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101. In the Solow growth model, technological change is ______, whereas in endogenous growth theories, technological change is ______. A) assumed; explained B) explained; assumed C) persistent; constant D) constant; persistent

A) assumed; explained

102. In the Solow model with technological progress, the steady-state growth rate of output per effective worker is: A) 0. B) g. C) n. D) n+g.

A) 0.

103. In the Solow model with technological progress, the steady-state growth rate of capital per effective worker is: A) 0. B) g. C) n. D) n+g.

A) 0.

3. The steady-state level of capital occurs when the change in the capital stock (∆k) equals: A) 0. B) the saving rate. C) the depreciation rate. D) the population growth rate.

A) 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: A) 0. B) n. C) δ. D) (n+δ).

A) 0.

6. Suppose an economy is initially in a steady state with capital per worker exceeding the Golden Rule level. If the saving rate falls to a rate consistent with the Golden Rule, then in the transition to the new steady state, consumption per worker will: A) always exceed the initial level. B) first fall below then rise above the initial level. C) first rise above then fall below the initial level. D) always be lower than the initial level.

A) always exceed the initial level.

36. If an economy is in a steady state with a saving rate below the Golden Rule level, efforts to increase the saving rate result in: A) both higher per-capita output and higher per-capita depreciation, but the increase in per-capita output would be greater. B) both higher per-capita output and higher per-capita depreciation, but the increase in per-capita depreciation would be greater. C) higher per-capita output and lower per-capita depreciation. D) lower per-capita output and higher per-capita depreciation.

A) both higher per-capita output and higher per-capita depreciation, but the increase in per-capita output would be greater.

21. In the Solow growth model, the steady-state occurs when: A) capital per worker is constant. B) the saving rate equals the depreciation rate. C) output per worker equals consumption per worker. D) consumption per worker is maximized.

A) capital per worker is constant.

86. In a steady-state economy with population growth n and labor-augmenting technological progress g, persistent increases in standards of living are possible because the: A) capital stock grows faster than does the labor force. B) capital stock grows faster than does the number of effective workers. C) rate of depreciation constantly decreases. D) saving rate constantly increases.

A) capital stock grows faster than does the labor force.

65. According to the Solow growth model, high population growth rates: A) force the capital stock to be spread thinly, thereby reducing living standards. B) place great strains on an economy's productive resources, resulting in perpetual poverty. C) are a prerequisite for technological advances and higher living standards. D) are not a factor in determining living standards.

A) force the capital stock to be spread thinly, thereby reducing living standards.

98. English-style legal systems give ______ protections to shareholders and creditors than French Napoleonic Codes, typically resulting in ______ capital markets and faster rates of economic growth. A) greater; more developed B) greater; more corrupt C) less; more developed D) less; less corrupt

A) greater; more developed

90. Empirical studies indicate that the rate of social return from positive "standing on others' shoulders" externalities of research ______ the negative "stepping on toes" externalities of research. A) greatly exceed B) approximately equal C) are substantially less than D) are only slightly less than

A) greatly exceed

56. If the production function exhibits increasing returns to scale in the steady state, an increase in the rate of growth of population would lead to: A) growth in total output and growth in output per worker. B) growth in total output but no growth in output per worker. C) growth in total output but a decrease in output per worker. D) no growth in total output or in output per worker.

A) growth in total output and growth in output per worker.

64. 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. A) increase B) decrease C) first increase, then decrease D) first decrease, then increase

A) increase

5. In the Solow growth model, increases in capital ______ output and ______ the amount of output used to replace depreciating capital. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease

A) increase; increase

67. In the Solow growth model, if investment exceeds depreciation, the capital stock will ______ and output will ______ until the steady state is attained. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase

A) increase; increase

78. Empirical evidence supports the theory that free trade: A) increases economic growth. B) decreases economic growth. C) increases imports, but decreases exports because of greater global competition. D) increases both imports and exports, but does not contribute to overall economic growth.

A) increases economic growth.

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: A) k* = (s/δ)2. B) k* = (δ/s)2. C) k* = s/δ. D) k* = δ/s.

A) k* = (s/δ)2.

84. An alternative to Prescott's explanation of the cyclical behavior of the Solow residual is that it is the result of: A) labor hoarding in recession and cyclical mismeasurement of output. B) bad weather, strict environmental regulations, and oil shocks. C) declines in capital utilization and labor force participation. D) technology shocks.

A) labor hoarding in recession and cyclical mismeasurement of output.

59. In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, then capital grows at rate ______ and output grows at rate ______. A) n;n B) n;0 C) 0;0 D) 0;n

A) n;n

89. With population growth at rate n and labor-augmenting technological progress at rate g, the Golden Rule steady state requires that the marginal product of capital (MPK): A) net of depreciation be equal to n + g. B) net of depreciation be equal to the depreciation rate plus n + g. C) plus n be equal to the depreciation rate plus g. D) plus g be equal to the depreciation rate plus n.

A) net of depreciation be equal to n + g.

41. With population growth at rate n but no technological change, the Golden Rule steady state may be achieved by equating the marginal product of capital (MPK): A) net of depreciation to n. B) ton. C) net of depreciation to the depreciation rate plus n. D) to the depreciation rate.

A) net of depreciation to n.

97. If the marginal product of capital net depreciation equals 8 percent, the rate of growth of population equals 2 percent, and the rate of labor-augmenting technical progress equals 2 percent, to reach the Golden Rule level of the capital stock, the ____ rate in this economy must be _____. A) saving; increased. B) population growth; decreased C) depreciation; decreased D) total output growth; decreased

A) saving; increased.

91. In a steady-state economy with a saving rate s, population growth n, and labor-augmenting technological progress g, the formula for the steady-state ratio of capital per effective worker (k*), in terms of output per effective worker (f(k*)), is (denoting the depreciation rate by δ): A) sf(k)/(δ + n + g). B) s/((f(k))( δ + n + g)). C) f(k)/((s)( δ + n + g)). D) (s-f(k))/(δ+n+g).

A) sf(k)/(δ + n + g).

45. 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 1 billion workers and Country Small has a population of 10 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 _____. A) the same in both countries; the same in both countries B) higher in Country Large; higher in Country Large C) higher in Country Small; higher in Country Small D) higher in Country Large; higher in Country Small

A) the same in both countries; the same in both countries

38. 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: A) total output will fall, but output per worker will rise. B) total output will rise, but output per worker will fall. C) both total output and output per worker will fall. D) both total output and output per worker will rise.

A) total output will fall, but output per worker will rise.

74. The recent worldwide slowdown in economic growth began in the early: A) 1960s. B) 1970s. C) 1980s. D) 1990s.

B) 1970s.

53. If y = k1/2, the country saves 10 percent of its output each year, and the steady-state level of capital per worker is 4, then the steady-state levels of output per worker and consumption per worker are: A) 2 and 1.6, respectively. B) 2 and 1.8, respectively. C) 4 and 3.2, respectively. D) 4 and 3.6, respectively.

B) 2 and 1.8, respectively.

61. If the per-worker production function is given by y = k1/2, the saving ratio is 0.2, and the depreciation rate is 0.1, then the steady-state ratio of output per worker (y) is: A) 1. B) 2. C) 3. D) 4.

B) 2.

19. If Y = K0.3L0.7, then the per-worker production function is: A) Y = F(K/L). B) Y/L = (K/L)0.3. C) Y/L = (K/L)0.5. D) Y/L = (K/L)0.7.

B) Y/L = (K/L)0.3.

46. 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: A) output needed to achieve the maximum level of consumption per worker. B) capital needed to replace depreciated capital and to equip new workers. C) saving needed to achieve the maximum level of output per worker. D) output needed to make the capital per worker ratio equal to the marginal product of capital.

B) capital needed to replace depreciated capital and to equip new workers.

60. 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. A) increase B) decrease C) first increase, then decrease D) first decrease, then increase

B) decrease

43. An increase in the rate of population growth with no change in the saving rate: A) increases the steady-state level of capital per worker. B) decreases the steady-state level of capital per worker. C) does not affect the steady-state level of capital per worker. D) decreases the rate of output growth in the short run.

B) decreases the steady-state level of capital per worker.

66. Unlike the long-run classical model in Chapter 3, the Solow growth model: A) assumes that the factors of production and technology are the sources of the economy's output. B) describes changes in the economy over time. C) is static. D) assumes that the supply of goods determines how much output is produced.

B) describes changes in the economy over time.

10. 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: A) always exceed the initial level. B) first fall below then rise above the initial level. C) first rise above then fall below the initial level. D) always be lower than the initial level.

B) first fall below then rise above the initial level.

63. Starting from a steady-state situation, if the saving rate increases, the rate of growth of capital per worker will: A) increase and continue to increase unabated. B) increase until the new steady state is reached. C) decrease until the new steady state is reached. D) decrease and continue to decrease unabated.

B) increase until the new steady state is reached.

96. A recent study suggests that the spectacular growth rates experienced by Hong Kong, Singapore, South Korea, and Taiwan are largely due to: A) rapid growth in total factor productivity. B) increases in factor inputs. C) high rates of saving. D) low rates of capital depreciation.

B) increases in factor inputs.

4. In the Solow growth model with population growth, but no technological progress, if in the steady state the marginal product of capital equals 0.10, the depreciation rate equals 0.05, and the rate of population growth equals 0.03, then the capital per worker ratio ____ the Golden Rule level. A) is above B) is below C) is equal to D) will move to

B) is below

7. If an economy with no population growth or technological change has a steady-state MPK of 0.125, a depreciation rate of 0.1, and a saving rate of 0.225, then the steady-state capital stock: A) is greater than the Golden Rule level. B) is less than the Golden Rule level. C) equals the Golden Rule level. D) could be either above or below the Golden Rule level.

B) is less than the Golden Rule level.

95. The endogenous growth model's assumption of constant returns to capital is more plausible if capital is defined to include: A) plant and equipment. B) knowledge. C) depreciation. D) technology.

B) knowledge.

69. If an economy moves from a steady state with positive population growth to a zero population growth rate, then in the new steady state, total output growth will be ______ and growth of output per person will be ______. A) lower; lower B) lower; the same as it was before C) higher; higher than it was before D) higher; lower

B) lower; the same as it was before

68. Two economies are identical except that the level of capital per worker is higher in Highland than in Lowland. The production functions in both economies exhibit diminishing marginal product of capital. An extra unit of capital per worker increases output per worker: A) more in Highland. B) more in Lowland. C) by the same amount in Highland and Lowland. D) in Highland, but not in Lowland.

B) more in Lowland.

29. 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: A) 0. B) n. C) δ. D) (n+δ).

B) n.

18. In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, total output grows at rate ______ and output per worker grows at rate ______. A) n;n B) n;0 C) 0;0 D) 0;n

B) n;0

72. The balanced growth property of the Solow growth model with population growth and technological progress predicts which of the following sets of variables will grow at the same rate in the steady state? A) output per effective worker, capital per effective worker, real wage B) output per worker, capital per worker, real wage C) real rental price of capital, real wage, output per worker D) capital-output ratio, output per worker, capital per worker

B) output per worker, capital per worker, real wage

48. When an economy begins above the Golden Rule, reaching the Golden Rule: A) produces lower consumption at all times in the future. B) produces higher consumption at all times in the future. C) requires initially reducing consumption to increase consumption in the future. D) requires initially increasing consumption to decrease consumption in the future.

B) produces higher consumption at all times in the future.

99. The rate of labor-augmenting technological progress (g) is the growth rate of: A) labor. B) the efficiency of labor. C) capital. D) output.

B) the efficiency of labor.

8. In the Solow growth model with population growth, but no technological progress, in the Golden Rule steady state, the marginal product of capital minus the rate of depreciation will equal: A) 0. B) the population growth rate. C) the saving rate. D) output per worker.

B) the population growth rate.

83. If the U.S. production function is Cobb-Douglas with capital share 0.3, output growth is 3 percent per year, depreciation is 4 percent per year, and the capital-output ratio is 2.5, the saving rate that is consistent with steady-state growth is: A) 12.5 percent. B) 14 percent. C) 17.5 percent. D) 20 percent.

C) 17.5 percent.

62. If the U.S. production function is Cobb-Douglas with capital share 0.3, output growth is 3 percent per year, depreciation is 4 percent per year, and the Golden Rule steady-state capital-output ratio is 4.29, to reach the Golden Rule steady state, the saving rate must be: A) 17.5 percent. B) 25 percent. C) 30 percent. D) 42.9 percent.

C) 30 percent.

50. Assume that two countries both have the per-worker production function y = k1/2, neither has population growth or technological progress, depreciation is 5 percent of capital in both countries, and country A saves 10 percent of output whereas country B saves 20 percent. If A starts out with a capital-labor ratio of 4 and B starts out with a capital-labor ratio of 2, in the long run: A) both A and B will have capital-labor ratios of 4. B) both A and B will have capital-labor ratios of 16. C) A's capital-labor ratio will be 4 whereas B's will be 16. D) A's capital-labor ratio will be 16 whereas B's will be 4.

C) A's capital-labor ratio will be 4 whereas B's will be 16.

79. If Y is output, K is capital, u is the fraction of the labor force in universities, L is labor, and E is the stock of knowledge, and the production Y = F(K,(1 - u) EL) exhibits constant returns to scale, then output (Y) will double if: A) K is doubled. B) K and u are doubled. C) K and E are doubled. D) L is doubled.

C) K and E are doubled.

26. 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) a higher saving rate B) a lower depreciation rate C) a higher population growth rate D) a higher capital per worker ratio

C) a higher population growth rate

92. Increases in the rate of growth of income per person in the United States in the mid-1990s is mostly likely the result of: A) increases in human capital. B) increases in physical capital. C) advances in information technology. D) an increase in the saving rate.

C) advances in information technology.

75. In the basic endogenous growth model, income can grow forever—even without exogenous technological progress—because: A) the saving rate equals the rate of depreciation. B) the saving rate exceeds the rate of depreciation. C) capital does not exhibit diminishing returns. D) capital exhibits diminishing returns.

C) capital does not exhibit diminishing returns.

24. 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: A) labor equals the marginal product of capital. B) labor equals the depreciation rate. C) capital equals the depreciation rate. D) capital equals zero.

C) capital equals the depreciation rate.

31. In the Solow model, it is assumed that a(n) ______ fraction of capital wears out as the capital-labor ratio increases. A) smaller B) larger C) constant D) increasing

C) constant

16. If a larger share of national output is devoted to investment, then living standards will: A) always decline in the short run but rise in the long run. B) always rise in both the short and long runs. C) decline in the short run and may not rise in the long run. D) rise in the short run but may not rise in the long run.

C) decline in the short run and may not rise in the long run.

70. Assume that a war reduces a country's labor force but does not directly affect its capital stock. If the economy was in a steady state before the war and the saving rate does not change after the war, then, over time, capital per worker will ______ and output per worker will ______ as it returns to the steady state. A) decline; increase B) increase; increase C) decline; decrease D) increase; decrease

C) decline; decrease

80. In year 1, capital stock was 6, labor input was 3, and output was 12. In year 2, capital was 7, labor was 4, and output was 14. If shares of labor and capital were each 1/2, between the two years, total factor productivity: A) increased by 1/12. B) increased by 1/18. C) decreased by 1/12. D) decreased by 1/18.

C) decreased by 1/12.

32. In the steady state with no population growth or technological change, the capital stock does not change because investment equals: A) output per worker. B) the marginal product of capital. C) depreciation. D) consumption.

C) depreciation.

57. If the national saving rate increases, the: A) economy will grow at a faster rate forever. B) capital-labor ratio will increase forever. C) economy will grow at a faster rate until a new, higher, steady-state capital-labor ratio is reached. D) capital-labor ratio will eventually decline.

C) economy will grow at a faster rate until a new, higher, steady-state capital-labor ratio is reached.

39. In the Solow growth model of an economy with population growth but no technological change, the break-even level of investment must do all of the following except: A) offset the depreciation of existing capital. B) provide capital for new workers. C) equal the marginal productivity of capital (MPK). D) keep the level of capital per worker constant.

C) equal the marginal productivity of capital (MPK).

44. The Golden Rule level of the steady-state capital stock: A) will be reached automatically if the saving rate remains constant over a long period of time. B) will be reached automatically if each person saves enough to provide for his or her retirement. C) implies a choice of a particular saving rate. D) should be avoided by an enlightened government.

C) implies a choice of a particular saving rate.

71. The efficiency of labor: A) is the marginal product of labor. B) is the rate of growth of the labor force. C) includes the knowledge, health, and skills of labor. D) equals output per worker.

C) includes the knowledge, health, and skills of labor.

77. Differences in factor accumulation and/or differences in production efficiency must account for all international differences in: A) human capital and physical capital. B) saving rates and population growth rate. C) income per person. D) labor efficiency.

C) income per person.

100. Assuming that technological progress increases the efficiency of labor at a constant rate is called: A) endogenous technological progress. B) the efficiency-wage model of economic growth. C) labor-augmenting technological progress. D) the Golden Rule model of economic growth.

C) labor-augmenting technological progress.

58. 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. A) higher; the same B) higher; a higher C) lower; the same D) lower; a lower

C) lower; the same

9. The Solow model with population growth but no technological change cannot explain persistent growth in standards of living because: A) total output does not grow. B) depreciation grows faster than output. C) output, capital, and population all grow at the same rate in the steady state. D) capital and population grow, but output does not keep up.

C) output, capital, and population all grow at the same rate in the steady state.

2. In the Solow growth model of Chapter 8, the demand for goods equals investment: A) minus depreciation. B) plus saving. C) plus consumption. D) plus depreciation.

C) plus consumption.

94. One explanation for greater economic development in moderate versus tropical climates is that institutions established by colonial settlers in moderate climates ______, while institutions established by colonists in tropical climates ______. A) were based on English common law; were based on the Napoleonic Code B) were based on the Napoleonic Code; were based on English common law C) protected property rights; were extractive and authoritarian D) were extractive and authoritarian; protected property rights

C) protected property rights; were extractive and authoritarian

54. When an economy begins below the Golden Rule, reaching the Golden Rule: A) produces lower consumption at all times in the future. B) produces higher consumption at all times in the future. C) requires initially reducing consumption to increase consumption in the future. D) requires initially increasing consumption to decrease consumption in the future.

C) requires initially reducing consumption to increase consumption in the future.

28. The Solow model shows that a key determinant of the steady-state ratio of capital to labor is the: A) level of output. B) labor force. C) saving rate. D) capital elasticity in the production function.

C) saving rate.

23. Investment per worker (i) as a function of the saving ratio (s) and output per worker (f(k)) may be expressed as: A) s + f(k). B) s - f(k). C) sf(k). D) s/f(k).

C) sf(k).

73. The Solow model predicts that two economies will converge if the economies start with the same: A) capital stocks. B) populations. C) steady states. D) production functions.

C) steady states.

87. In the two-sector endogenous growth model, income growth persists because: A) the production function shifts exogenously. B) the saving rate exceeds the rate of depreciation. C) the creation of knowledge in universities never slows down. D) the fraction of the labor force in universities is large.

C) the creation of knowledge in universities never slows down.

76. Empirical results justify substantial government subsidies to research based on the finding that the: A) the private return to research is greater than the social return to research. B) the private return to research is approximately equal to the social return to research. C) the private return to research is less than the social return to research. D) the private return to research is positive, but the social return to research is negative.

C) the private return to research is less than the social return to research.

93. In the Solow growth model with population growth and technological change, the steady-state growth rate of income per person depends on: A) the rate of population growth. B) the saving rate. C) the rate of technological progress. D) the rate of population growth plus the rate of technological progress.

C) the rate of technological progress.

81. If two economies are identical (including having the same saving rates, population growth rates, and efficiency of labor), but one economy has a smaller capital stock, then the steady-state level of income per worker in the economy with the smaller capital stock: A) will be at a lower level than in the steady state of the high capital economy. B) will be at a higher level than in the steady state of the high capital economy. C) will be at the same level as in the steady state of the high capital economy. D) will be proportional to the ratio of the capital stocks in the two economies.

C) will be at the same level as in the steady state of the high capital economy.

25. If y = k1/2, there is no population growth or technological progress, 5 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: A) 2. B) 4. C) 8. D) 16.

D) 16.

12. If the capital stock equals 200 units in year 1 and the depreciation rate is 5 percent per year, then in year 2, assuming no new or replacement investment, the capital stock would equal _____ units. A) 210 B) 200 C) 195 D) 190

D) 190

88. In a Solow model with technological change, if population grows at a 2 percent rate and the efficiency of labor grows at a 3 percent rate, then in the steady state, total output grows at a ______ percent rate. A) 0 B) 2 C) 3 D) 5

D) 5

33. ______ cause(s) the capital stock to rise, while ______ cause(s) the capital stock to fall. A) Inflation; deflation B) Interest rates; the discount rate C) Investment; depreciation D) International trade; depressions

D) International trade; depressions

17. Among the four countries—the United States, the United Kingdom, Germany, and Japan—the one that experienced the most rapid growth rate of output per person between 1948 and 1972 was: A) the United States. B) the United Kingdom. C) Germany. D) Japan.

D) Japan.

104. When capital increases by ∆K units, output increases by: A) ∆L units. B) MPL × ∆L units. C) ∆K units. D) MPK × ∆K units.

D) MPK × ∆K units.

. The formula for steady-state consumption per worker (c*) as a function of output per worker and investment per worker is: A) c* = f(k*) - δk*. B) c* = f(k*) + δk*. C) c* = f(k*) ÷ δk*. D) c* = k* - δf(k)*.

D) c* = k* - δf(k)*.

In this graph, capital-labor ratio k2 is not the steady-state capital-labor ratio because:

D) depreciation is greater than gross investment.

42. In the Solow growth model, with a given production function, depreciation rate, no technological change, and no population growth, a higher saving rate produces a: A) higher MPK in the new steady state. B) higher steady-state growth rate of output per worker. C) higher steady-state growth rate of total output. D) higher steady-state level of output per worker.

D) higher steady-state level of output per worker.

47. If an economy is in a steady state with no population growth or technological change and the capital stock is below the Golden Rule: A) a policymaker should definitely take all possible steps to increase the saving rate. B) if the saving rate is increased, output and consumption per capita will both rise, both in the short and long runs. C) if the saving rate is increased, output per capita will at first decline and then rise above its initial level, and consumption per capita will rise both in the short and long runs. D) if the saving rate is increased, output per capita will rise and consumption per capita will first decline and then rise above its initial level.

D) if the saving rate is increased, output per capita will rise and consumption per capita will first decline and then rise above its initial level.

27. In the Solow growth model the saving rate determines the allocation of output between: A) saving and investment. B) output and capital. C) consumption and output. D) investment and consumption.

D) investment and consumption.

34. A higher saving rate leads to a: A) higher rate of economic growth in both the short run and the long run. B) higher rate of economic growth only in the long run. C) higher rate of economic growth in the short run but a decline in the long run. D) larger capital stock and a higher level of output in the long run.

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

85. In the two-sector endogenous growth model, the fraction of labor in universities (u) affects the steady-state: A) level of income. B) growth rate of income. C) level of income and growth rate of income. D) level of income, growth rate of income, and growth rate of the stock of knowledge.

D) level of income, growth rate of income, and growth rate of the stock of knowledge.

40. In the Solow growth model with no population growth and no technological progress, the higher the steady capital-per-worker ratio, the higher the steady-state: A) growth rate of total output. B) level of consumption per worker. C) growth rate of output per worker. D) level of output per worker.

D) level of output per worker.

51. If an economy is in a steady state with no population growth or technological change and the capital stock is above the Golden Rule level and the saving rate falls: A) output, consumption, investment, and depreciation will all decrease. B) output and investment will decrease, and consumption and depreciation will increase. C) output and investment will decrease, and consumption and depreciation will increase and then decrease but finally approach levels above their initial state. D) output, investment, and depreciation will decrease, and consumption will increase and then decrease but finally approach a level above its initial state.

D) output, investment, and depreciation will decrease, and consumption will increase and then decrease but finally approach a level above its initial state.

35. In the Solow growth model of Chapter 8, investment equals: A) output. B) consumption. C) the marginal product of capital. D) saving.

D) saving.

82. Endogenous growth theory rejects the assumption of exogenous: A) production functions. B) rates of depreciation. C) population growth rates. D) technological change.

D) technological change.

55. When f(k) is drawn on a graph with increases in k noted along the horizontal axis, the slope of the line denotes: A) output per worker. B) output per unit of capital. C) the marginal product of labor. D) the marginal product of capital.

D) the marginal product of capital.

20. In an economy with population growth at rate n, the change in capital stock per worker is given by the equation: A) ∆k=sf(k)+δk. B) ∆k=sf(k)-δk. C) ∆k=sf(k)+(δ+n)k. D) ∆k=sf(k)-(δ+n)k.

D) ∆k=sf(k)-(δ+n)k.


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