Macro Chapt 9

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

(MPK × ΔK) + (MPL × ΔL) units.

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, output per effective worker grows at a ______ percent rate.

0

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.

5

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:

5 percent.

If the marginal product of capital net of depreciation equals 10 percent and the rate of population growth equals 2 percent, then this economy will be at the Golden Rule steady state if the rate of technological progress equals _____ percent

8

International differences in income per person in accounting terms must be attributed to differences in either ______ and/or ______.

factor accumulation; production efficiency

In the Solow model with technological progress, the steady-state growth rate of output per (actual) worker is:

g.

The efficiency of labor:

includes the knowledge, health, and skills of labor.

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.

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.

If the production function is y = k1/2, the steady-state value of y is:

y = s/(δ + n + g).

In the Solow growth model, the steady-state growth rate of output per effective worker is ______, and the steady-state growth rate of output per actual worker is ______.

zero; the rate of technological progress

When capital increases by ΔK units, output increases by

MPK × ΔK units.

In the Solow growth model, technological change is ______, whereas in endogenous growth theories, technological change is ______.

assumed; explained

In the basic endogenous growth model, income can grow forever—even without exogenous technological progress—because:

capital does not exhibit diminishing returns.

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:

capital stock grows faster than does the labor force.

In the Solow model with technological change, the Golden Rule level of capital is the steady state that maximizes:

consumption per effective worker.

The endogenous growth model's assumption of constant returns to capital is more plausible if capital is defined to include:

knowledge.

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

labor-augmenting technological progress

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):

net of depreciation be equal to n + g.

Schumpeter's thesis of "creative destruction" is an explanation of economic progress resulting from

new product producers driving incumbent producers out of business.

Over the past 50 years in the United States:

output per worker hour, the real wage, and capital stock per worker hour have all increased about 2 percent per year, whereas the real rental price of capital has remained about the same

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?

output per worker, capital per worker, real wage

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:

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

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):

sf(k)/(δ + n + g).

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.

According to the Solow model, persistently rising living standards can only be explained by

technological progress.

The rate of labor-augmenting technological progress (g) is the growth rate of:

the efficiency of labor.

International data suggest that economies of countries with different steady states will converge to

their own steady state.