MACRO EXAM 3

Growth in the Solow residual was fastest in the

1960s.

Growth in the Solow residual was slowest in the

1970s.

Compared to the United States, GDP per capita in the poorest countries is about

2%.

For the production function, Y = zK N , if measured output is Y^, measured capital input is K^,and measured labor input is N^, then the Solow residual would be equal to

Y^ / K^0.36 N^0.64.

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

A constant marginal product of capital.

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

A savings rate that increases as income increases.

A steady state is .

a long-run equilibrium.

Suppose a poor economy inches towards the steady state in Solow's exogenous growth model. What happens?

Capital grows faster than population.

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

decreases output per worker and decreases capital per worker.

In an exogenous growth model, growth is caused by

forces that are not explained by the model itself.

In the Solow growth model, countries with identical total factor productivities, identical labor force growth rates, and identical savings rates

in equilibrium, have identical levels of capital per worker and output 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.

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

it is constant.

All of the following increase total factor productivity except

more capital.

Which of the following increases total factor productivity?

new production procedures

The Golden Rule says that

one should save something between A and B.

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

population growth rate plus the depreciation rate.

Percentage deviations from trend in the Solow residual are

procyclical and have about equal magnitude as percentage deviations from trend in GDP.

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*.

The per-worker production function relates output per worker

to capital per worker.

One plausible explanation of the U.S. productivity slowdown starting in 1973 is that it was the result of the time needed to adapt to new technology. This explanation would require that

workers time at their jobs be diverted from production to learning the technology.

With the Golden Rule,

savings maximize consumption.

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.

With an increase in total factor productivity in the Solow growth model,

the economy reaches a steady state with higher output.

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

the marginal return of capital is decreasing.

Suppose a poor economy inches towards the steady state in Solow's exogenous growth model. What happens?

The growth rate of output decreases.

Which feature of the data can the Solow growth model not replicate?

There is a widening gap between income levels across countries.

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

Total saving is steady.

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

The rapid growth of output for the East Asian Growth Miracles was mostly due to

capital accumulation.

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

higher population growth

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

higher population growth.

If the population growth rate increases by the same percentage points as the depreciation rate, what happens to the steady-state, per-worker output in Solow's exogenous growth model?

It decreases.

If the population growth rate increases by the same percentage points as the depreciation rate decreases, what happens to the steady-state, per-worker consumption in Solow's exogenous growth model?

It does not change.

According to Solow's exogenous growth theory, what happens to a country at steady state that suffered extensive capital destruction due to a war or climate event?

It will get back to its original status.

What happens to a poor economy in Solow's exogenous growth model?

Its saving per capita increases.

The biggest contribution to real GDP growth in the "East Asian Tigers" during the period 1966-1991 was due to growth in

the capital stock.

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

the constant returns to scale.

Suppose that two countries share identical levels of total factor productivity, identical labor force growth rates and identical savings rates. According to the Solow model

the country with the smaller initial level of output per worker will grow more rapidly than the country with the greater initial level of output per worker.

On average, real GDP per capita in the United States increases by

2%.

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

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

consumption per worker.

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

marginal product of capital.

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.

In the Solow growth model, the law of motion of capital takes into account

the depreciation of old capital.

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

the direct contribution of labor and capital.

Suppose a country is much richer than the others in the Solow growth model. What happens in the long run?

The other countries catch up to the rich one.