Exam 2 Collective

Which of the following is correct? a) Industry may produce agricultural tools that, in turn, may produce higher agricultural surplus. The tools and the surplus must be traded. b) High agricultural surplus would lead to a better living standard for the workers in agriculture and in industry. c) Agriculture must produce food over and above the food required to sustain the agricultural workers. The surplus food can be used to feed industrial workers. d) Rural to urban migration is important in economic development because rural workers must migrate to urban manufacturing areas to increase manufacturing output. e) All of the above

e) All of the above

If population grows at rate n and workers become more effective at rate g, which variable grows at rate n + g? A. Output B. Output per worker C. Output per effective worker D. Capital per effective worker

A. Output

Assuming the production function is 𝑦 = 𝑘, what is the approximate depreciation rate for an economy with a steady-state capital stock of 8 units of capital per worker and a saving rate of 0.4? A. 0.05 B. 0.14 C. 0.32 D. 0.40

B. 0.14

The people living at the subsistence level in poor countries A. Get a lot of help from their governments B. Have high savings rates C. Depend on their family and friends for support D. Have a high marginal product of labor

C. Depend on their family and friends for support

Zheng He's expeditions: a) Occurred immediately after the age of Columbus. b) Led to early Chinese settlements in Australia. c) The reason Chinese Jasmine tea became so popular. d) None of the above.

d) None of the above.

Spice trade that changed the world were based on: a) Turmeric, Coriander, and Cumin b) Saffron, Fennel, and Anise c) Sumac, Pepper, and Mustard seeds d) Nutmeg, Cloves, and Mace

d) Nutmeg, Cloves, and Mace

Steady-state consumption is the gap between: A. output and depreciation. B. depreciation and investment. C. saving and investment. D. saving and depreciation.

A. output and depreciation.

Africa has: a) A land area that is more than three times the size of continental US. b) multiple rivers that make navigation easier. c) the highest economic growth at this time. d) The world's largest population of horses.

a) A land area that is more than three times the size of continental US.

Abrahamic or Eastern Religions: a) Do not emphasize economic growth as we know today. b) Claim that people should save at least 50% of their income. c) Visualize time and space as circular that result in reincarnation. d) Believe in the concept of Original Sin that prevents economic growth

a) Do not emphasize economic growth as we know today.

In the standard Lewis model, as GDP rises A. Income share of capital rises as well B. Income share of labor rises as well C. Both the shares of capital and labor rise. D. None of the above

A. Income share of capital rises as well

In Piketty's Model, if (r -g) is very high A. Income share of capital will rise B. Income share of labor will rise C. Both the shares of capital and labor will rise. D. None of the above

A. Income share of capital will rise

In the Solow growth model, which variable is endogenous? A. The capital stock B. The saving rate C. The depreciation rate D. Technological progress

A. The capital stock

Jared Diamond argues that the following animals played an important role in economic development: a) Sheep, goats, cows, pigs, and horses. b) Zebras, Giraffes, Monkeys, Apes, and Okapis. c) Cats and dogs. d) All of the above

a) Sheep, goats, cows, pigs, and horses.

Which economist predicted that humanity's long-run prospect is poverty? A. Paul Romer B. Thomas Malthus C. Michael Kramer D. Robert Solow

B. Thomas Malthus

Which statement is TRUE according to the Solow growth model? A. A higher saving rate results in faster, sustained growth. B. A higher saving rate results in temporarily faster growth. C. A sustained high saving rate will result in a larger capital stock but not more output. D. An increase in the saving rate does not change the steady state but enables the economy to reach it more quickly.

B. A higher saving rate results in temporarily faster growth.

Which statement is TRUE when the economy starts with LESS capital than the Golden Rule level? A. Depreciation must be reduced to reach the Golden Rule level of capital. B. Current generations must sacrifice to maximize future consumption. C. To maximize consumption, the current saving rate must fall. D. Increasing the capital stock to the Golden Rule level benefits both current and future generations.

B. Current generations must sacrifice to maximize future consumption.

In the Solow growth model, which expression defines the marginal product of capital? A. MPK =f (k + 1)/f (k ) B. MPK =f (k + 1) −f (k ) C. MPK =f (k + 1) +f (k ) D. MPK =f (k ) −f (k + 1)

B. MPK =f (k + 1) −f (k )

In the steady state in the Solow model, which is NOT one of the uses of new capital? A. To replace depreciating capital B. To replace capital exported to other countries C. To provide capital for new 'effective workers' created by technological progress D. To provide capital for new workers

B. To replace capital exported to other countries

Lewis dual economies are countries A. with double capital and labor. B. with a modern manufacturing sector as well as traditional agriculture sector. C. are a pair of countries where one specializes in labor-intensive products and the other specializes in capital-intensive products. D. with foreign-owned and domestically-owned capital.

B. with a modern manufacturing sector as well as traditional agriculture sector.

In the Solow model with population growth and static technology, what is the Golden Rule condition? A. MPK = δ − n B. MPK + n = δ C. MPK − δ = n D. MPK + δ = n

C. MPK − δ = n

How do the long-run predictions of the Solow growth model and endogenous growth model compare? A. Both predict an eventual steady-state equilibrium. B. Both recognize the possibility of unlimited growth. C. The Solow model predicts an eventual steady-state equilibrium, and the endogenous growth model allows for continued growth. D. The endogenous growth model predicts an eventual steady-state equilibrium, and the Solow model allows for continued growth.

C. The Solow model predicts an eventual steady-state equilibrium, and the endogenous growth model allows for continued growth.

Assuming the production function is𝑦 = 𝑘, what is the steady-state capital stock for an economy with a saving rate of 0.4 and a depreciation rate of 0.2? A. 0.25 B. 0.5 C. 2 D. 4

D. 4

Which statement is TRUE when the economy starts with MORE capital than the Golden Rule level? A. Depreciation must be increased to reach the Golden Rule level of capital. B. Current generations must sacrifice to maximize future consumption. C. To maximize consumption, the current saving rate must rise. D. Decreasing the capital stock to the Golden Rule level benefits both current and future generations.

D. Decreasing the capital stock to the Golden Rule level benefits both current and future generations.

In the Solow model, which two variables have similar effects on the capital stock per worker? A. Depreciation and technological change B. The saving rate and depreciation C. Population growth and technological change D. Depreciation and population growth

D. Depreciation and population growth

Assuming the labor force and technology are fixed, why is there a limit to capital accumulation? A. Over time, consumers become unwilling to save. B. The current generation is unwilling to sacrifice for future generations. C. There is a finite limit on output. D. More capital means more capital must be replaced.

D. More capital means more capital must be replaced.

In the standard Solow model, as GDP rises A. Income share of capital rises as well B. Income share of labor rises as well C. Both the shares of capital and labor rise. D. None of the above.

D. None of the above.

How do the Solow growth model and endogenous growth (Romer) model view the marginal product of capital? A. Both assume diminishing returns to capital. B. Both assume constant returns to capital. C. The Solow model assumes constant returns, and the endogenous growth model assumes diminishing returns to capital. D. The Solow model assumes diminishing returns, and the endogenous growth model assumes constant returns to capital.

D. The Solow model assumes diminishing returns, and the endogenous growth model assumes constant returns to capital.

At the Golden Rule level of capital, what must the marginal product of capital equal? A. Zero B. The saving rate C. The interest rate D. The depreciation rate plus the population growth if there is no labor productivity growth is zero

D. The depreciation rate plus the population growth if there is no labor productivity growth is zero

After the Lewis Turning Point (LTP): A. the traditional sector workers start moving back to their villages B. The model becomes identical to the Solow model C. The capitalists' income triangle becomes less than the workers' income rectangle. D. Wages start rising in the urban manufacturing sector.

D. Wages start rising in the urban manufacturing sector.

The Golden Rule level of capital maximizes: A. output. B. the growth rate. C. the steady state. D. consumption.

D. consumption.

According to Jared Diamond: a) Countries located in the horizontal arrows were at a geographical disadvantage in early economic growth. b) Countries located in the horizontal arrows were at a geographical advantage in early economic growth. c) Countries located in the horizontal arrows were in cold regions - hence could not sustain economic growth. d) Countries located in the vertical arrows were well immunized against smallpox.

b) Countries located in the horizontal arrows were at a geographical advantage in early economic growth.

Vikings were an important part of European economic history because: a) Vikings spread Christianity to the rest of Europe, which led to economic growth. b) Vikings were good shipbuilders and shipbuilding made their Norse settlements possible. c) Modern Italian architecture is largely based on Viking architectural models. d) The Vikings were pioneers in perfume trade.

b) Vikings were good shipbuilders and shipbuilding made their Norse settlements possible.

The Hydraulic Theory of Economic Growth emphasizes that: a) Most civilizations would be destroyed by hydrogen bombs. b) Societies should aspire to be like Hydra Vulgaris, a freshwater organism that are biologically immortal. c) Most civilizations developed around water: rivers or oceans. d) Hydroelectric powerplants accelerate economic growth.

c) Most civilizations developed around water: rivers or oceans.