ECON 320 Chapter 9

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

0.

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: rate of depreciation constantly decreases. capital stock grows faster than does the labor force. capital stock grows faster than does the number of effective workers. saving rate constantly increases.

capital stock grows faster than does the labor force.

Which of the following changes would bring the U.S. capital stock, currently below the Golden Rule level, closer to the steady-state, consumption-maximizing level? increasing the population growth rate increasing the rate of technological progress increasing the rate of capital depreciation increasing the saving rate

increasing the saving rate

Changes that can increase measured total factor productivity include: increases in the capital-labor ratio. regulations requiring increases in worker safety. regulations requiring reductions in pollution. increased expenditures on education.

increased expenditures on education.

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

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

Assume that an economy described by the Solow model is in a steady state with output and capital growing at 3 percent, and labor growing at 1 percent. The capital share is 0.3. The growth-accounting equation indicates that the contributions to growth of capital, labor, and total factor productivity are: 0 percent, 1 percent, and 2 percent, respectively. 1.8 percent, 0.3 percent, and 0.9 percent, respectively. 0.9 percent, 0.7 percent, and 1.4 percent, respectively. 0.3 percent, 0.7 percent, and 2 percent, respectively.

0.9 percent, 0.7 percent, and 1.4 percent, respectively.

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: 17.5 percent. 12.5 percent. 20 percent. 14 percent.

17.5 percent.

If the labor force is growing at a 3 percent rate and the efficiency of a unit of labor is growing at a 2 percent rate, then the number of effective workers is growing at a rate of: 2 percent. 6 percent. 5 percent. 3 percent.

5 percent.

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 u are doubled. K is doubled. K and E are doubled. L is doubled.

K and E are doubled

Labor hoarding refers to: keeping workers in low-wage jobs in order to reduce labor costs. contractually preventing workers from obtaining jobs with competing firms. continuing to employ workers during a recession to ensure they will be available in the recovery. using less capital in production so that more workers will have jobs.

continuing to employ workers during a recession to ensure they will be available in the recovery.

In the Solow growth model with population growth and technological change, the break-even level of investment must cover: depreciating capital and capital for new workers. depreciating capital. depreciating capital and capital for new effective workers. depreciating capital, capital for new workers, and capital for new effective workers.

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

The preponderance of empirical evidence supports the hypothesis that economies that are open to trade _____ than comparable closed economies. converge more slowly to a steady-state equilibrium have faster rates of population growth and technological progress have lower steady-state levels of income per worker due to foreign competition grow more rapidly

grow more rapidly

If the per-worker production function is y = Ak, where A is a positive constant, in the steady state, a: lower saving rate does not affect the growth rate. lower saving rate leads to a higher growth rate. higher saving rate does not affect the growth rate. higher saving rate leads to a higher growth rate.

higher saving rate leads to a higher growth rate.

A possible externality associated with the process of accumulating new capital is that: the government may need to adopt an industrial policy. old capital may be made more productive. a reduction in labor productivity may occur. new production processes may be devised.

new production processes may be devised.

Public policies in the United States designed to stimulate technological progress do not include: tax breaks to encourage homeownership. subsidies given by the National Science Foundation. tax breaks for research and development. the temporary monopoly granted by the patent system.

tax breaks to encourage homeownership.

Endogenous growth theory rejects the assumption of exogenous: rates of depreciation. technological change. population growth rates. production functions.

technological change.

If two economies are identical (with the same population growth rates and rates of technological progress), but one economy has a lower saving rate, then the steady-state level of income per worker in the economy with the lower saving rate: will be at the same level as in the steady state of the high-saving economy. will be at a higher level than in the steady state of the high-saving economy. will grow at a slower rate than in the high-saving economy. will be at a lower level than in the steady state of the high-saving economy.

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

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 a lower level than in the steady state of the high capital economy. will be at the same level as in the steady state of the high capital economy. will be at a higher level than in the steady state of the high capital economy. will be proportional to the ratio of the capital stocks in the two economies.

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