Macro ch 8&9

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: (1 point) 0. n. δ. (n + δ).

0

In the Solow model with technological progress, the steady-state growth rate of capital per effective worker is: (1 point) 0. g. n. n + g.

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 _____. (1 point) 50; 2 200; 1/2 50; 1/2 200; 2

200; 1/2

If the per worker production function for an economy is given by y = k1/2, the saving rate is 0.3, 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. (1 point) 5; 0 3.5; 1.5 1.5; 3.5 2.5; 2.5

3.5; 1.5

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: (1 point) 1. 2. 4. 9.

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: (1 point) 2 percent. 3 percent. 5 percent. 6 percent.

5 percent.

Consider the Solow model with population growth and no technological progress with production function Y = K1/2L1/2. If the total capital per worker in year 1 is 9 units, the population growth rate is 1 percent, depreciation rate is 9 percent, and saving rate is 40 percent, then the capital per worker at the beginning of year 2 will be _____ units. 9 9.1 9.2 9.3

9.3

An increase in the rate of population growth with no change in the saving rate: (1 point) increases the steady-state level of capital per worker. decreases the steady-state level of capital per worker. does not affect the steady-state level of capital per worker. decreases the rate of output growth in the short run.

decreases the steady-state level of capital per worker.

In the Solow model with technological progress, the steady-state growth rate of output per effective worker is: (1 point) 0. g. n. n + g.

0.

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: (1 point) a higher level of output per person than before. the same level of output per person as before. a lower level of output per person than before. the Golden Rule level of output per person.

the same level of output per person as before.

If Y = K0.3L0.7, then the per-worker production function is: (1 point) Y = F(K / L). Y / L = (K / L)0.3. Y / L = (K / L)0.5. Y / L = (K / L)0.7.

Y / L = (K / L)0.3.

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: (1 point) labor equals the marginal product of capital. labor equals the depreciation rate. capital equals the depreciation rate. capital equals zero.

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: (1 point) capital per worker will be lower compared to the original steady state. output per worker will be lower compared to the original steady state. investment per worker will be lower compared to the original steady state. consumption per worker will be lower compared to the original steady state.

consumption per worker will be lower compared to the original steady state.

Assume that two countries have the same per-worker production function y = k1/2, neither has population growth nor technological progress, depreciation 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: (1 point) both country A and country B will have capital-labor ratios of 4. both country A and country B will have capital-labor ratios of 16. country A's capital-labor ratio will be 4, whereas country B's will be 16. country A's capital-labor ratio will be 16, whereas country B's will be 4.

country A's capital-labor ratio will be 4, whereas country B's will be 16.

A reduction in the saving rate starting from a steady state with more capital than the Golden Rule causes investment to _____ in the transition to the new steady state. (1 point) increase decrease first increase and then decrease first decrease and then increase

decrease

In the Solow growth model with population growth and labor-augmenting technological change, the break even level of investment must cover: (1 point) depreciating capital. depreciating capital and capital for new workers. depreciating capital and capital for new effective workers. depreciating capital, capital for new workers, and capital for new effective workers.

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: (1 point) amount of capital available to each worker. rate of growth of the number of workers. efficiency of each worker. saving rate of each worker.

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: (1 point) offset the depreciation of existing capital. provide capital for new workers. equal the marginal productivity of capital (MPK). keep the level of capital per worker constant.

equal the marginal productivity of capital (MPK).

An increase in the saving rate starting from a steady state with less capital than the Golden Rule causes investment to _____ in the transition to the new steady state. (1 point) increase decrease first increase and then decrease first decrease and then increase

increase

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: (1 point) largest MPK. smallest depreciation rate. largest consumption per worker. largest output per worker.

largest consumption per worker.

If an economy has a steady state MPK of 0.15 and a depreciation rate of 0.10, 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. (1 point) more; increase more; decrease less; increase less; decrease

less; increase

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. (1 point) higher; the same higher; a higher lower; the same lower; a lower

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: (1 point) 0. n. δ. (n + δ).

n.

A permanent increase in the saving rate of an economy has: (1 point) a growth effect but no level effect. no growth effect but a level effect. neither growth nor level effect. both growth and level effect.

no growth effect but a level effect.

According to Thomas Malthus, large populations: (1 point) save and invest a large amount of output, resulting in higher living standards. place great strains on an economy's productive resources, resulting in perpetual poverty. are a prerequisite for technological advances and higher living standards. are not a factor in determining living standards.

place great strains on an economy's productive resources, resulting in perpetual poverty.

When an economy's capital is below the Golden Rule level, reaching the Golden Rule level: (1 point) produces lower consumption at all times in the future. requires higher consumption levels at all times. requires initially reducing consumption to increase consumption in the future. requires initially increasing consumption to decrease consumption in the future.

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: (1 point) total stock of capital. total amount of labor. stock of capital per worker. stock of human capital

stock of capital per worker.

Which of these statements is NOT true about the steady state in the Solow Model with population and technological progress: (1 point) capital per effective worker and output per effective worker are constant. capital per worker and output per worker grow at the rate of technological progress. total capital stock and total output grow at the rate of population growth. saving per effective worker and consumption per effective worker are constant.

total capital stock and total output grow at the rate of population growth.

In an economy with population growth at rate n, the change in capital stock per worker is given by the equation: (1 point) ∆k = sf (k) + δk. ∆k = sf (k) - δk. ∆k = sf (k) + (δ + n) k. ∆k = sf (k) - (δ + n) k

∆k = sf (k) - (δ + n) k