ECON Test 3

Y = Kα(AN)1-α α = 0.5 δ = 0.1 gA = 0.04 gN = 0.01 s = 0.3 The steady state of output per effective labor is

2.

Y = Kα(AN)1-α α = 0.5 δ = 0.1 gA = 0.04 gN = 0.01 s = 0.3 Assume that gA = gN = 0. The level of consumption per worker (C/N) is

2.1

Use the information provided below to answer the questions H9 - H13. Y = K^α(AN)^(1-α) α = 0.5 δ = .11 gA = .03 gN = .02 s = 0.4 Refer to the information above. The steady state level of output per effective labor is

2.5

When the production function is represented by Y = AN, where A=3, labor productivity is

3

Use the information provided below to answer the questions H9 - H13. Y = K^α(AN)^1-α α = 0.5 δ = .11 gA = .03 gN = .02 s = 0.4 Refer to the information above. Given this information, the steady state rate of growth of capital per worker (K/N) is

3%.

Assume that the production function has the form Yt=F(Kt,Nt)=(Kt)^alpha (Nt)^(1-alpha). What is the steady state capital and output per worker?

K/N = (s/delta)^(1/(1-alpha)) and Y/N = (s/delta)^(alpha/(1-alpha))

When steady state capital per worker is above the golden-rule level, we know with certainty that an increase in the saving rate will

decrease consumption in both the short run and the long run.

Which of the following must occur to sustain economic growth in the long run?

technological progress

An increase in productivity will likely cause

the AS curve to shift downward, and have an ambiguous effect on the AD curve.

Y = Kα(AN)1-α α = 0.5 δ = 0.1 gA = 0.04 gN = 0.01 s = 0.3 The steady state rate of growth of output per unit of technology (Y/A) is

.01

Assume that: (1) the rate of depreciation is 10% per year, (2) the population growth rate is 2% per year, and (3) the growth rate of technology is 3% per year. Which of the following represents the steady-state growth rate of output in this economy?

.05

Assume that: (1) the rate of depreciation is 8% per year, (2) the population growth rate is 3% per year, and (3) the growth rate of technology is 5% per year. Refer to the information above. Which of the following represents the steady-state growth rate of output per worker in this economy?

.05

Assume that: (1) the rate of depreciation is 10% per year, (2) the population growth rate is 2% per year, and (3) the growth rate of technology is 3% per year. Which of the following represents the level of investment per effective worker needed to maintain constant capital per effective worker (K/NA) in this economy?

.15K/NA

Use the information provided below to answer the questions H9 - H13. Y = K^α(AN)^(1-α) α = 0.5 δ = .11 gA = .03 gN = .02 s = 0.4 Refer to the information above. Which of the following represents the amount of investment per effective worker needed to maintain a constant level of capital per effective worker (K/NA)?

.16(K/AN)

Use the information provided below to answer the questions H9 - H13. Y = K^α(AN)^1-α α = 0.5 δ = .11 gA = .03 gN = .02 s = 0.4 Refer to the information above. Given this information, the steady state rate of growth of output per effective worker (Y/NA) is

0%

Y = Kα(AN)1-α α = 0.5 δ = 0.1 gA = 0.04 gN = 0.01 s = 0.3 The steady state rate of growth of capital per worker (K/N) is

0.04

Y = Kα(AN)1-α α = 0.5 δ = 0.1 gA = 0.04 gN = 0.01 s = 0.3 How much investment needs to be done to keep capital per effective worker constant?

0.15(K/AN).

Assume that the production function is given by Y = K^(1/3) N^(2/3), and that δ=0.08, s=0.32. The steady state level of output per worker (Y/N) is

2

Use the information provided below to answer the questions H9 - H13. Y = K^α(AN)^1-α α = 0.5 δ = .11 gA = .03 gN = .02 s = 0.4 Refer to the information above. Given this information, the steady state rate of growth of consumption (C) is

5%.

For this question, assume that expectations of P and A are correct. Based on price setting behavior, the real wage will be equal to which of the following?

A/(1+m)

Suppose that the economy is at the steady state and the depreciation rate decreases. What of the following possibilities will happen?

Capital per worker will increase for some time and eventually converge to a higher steady state level

In the following production function, Y = f(K, NA), a 20% increase in A will cause which of the following variables to increase by 20%?

Effective Labor

Which of the following will cause a reduction in the steady-state growth rate of output per worker?

In the steady state, output per worker grows at the rate of technological progress, gA.

Assume that the production function has the form Yt = F(Kt,Nt) = 2 [(Kt)^1/2 (Nt)^1/2]. What are the steady state functions of capital and output per worker?

K/N = (2s/delta)^2 and Y/N = (2s/delta)

Assume that the production function has the form Yt = F(Kt,Nt) = 2 [(Kt)^1/2 (Nt)^1/2]. Assume now that there is an increase in the saving rate to s=0.6, while delta stays at 0.12 What are the new steady state levels of capital and output per worker?

K/N = 100 and Y/N = 10

Assume that the production function has the form Yt = F(Kt,Nt) = 2 [(Kt)^1/2 (Nt)^1/2]. Assume further that s=0.3 and delta=0.12 What are the steady state levels of capital and output per worker?

K/N = 25 and Y/N = 5

Assume that the production function has the form Yt = F(Kt,Nt) = 2 [(Kt)^1/2 (Nt)^1/2]. Assume now that there is a decrease in the depreciation rate to s=0.1, while s stays at the original level of 0.3 What are the new steady state levels of capital and output per worker?

K/N = 36 and Y/N = 6

Assume that the production function has the form Yt=F(Kt,Nt)=(Kt)^alpha (Nt)^(1-alpha). Further assume that s=0.4, delta=0.1 and alpha=1/3. What is the steady state values of capital and output per worker?

K/N = 8 and Y/N = 2

When the production function is represented by Y = NA, labor productivity is represented by which of the following expressions?

Labor productivity is the output per worker and from Y = AN follows that Y/N = A

For this question assume that technological progress does not occur. The rate of saving in Canada has generally been greater than the saving rate in the U.S. Given this information, we know that in the long run

None of the Above

Which of the following will cause a reduction in the steady-state growth rate of output per worker?

On the balanced growth, output per worker grows at the rate of technological progress, gA

The saving rate determines the level of output per worker in the long run.

Other things being equal, countries with a higher saving rate will achieve higher output per worker in the long run but this will be for some time, not forever.

Assume that an economy experiences both positive population growth and technological progress. Once the economy has achieved balanced growth, we know that

S/NA = (δ + gA + gN)K/NA.

Suppose that the economy is at the steady state and the depreciation rate increases. What of the following possibilities will happen?

The capital depreciation curve shifts up and the steady state capital per worker decreases

Suppose that the economy is at the steady state and the saving rate decreases. What of the following possibilities will happen?

The saving curve shifts down and the steady state capital per worker decreases

Suppose that the economy is at the steady state and the saving rate increases. What of the following possibilities will happen?

The saving curve shifts up and the steady state output per worker increases

Assume that an economy experiences both positive population growth and technological progress. In this economy, which of the following is constant when balanced growth is achieved?

Y/AN

Assume that an economy experiences both positive population growth and technological progress, and that the production function is of the form Y = K^α(AN)^(1-α). The level of capital per effective worker in the balance growth path is

Y/AN = (s/(δ+gA+gN))^(α/(1- α))

Assume that an economy experiences both positive population growth and technological progress. In this economy, which of the following is constant when balanced growth is achieved?

Y/NA

For s between zero and sG (G for golden rule)

a higher saving rate leads to higher capital per worker, higher output per worker, and higher consumption per worker.

For this question, assume that there are decreasing returns to capital, decreasing returns to labor, and constant returns to scale. A reduction in the capital stock will cause which of the following?

a reduction in output

Suppose, due to the effects of a military conflict that has ended, that a country experiences a large reduction in its capital stock. Assume no other effects of this event on the economy. Which of the following will tend to occur as the economy adjusts to this situation?

a relative high growth rate for some time

Suppose an economy experiences an increase in technological progress. This increase in technological progress will

allow more output to be produced with the same number of workers. allow the same amount of output to be produced with fewer workers. lead to changes in the types of goods produced.

For this question, assume productivity has been increasing by 5% per year. Also assume that workers' expectations of productivity growth adjust slowly over time. For this economy, a reduction in productivity growth from 5% to 2% will most likely cause which of the following to occur?

an increase in the natural rate of unemployment

For this question, assume productivity has been increasing by 5% per year.Also assume that workers' expectations of productivity growth adjust slowly over time. For this economy, a reduction in productivity growth from 5% to 2% will most likely cause which of the following to occur?

an increase in the natural rate of unemployment

Which of the following will cause an increase in the steady-state growth rate of capital?

an increase in the population growth rate

Suppose workers' and firms' expectations of the price level and productivity are accurate. In this case, an increase in productivity will cause which of the following?

an increase in the real wage and no change in the natural rate of unemployment

An increase in productivity will cause which of the following according to the price-setting behavior of firms?

an increase in the real wage paid by firms

Which of the following will cause an increase in steady state output per effective worker?

an increase in the saving rate

At the current steady state capital-labor ratio, assume that the steady state level of per capita consumption, (C/N)*, is less than the golden rule level of steady state per capita consumption. Given this information, we can be certain that

an increase in the saving rate will cause an increase in the steady state level of per capita consumption ((C/N)*).

Which of the following statements is always true?

any change in the capital stock is equal to investment minus depreciation.

Suppose that Kt/N is above the steady state. Given this information, we know that

capital per worker in t+1 will be lower than in period t

Suppose there is an increase in the saving rate.This increase in the saving rate must cause an increase in consumption per capita in the long run when

capital per worker is less than the golden-rule level of capital per worker.

Assume that both technology growth and population growth are positive. If starting from a given steady state there is an increase in the rate of population growth, capital per effective labor

decreases for some time and eventually settles at a lower level.

In the following production function, Y = f(K, NA), a 20% increase in A will cause which of the following variables to increase by 20%?

effective labor

Assume that both technology growth and population growth are positive.When the saving rate increases from 30% to 35% for ever, output per worker

eventually settles at a new balance growth path with the same positive slope as before

Assume that there is no technology or population growth.Assume that there is a decrease in the depreciation rate, then

for some time investment per worker will be higher than depreciation of capital per worker. capital per worker will increase for some time and eventually settle at a higher level.

Assume that an economy experiences both positive population growth and technological progress. Once the economy has achieved balanced growth, we know that the capital stock is

growing at a rate of gA + gN.

In the OECD countries, there is a negative relationship between output per capita in 1950 and

growth since 1950.

The evidence suggests that recent technological change

has increased the wage gap between skilled and unskilled workers.

In recent years, real wages of the least educated workers

have decreased, while the real wages of college-educated workers have increased.

In the absence of technological progress, we know with certainty that an increase in the saving rate will cause which of the following?

increase steady state consumption only if the increase in saving is less than the increase in depreciation

Which of the following would increase the gap in wages between skilled and unskilled workers?

less technological progress of the kind we've experienced in the past 15 years new types of production technology that require workers to have more skills an increase in the costs of going to college

The saving rate has no effect

on the long-run growth rate of output per worker, which is zero.

Suppose there are two countries that are identical with the following exception.The saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run

output per capita will be greater in A than in B.

An increase in the saving rate will affect which of the following variables in the long run?

output per worker, capital per worker, the level of investment

Suppose individuals wish to obtain the most accurate comparison of living standards between the Canada and Saudi Arabia.To do so, one would convert Saudi Arabian output into dollars using

purchasing power parity methods

Which of the following best describes a situation where research is considered relatively fertile?

research that translates into many new products

Suppose that: Kt+1/N = Kt/N. Given this information, we know that

saving per worker equals depreciation per worker in period t.

Suppose the following situation exists for an economy: Kt+1/N = Kt/N. Given this information, we know that

saving per worker equals depreciation per worker in period t.

Assume that there is no technology or population growth. Further suppose that the economy is in a situation where: Kt+1/N > Kt/N. Given this information, we know that

saving per worker is greater than depreciation per worker in period t.

Suppose the following situation exists for an economy: Kt+1/N > Kt/N. Given this information, we know that

saving per worker is greater than depreciation per worker in period t.

When an economy is operating at the steady state, we know that

steady state saving per worker is equal to depreciation per worker.

At the steady state

the growth of output per worker is zero.

In the absence of technological progress, which of the following is true when the economy is operating at the steady state?

the growth of output per worker is zero.

A reduction in the saving rate will NOT affect which of the following variables in the long run?

the growth rate of output per worker

The only thing you know with certainty is that in the absence of technological progress

the long-run growth rate of output per worker remains equal to zero.

In the following production function, Y = f(K, NA), suppose A increases by 20%. This 20% increase in A implies that

the same output can be produced with 20% less labor. the effective quantity of labor has increased by 20%. output will increase by less than 20%.

Suppose there are two countries that are identical in every way with the following exception: Country A has a lower depreciation rate (δ) than country B. Given this information, we know with certainty that

the steady state growth rate will be the same in the two countries.

When the unemployment rate is on the horizontal axis and the real wage is on the vertical axis, an increase in productivity will cause which of the following to occur?

the wage-setting and price-setting curves will both shift upward.

Which of the following is a main conclusion about growth for OECD countries and the four rich countries examined in the textbook?

there has been a large increase in the standard of living since 1950. there has been a convergence of output per capita since 1950.

Since capital per worker has increased

this means that at time t, investment exceeded depreciation.

Between 1950 and 2004, standards of living in the OECD countries

were converging.