, the marginal product of capital minus the rate of depreciation will equal:
population growth rate
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
When an economy begins above the Golden Rule level, reaching the Golden rule level
results in higher consumption at all times in the future.
The Solow model shows that a key determinant of the steady state ratio of capital labor is the
saving rate
The rate of labor-augmenting technological progress (g) is the growth rate of:
the efficiency of labor.
in a steady state economy with a saving rate s, population growth n, depreciation rate d, and labor augmenting technological progress g, the steady state ratio of capital per effective worker (k*), in terms of output per effective worker (f(k*)), is
sf(k)/(d +n+g)
endogenous growth theory rejects the assumption of exogenous
technological change
According to the Solow model, persistently rising living standards can only be explained by:
technological progress
If the production function is y = 2k1/2, δ = 0.1, and k = 100, then the saving rate is _____ the Golden Rule level.
the same as
If an economy begins with a level of steady-state capital that is less than the Golden Rule level of capital, then, to guide the economy to the Golden Rule level of capital, policymakers must increase:
the saving rate
If a country had a saving rate of 100 percent, then:
there would be no consumption
Which per-worker production function does NOT exhibit diminishing returns to capital?
y = k
Consumption per worker in steady state can be written in all of these ways EXCEPT:
y(f) - (k - i)
The Cobb-Douglas production function Y = K1/2 L1/2 can be rearranged into the output per worker function:
y=k^1/2
The Cobb-Douglas production function Y = K2/3 L1/3 can be rearranged into the output per worker function:
y=k^2/3
if the production function is y=k^1/2, the steady state value of y in the Solow model with no population growth and technological progress is:
y=s/(d + n + g)
The Golden Ryle level of steady state consumption per worker is
AB