Chapter 9 Econn Intermediate Macro

The efficiency of labor is a term that does not reflect the:

high output that comes from labor cooperating with a large amount of capital.

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 _____.

saving; increased.

When capital increases by ΔK units and labor increases by ΔL units, output (ΔY) increases by:

(MPK ∞ ΔK) + (MPL ∞ ΔL) units.

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:

K and E are doubled.

Empirical investigations into whether differences in income per person are the result of differences in the quantities of the factors of production available or differences in the efficiency with which the factors are employed typically find:

a positive correlation between the quantity of factors and the efficiency of use.

Empirical evidence supports the theory that free trade:

increases economic growth.

Assuming that technological progress increases the efficiency of labor at a constant rate is called:

labor-augmenting technological progress.

In the two-sector endogenous growth model, the fraction of labor in universities (u) affects the steady-state:

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

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 ______.

protected property rights; were extractive and authoritarian

The Solow model predicts that two economies will converge if the economies start with the same:

steady states.

Endogenous growth theory rejects the assumption of exogenous:

technological change.

In a steady state with population growth and technological progress:

the real rental price of capital is constant and the real wage grows at the rate of technological progress.

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:

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