Econ 320 - Ch 8

If the per-worker production function is given by y = k1/2, the saving rate (s) is 0.2, and the depreciation rate is 0.1, then the steady-state ratio of capital to labor is: - 1 - 2 - 4 - 9

4

Among the four countries—the United States, the United Kingdom, Germany, and Japan—the one that experienced the most rapid growth rate of output per person between 1948 and 1972 was: - Germany - Japan - United States - United Kingdom

Japan

Two economies are identical except that the level of capital per worker is higher in Highland than in Lowland. The production functions in both economies exhibit diminishing marginal product of capital. An extra unit of capital per worker increases output per worker: - By the same amount in Highland and Lowland. - More in Highland. - In Highland, but not in Lowland. - More in Lowland

More in Lowland

In the Solow growth model, if investment is less than depreciation, the capital stock will ______ and output will ______ until the steady state is attained. - increase; increase - increase; decrease - decrease; decrease - decrease; increase

decrease, decrease

If the production function exhibits decreasing returns to scale in the steady state, an increase in the rate of population would lead to: - growth in total output and growth in output per worker. - growth in total output but no growth in output per worker. - growth in total output but a decrease in output per worker. - no growth in total output or in output per worker.

growth in total output but a decrease in output per worker.

In the Solow growth model with population growth, but no technological progress, the steady-state amount of investment can be thought of as a break-even amount of investment because the quantity of investment just equals the amount of: - capital needed to replace depreciated capital and to equip new workers. - saving needed to achieve the maximum level of output per worker. - output needed to achieve the maximum level of consumption per worker. - output needed to make the capital per worker ratio equal to the marginal product of capital.

capital needed to replace depreciated capital and to equip new workers.

According to the Solow growth model, high population growth rates: - are a prerequisite for technological advances and higher living standards. - place great strains on an economy's productive resources, resulting in perpetual poverty. - force the capital stock to be spread thinly, thereby reducing living standards. - are not a factor in determining living standards.

force the capital stock to be spread thinly, thereby reducing living standards.

In the Solow growth model, with a given production function, depreciation rate, no technological change, and no population growth, a higher saving rate produces a: - higher MPK in the new steady state. - higher steady-state growth rate of total output. - higher steady-state level of output per worker. - higher steady-state growth rate of output per worker.

higher steady-state level of output per worker

If an economy is in a steady state with no population growth or technological change and the capital stock is below the Golden Rule: - if the saving rate is increased, output and consumption per capita will both rise, both in the short and long runs. - if the saving rate is increased, output per capita will rise and consumption per capita will first decline and then rise above its initial level. - a policymaker should definitely take all possible steps to increase the saving rate. - if the saving rate is increased, output per capita will at first decline and then rise above its initial level, and consumption per capita will rise both in the short and long runs.

if the saving rate is increased, output per capita will rise and consumption per capita will first decline and then rise above its initial level.

In the Solow growth model, increases in capital ______ output and ______ the amount of output used to replace depreciating capital. - increase; increase - decrease; increase - increase; decrease - decrease; decrease

increase; increase

In the Solow growth model, with a given production function, depreciation rate, saving rate, and no technological change, lower rates of population growth produce: - lower steady-state levels of output per worker. - lower steady-state ratios of capital per worker. - lower steady-state growth rates of output per worker. - lower steady-state growth rates of total output.

lower steady-state levels of total output

In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, then capital grows at rate ______ and output grows at rate ______. - n; 0 - 0; 0 - 0; n - n; n

n; n

Assume that a war reduces a country's labor force but does not directly affect its capital stock. Then the immediate impact will be that: - total output will fall, but output per worker will rise. - both total output and output per worker will rise. - total output will rise, but output per worker will fall. - both total output and output per worker will fall.

total output will fall, but output per worker will rise.

If a larger share of national output is devoted to investment, starting from an initial steady-state capital stock below the Golden Rule level, then productivity growth will: - not increase in either the short run or the long run. - increase in the long run but not in the short run. - increase in both the short run and the long run. - increase in the short run but not in the long run.

increase in the short run but not in the long run.

If an economy is in a steady state with no population growth or technological change and the capital stock is above the Golden Rule level and the saving rate falls: - output and investment will decrease, and consumption and depreciation will increase and then decrease but finally approach levels above their initial state. - output, consumption, investment, and depreciation will all decrease. - output and investment will decrease, and consumption and depreciation will increase. - output, investment, and depreciation will decrease, and consumption will increase and then decrease but finally approach a level above its initial state.

output, investment, and depreciation will decrease, and consumption will increase and then decrease but finally approach a level above its initial state.