Econ Quiz 7

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.

The type of legal system and the level of corruption in a country have been found to be:

significant determinants of the rate of economic growth in a country.

In the two-sector endogenous growth model, the steady-state stock of physical capital is determined by _____, and the growth in the stock of knowledge is determined by _____.

the saving rate; the fraction of labor in universities

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

In the Solow growth model with population growth and technological change, the break-even level of investment must cover:

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

In the Solow growth model, capital exhibits ______ returns. In the basic endogenous growth model, capital exhibits ______ returns.

diminishing; constant

The efficiency of labor:

includes the knowledge, health, and skills of labor.

In the Solow growth model with population growth and technological change, the steady-state growth rate of income per person depends on:

the rate of technological progress.

If capital grows at 3 percent per year and labor grows at 1 percent per year, and capital's share is 1/3 while labor's share is 2/3, if there is no technological progress and the neoclassical assumptions hold, the growth rate of output will be:

1-2/3 percent per year.

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 Y=A(L^B)(K^A)

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 actual worker grows at a ______ percent rate.

3

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 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

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

capital does not exhibit diminishing returns.

If the per-worker production function is y = Ak, where A is a positive constant, then the marginal product of capital:

is constant as k increases.

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

knowledge.

In the two-sector endogenous growth model, the fraction of labor in universities (u) affects the steady-state:

level of income, growth rate of income, and growth rate of the stock of knowledge.

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

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

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