extra

TF higher growth in aggregate income needs to have higher income per worker.

False. Labor force growth

What model? a) Exogenous factors (such as the savings rate and the population growth rate) can lead to short-term growth b) Sustained long-term growth is due to increases in total factor productivity

Solow Growth Model:

z = Y / K^aN^b

Solow Residual

What is teh solow residual

This measure of total factor productivity is a residual, because it is the output that remains to be accounted for after we measure the direct contribution of the capital and labor inputs to output,

In the endogenous model, the representative consumer allocates his or her time between supplying ________ and accumulating human capital, where human capital is the accumulated stock of skills and education that a worker has at a point in time. The higher the human capital that workers have, the more they can produce, and the more new human capital they can produce.

labor to produce output

The Solow model relies on increases in total factor productivity coming from outside the model to generate ______ increases in per capita output,

long-run

Increasing the rate of economic growth may or may not improve economic welfare, because an increase in the growth rate of aggregate consumption is always associated with ___________ in the short run.

lower consumption

In the endogenous growth model, the rate of growth of output and consumption is determined by ____________________ and the ____________ between goods production and human capital accumulation.

the efficiency of human capital accumulation, allocation of labor time

A ___________________ exists when contact with others with high levels of human capital increases our human capital or makes us more productive.

human capital externality

In the endogenous growth model, per capita incomes do not converge across rich and poor countries, even if countries are identical except for initial levels of __________-

human capital.

If the government could introduce policies that altered the efficiency of human capital accumulation or the allocation of labor time, it could alter the rate of economic growth in the ___________ model.

endogenous growth

An increase in the savings rate could cause consumption per worker to increase or decrease in the Solow growth model. The golden rule savings rate maximizes consumption per worker in the steady state. The Solow growth model also predicts that a country's standard of living, as measured by income per worker, cannot increase in the long run unless there is __________

ever increasing total factor productivity.

The Solow growth model is a model of _________ growth in that, in the long-run steady state of this model, growth in aggregate output, aggregate consumption, and aggregate investment is explained by __________ growth in the labor force.

exogenous, exogenous

In the endogenous model, a higher level of human capital means that the economy can __________.

grow at a faster rate

the primary deficiency of the Solow growth model is that it does not explain a key observation, which is _______ itself.

growth

•The Solow model implies that countries that are below the steady state per capita capital level will have ___________ growth rates than those that are closer to it.

higher

the Solow growth model predicts that capital per worker and output per worker will _________ in the steady state when the labor force growth rate increases, but aggregate output will grow at a _________ rate, which is the new rate of labor force growth. n.

decrease, higher

If s > a, the extra units of capital do not produce enough to pay for ___________ and for equipping new workers, so consumption ________. It is better to consume than to save.

depreciation, falls

We constructed an endogenous growth model with _____________. This model has the property that, even with no increases in total factor productivity and no population growth, there can be _________ growth in aggregate output and aggregate consumption, fueled by growth in the stock of human capital (i.e., skills and education).

human capital accumulation, unlimited

There is a ______ correlation between the population growth rate and output per capita across countries.

negative

In the endogenous growth model, two identical countries that differ only according to their initial incomes _____________ converge.

never

In the endogenous growth model we have constructed here, convergence does ____ occur even if countries are identical in all respects except that there are differences in the initial level of human capital.

not

If s = a, the marginal product of capital is exactly enough to cover depreciation and the needs of new workers. This is the _______ level of saving (and hence, the __________ level of consumption).

optimal,optimal

To be Cobb-Douglas, the function F takes the form

F(K, N) = Ka N1-a

what are the Fundamental principles of Malthusian theory?

1.Population growth exceeds growth of the food supply 2.Population growth is kept in line with food supply via: a)Positive Checks: Starvation, disease, and higher death rates b)Preventative Checks: Postponement of marriage, "moral restraint," and other means to keep down the birth rate 3.Attempts to improve the condition of the lower classes by increasing their incomes is useless, as any gains will be absorbed by a larger population a)Malthus had little faith that "moral restraint" could be effective b)Society might wish to do what it could to hurry along nature's positive checks

What is c = (1 - s)zf(k*), which is the difference between steady state income per worker, y* = zf(k*), and steady state savings per worker, which is szf(k*).

Consumption per worker in the steady state

___________ is an approach to measuring the contributions to growth in aggregate output from growth in the capital stock, in employment, and in total factor productivity. The latter is measured by the ______________

Growth accounting, Solow residual.

What can explain explain the existence of cities and the specialized activities that take place there ie NYC?

Human capital externalities

What is Solow residual?

The solow residual is the remainder of factors within the production function. Normally it is comprised of labor and capital, the solow residual accounts for changes in technology and other unaccounted factors.

The ____________ model predicts that an increase in total factor productivity has no effect on consumption per worker in the long run, but the population increases. The standard of living can only increase in the long run if population growth is reduced, perhaps by governmental population control.

Malthusian

What model? a)Gains in productivity are diluted by increases in population b)Growth can be achieved via population control

Malthusian Model

This quantity, which maximizes consumption per worker in the steady state, is kgr, and the maximized quantity of consumption per worker is c**. The golden rule savings rate sgr achieves the _______________________ in a competitive equilibrium steady state.

The Golden Rule Quantity of Capital per Worker

T/F The Solow model predicts that a country's standard of living can continue to increase in the long run only if there are continuing increases in total factor productivity,

True

the steady state effects of an increase in the labor force growth rate, from n1 to n2. Initially, the quantity of capital per worker is k1 *, determined by the intersection of the curves szf(k*) and (n1 + d)k*. When the population growth rate increases, this results in a __________ in the quantity of capital per worker from k1 * to k2 *. Because capital per worker ______, output per worker also _____ from the per-worker production function. That is, output per worker ____ from zf(k1 *) to zf(k2 *). The reason for this result is that when the labor force grows at a higher rate, the current labor force faces a tougher task in building capital for next period's consumers, who are a proportionately larger group. Thus, output per worker and capital per worker are ultimately ____ in the steady state.

decrease, falls, falls, falls, lower

•If s < a, the marginal product of capital is large enough to cover _____________ of the extra unit and to provide the n new workers with an additional unit of capital. Hence it is better to ________, as k can increase and the extra production can be consumed.

depreciation,save

Richer countries are much more ______ in terms of rates of growth of real per capita income than are poor countries.

alike

aggregate output, aggregate consumption, and aggregate investment grow at the labor force growth rate n in the steady state. Therefore, when the labor force growth rate increases, growth in all of these variables must ______ . This is an example that shows that higher growth in aggregate income need not be associated, in the long run, with _____ income per worker.

also increase, higher

The Solow growth model predicts that rich and poor countries will converge to the same level of _____________ and ____________ Ultimately, the poor country will catch up with the rich country with regard to living standards.

capital per worker, output per worker.

In contrast to the Solow growth model, the endogenous growth model we study does not predict ________ in levels of per capita income across countries when countries are identical except for being initially rich and initially poor. In fact, the endogenous growth model predicts that differences in per capita income __________ forever.

convergence, persist

In the Solow growth model, output per worker ________ in the long run to a steady state level, in the absence of a change in total factor productivity. The model predicts that output per worker increases in the long run when the savings rate _________ or when the population growth rate _________. Both of these predictions are consistent with the data.

converges, increases, decreases

An increase in the labor force growth rate from n1 to n2 causes a _________ in the steady state quantity of capital per worker.

decrease

Solow Model: Increases in total factor productivity from z1 to z2 and from z2 to z3 cause increases in the quantity of capital per worker from k1 to k2 and from k2 to k3. Thus, increases in total factor productivity lead to __________ in output per worker.

increases

In the data, there _____ evidence for convergence among the richest countries of the world, but convergence _______ appear to be occurring among all countries or among the poorest countries.

is, does not

In contrast to the Malthusian model, where the gains from technological advance are dissipated by a higher population, the Solow model gives a more ______ outlook for increases in the standard of living over time.

optimistic

There is a ________ correlation between the rate of investment and output per capita across countries.

positive

the Malthusian growth model, the population growth depends _________ on consumption per worker, and output is produced from the ________ and a fixed quantity of land.

positively, labor input

Solow growth model to show that growth in total factor productivity is a ________ of long-run standards of living and real GDP growth.

principal driver

•The Solow Model is considered an 'exogenous' growth model because the key parameters, ________________, are all determined outside of the model

s, n, d, and z because there is a unique steady-state value k*

In the Solow growth model, with exogenous growth, countries that are in all respects identical, except for their initial quantities of capital per worker, have in the long run the _______ level and growth rate of income per worker.

same

The curve ______ is the per-worker production function multiplied by the savings rate s, and so this function inherits the properties of the per-worker production function

szf(k*)

The steady state quantity of capital, k1*, is determined by the intersection of the curve _________ with the line (n + d)k*.

szf(k*)

The Solow growth model is consistent with the data if __________________________________________. Productivity differences can result from learning by doing, barriers to technology adoption, and inefficiencies within countries in the _______________

total factor productivity differs across countries, allocation of factors of production.

____ models are way of introducing externalities into the production function.

•Spillover