Economics Ch 8,9

Among the four countries—the United States, the United Kingdom, Germany, and Japan—the one that experienced the most rapid growth rate of output per person between 1948 and 1972 was:

Japan.

If Y is output, K is capital, u is the fraction of the labor force in universities, L is labor, and E is the stock of knowledge, and the production Y = F(K,(1 - u) EL) exhibits constant returns to scale, then output (Y) will double if:

K and E are doubled.

Two economies are identical except that the level of capital per worker is higher in Highland than in Lowland. The production functions in both economies exhibit diminishing marginal product of capital. An extra unit of capital per worker increases output per worker:

More in Lowland.

Labor hoarding refers to:

continuing to employ workers during a recession to ensure they will be available in the recovery.

In the Solow growth model, if investment is less than depreciation, the capital stock will ______ and output will ______ until the steady state is attained.

decrease; decrease

In the Solow growth model with population growth and technological change, the break-even level of investment must cover:

depreciating capital, capital for new workers, and capital for new effective workers.

According to the Solow growth model, high population growth rates:

force the capital stock to be spread thinly, thereby reducing living standards.

The preponderance of empirical evidence supports the hypothesis that economies that are open to trade _____ than comparable closed economies.

grow more rapidly

If the production function exhibits decreasing returns to scale in the steady state, an increase in the rate of population would lead to:

growth in total output but a decrease in output per worker.

If the per-worker production function is y = Ak, where A is a positive constant, in the steady state, a

higher saving rate leads to a higher growth rate.

In the Solow growth model, with a given production function, depreciation rate, no technological change, and no population growth, a higher saving rate produces a:

higher steady-state level of output per worker

If an economy is in a steady state with no population growth or technological change and the capital stock is below the Golden Rule:

if the saving rate is increased, output per capita will rise and consumption per capita will first decline and then rise above its initial level.

If a larger share of national output is devoted to investment, starting from an initial steady-state capital stock below the Golden Rule level, then productivity growth will:

increase in the short run but not in the long run.

In the Solow growth model, with a given production function, depreciation rate, saving rate, and no technological change, lower rates of population growth produce:

lower steady-state growth rates of total output.

Endogenous growth theory rejects the assumption of exogenous:

technological change.

Empirical results justify substantial government subsidies to research based on the finding that the:

the private return to research is less than the social return to research.

Assume that a war reduces a country's labor force but does not directly affect its capital stock. Then the immediate impact will be that:

total output will fall, but output per worker will rise.

In the Solow model with technological progress, the steady-state growth rate of output per effective worker is:

0.

Assume that an economy described by the Solow model is in a steady state with output and capital growing at 3 percent, and labor growing at 1 percent. The capital share is 0.3. The growth-accounting equation indicates that the contributions to growth of capital, labor, and total factor productivity are:

0.9 percent, 0.7 percent, and 1.4 percent, respectively.

f the U.S. production function is Cobb-Douglas with capital share 0.3, output growth is 3 percent per year, depreciation is 4 percent per year, and the capital-output ratio is 2.5, the saving rate that is consistent with steady-state growth is:

17.5 percent.

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:

4.

If the labor force is growing at a 3 percent rate and the efficiency of a unit of labor is growing at a 2 percent rate, then the number of effective workers is growing at a rate of:

5 percent.

In a steady-state economy with population growth n and labor-augmenting technological progress g, persistent increases in standards of living are possible because the:

capital stock grows faster than does the labor force.

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.

In the Solow growth model, increases in capital ______ output and ______ the amount of output used to replace depreciating capital.

increase; increase

Changes that can increase measured total factor productivity include:

increased expenditures on education.

Which of the following changes would bring the U.S. capital stock, currently below the Golden Rule level, closer to the steady-state, consumption-maximizing level?

increasing the saving rate

In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, then capital grows at rate ______ and output grows at rate

n; n

A possible externality associated with the process of accumulating new capital is that:

new production processes may be devised

If an economy is in a steady state with no population growth or technological change and the capital stock is above the Golden Rule level and the saving rate falls:

output, investment, and depreciation will decrease, and consumption will increase and then decrease but finally approach a level above its initial state.

Public policies in the United States designed to stimulate technological progress do not include:

tax breaks to encourage homeownership.

If two economies are identical (with the same population growth rates and rates of technological progress), but one economy has a lower saving rate, then the steady-state level of income per worker in the economy with the lower saving rate:

will be at a lower level than in the steady state of the high-saving economy.

If two economies are identical (including having the same saving rates, population growth rates, and efficiency of labor), but one economy has a smaller capital stock, then the steady-state level of income per worker in the economy with the smaller capital stock:

will be at the same level as in the steady state of the high capital economy.