Macro Review

No growth effect but a level effect

A permanent increase in the saving rate of an economy has:

Decrease

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.

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

According to Thomas Malthus, large populations:

Decreases the steady-state level of capital per worker

An increase in the rate of population growth with no change in the saving rate:

Increase

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.

Lower; the same

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.

Y/L = (K/L)0.3

If Y = K0.3L0.7, then the per-worker production function is:

The same level of output per person as before

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

Less; Increase

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.

4

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:

Capital equals the depreciation rate

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

Equal the marginal productivity of capital (MPK)

In the Solow growth model of an economy with population growth but no technological change, the breakeven level of investment must do all of these EXCEPT

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

In the Solow growth model with population growth and labor-augmenting technological change, the breakeven level of investment must cover

0

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:

n

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:

0

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

0

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

Stock of capital per worker

In the Solow model, the assumption of constant returns to scale implies that the output per worker is a function of only the

Consumption per worker will be lower compared to the original steady state

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:

Efficiency of each worker

The number of effective workers takes into account the number of workers and the:

Largest consumption per worker

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

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

Which of these statements is NOT true about the steady state in the Solow Model with population and technological progress?

Requires initially reducing capital to increase consumption in the future

\When an economy's capital is below the Golden Rule level, reaching the Golden Rule level: