exam 2 macro

If two economies are otherwise identical ( same capital share, depreciation rate, technological growth rate, and population growth rate, etc) but one economy has a smaller capital stock, then the steady state level of income per worker in the ecoomy with the smaller capital stock will be

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

If the government's tax revenue is less than what it spends, then the government runs a budget _____, whichlead to the_____ national saving (and saving rate s).

deficit; negative effect on

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

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

All of the following are causes of structural unemployment

efficiency wages, the monopoly power of unions, and minimum wage laws

Suppose an economy is initially in a steady state with capital per worker below the Golden Rule level. If the saving rate increases to a rate consistent with the Golden Rule, then in the transition to the new steady state consumption per worker will

first fall below and then rise above the initial level

Short term unemployment is most likely to be ______ unemployment, while long term unemployment is mostly likely to be ______ unemployment

fricitional; structural

In the Solow model with population growth and technological progress, the Steady state growth rate of output per worker is

g

All of the following are reasons for frictional unemployment

geographic mobility takes time the flow of information is imperfect workers have different preferences and abilities

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

increase until the new steady state is reached

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

increase; increase

Which of these policies of the government is NOT designed to increase resources devoted to research and development?

increasing the amount people can put in tax exempt retirement accounts

Sectoral shifts

make fricitional unemployment inevitable

When insiders have a much greater impact on the wage bargaining process than do outsiders, the negotiated wage is likely to be ____ the equilibrium wage

much greater than

In the Solow model with population growth and technological progress, the steady state growth rate of total output is

n+g

Differences of these variables prevent countries from converging to the same steady state

saving rate, depreciation rate, and population growth rate

If the marginal product of capital net depreciation equals 8 percent, the rate of growth of population equals 2percent, and the rate of labor-augmenting technical progress equals 2 percent, to reach the Golden Rule levelof the capital stock, the _____ rate in this economy must be _____.

saving; increased

Unemployment insurance is not a cause of

structural unemployment

policies of the government is designed to increase resources devoted to research and development?

tax breaks to firms engaging in research and development, providing innovators with temporary monopoly in the form of patents and providing subsidies for basic research at universities

According to the solow model, persistently rising living standards can only be explained by

technological progress

If two economies are otherwise identical(same capital share, depreciaiton rate, technological growth rate, and population growth rate, etc) but one country has initally a lower level of capital per worker than the other then as the countries appracohed the steady state

the country with the lower capital per worker will grow faster

Suppose the marginal product of capital is 0.09, depreciation rate is 0.05, and technology is growing at 0.03.If the economy is at a steady state where consumption is being maximized, then the population growth ratemust be:

1 percent

Suppose for an economy the total capital stock is 6 times one years GDP and the deprecaition of capital is 18 percent of the GDP. In this case, we can conclude that the depreciaiton rate is equal to

3

Suppose for an economy the capital stock is 6 times one year's GDP and the capital income is 30 percent ofGDP. In this case, we can conclude that the marginal product of capital is equal to _____ percent per year

5

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

5 percent

If the per worker production function is given by y=k1/2, the saving ratio is 0.3 and the depreciation rate is 0.1 then the steady state capital per worker is

9

this is not a reason for frictional unemployment

unemployed workers accept the first job offer that they receive

Balanced growth refers to the property where

values of many variables within a country rise together in the steady state

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

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

In the Solow growth model with population growth and technological progress, the steady state growth rate of capital per effective worker is ____, and the steady state growth rate of capital per (actual) worker is ______

zero; the rate of technological progress

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

0

In the Solow model with population growth and labor augmenting technological progress, which of these describes the condition for the maximization of consumption per effective worker at the steady state

MPK-&=n+g

Assume that two economies are identical in every way except that one has a higher saving rate. According to the Solow growth model, in the steady state the country with the higher saving rate will have ____ level of output per worker and ____ rate of growth of output per worker compared to the country with the lower saving rate.

a higher; the same

If the rate of separation is 0.02 and and the rate of job finding is 0.08 but the current unemployment rate is 0.10, then the current unemployment rate is _____ the equilibrium rate, and in the next period it will move ____ the equilibrium rate.

below; toward

In the Solow growth model in Chapter 8, the steady state occurs when

capital per worker is constant

In an economy with population growth at rate n, the change in capital stock per worker is given by the equation

change in k=sf(k)*(&+n)k

Differences in which of these variables do NOT prevent countries from converging to the same steady state?

initial capital stock per worker

_____ causes the capital stock to rise, while ____ causes the capital stock to fall

investment; depreciaiton

One reason for unemployment is that

it takes time to match workers and jobs

With a per worker production function y=k1/2 the steady state capital stock per worker (k*) as a function of the saving rate (s) is given by:

k*(s/&)^2

The endogenous growth model's assumption of constant returns to capital is more plausible if capital is defined to inclue

knowledge

A higher saving rate leads to

larger capital stock and a higher level of output in the long run

The production function y=f(k) means

output per worker is a function of capital per worker

The balanced growth property of the Solow growth model with population growth and technological progress predicts which of these sets of variables will grow at the same rate g ( the rate of technological progress) in the steady state?

output per worker, capital per worker

Wage rigidity

prevents labor demand and labor supply from reaching the equilibrium level

In the Solow growth model, 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

According to efficiency wage theories, firms benefit by paying higher than equilibrium wages because worker _____ increases.

productivity

Any policy aimed at lowering natural rate of unemployment must either ______ the rate of job separation or ____ the rate of job finding.

reduce; increase