MACRO QUIZ 6

In the Solow growth model with population growth, but no technological change, which of the following will generate a higher steady-state growth rate of total output?

a higher population growth rate

If an economy is in a steady state with no population growth or technological change and the marginal product of capital is less than the depreciation rate:

steady-state consumption per worker would be higher in a steady state with a lower saving rate.

If y = 8k1/2, there is no population growth or technological progress, 40 percent of capital depreciates each year, and a country saves 20 percent of output each year, then the steady-state level of capital per worker is:

16

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

increase; increase

(Exhibit: Steady-State Consumption II) The Golden Rule level of steady-state output per worker is:

AC.

(Exhibit: Steady-State Consumption II) The Golden Rule level of steady-state investment per worker is:

BC.

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.

Starting from a steady-state situation, if the saving rate increases, the capital stock per worker will:

increase until the new steady state is reached.

Starting from a steady-state situation, if the saving rate increases, the rate of growth of capital per worker will:

increase until the new steady state is reached.

In this graph, starting from capital-labor ratio k1, the capital-labor ratio will: remain constant.

increase.

In the Solow growth model with population growth but no technological progress, increases in capital have a positive impact on steady-state consumption per worker by _____, but have a negative impact on steady-state consumption per worker by _____.

increasing output; increasing output required to replace depreciating capital.

In the Solow growth model the saving rate determines the allocation of output between:

investment and consumption.

In the Solow growth model with population growth, but no technological progress, if in the steady state the marginal product of capital equals 0.07, the depreciation rate equals 0.05, and the rate of population growth equals 0.015, then the capital per worker ratio ____ the Golden Rule level.

is below

If an economy with no population growth or technological change has a steady-state MPK of 0.095, a depreciation rate of 0.1, and a saving rate of 0.2, then the steady-state capital stock:

is greater than the Golden Rule level.

Assume 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 as/than the country with the lower population growth rate.

lower; the same

In the Solow growth model of Chapter 8, for any given capital stock, the ______ determines how much output the economy produces and the ______ determines the allocation of output between consumption and investment.

production function; saving rate

In the Solow growth model, if two countries are otherwise identical (with the same production function, same saving rate, same depreciation rate, and same rate of population growth) except that Country Large has a population of 5 billion workers and Country Small has a population of 20 million workers, then the steady-state level of output per worker will be _____ and the steady-state growth rate of output per worker will be _____.

the same in both countries; the same in both countries

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 this graph, when the capital-labor ratio is OA, BC represents:

consumption per worker, and AB represents investment per worker.

In the steady state with no population growth or technological change, the capital stock does not change because investment equals:

depreciation.