Exogenous Growth Model
Growth accounting, popularized by Robert Solow, attempts to attribute a change in aggregate output
separately between changes in total factor productivity and changes in the supplies of factors of production
In Solow's exogenous growth model, the economy reaches a stable steady state because
the marginal return of capital is decreasing
We can use a per-worker production function in the Malthusian model because
the production function has constant returns to scale
There is evidence that income per worker is converging in
the richest countries, but not the poorest countries
The Solow growth model can account for
why richer countries have higher investment rates
All of the following increase total factor productivity except A) new management techniques B) new inventions C) favorable changes in government regulations D) more capital
D
Malthus was wrong in what sense?
He did not predict the high rates of future growth in standards of living
The Malthusian model performs poorly in explaining economic growth after the
Industrial revolution
In a Malthusian world, why is misery recurrent?
Mortality depends on the standard of living
The idea that an improvement in technology causes an increase in population but causes no increase in the average standard of living is attributed to
Thomas Malthus
Which of the following is not a feature of the steady state in Solow's exogenous growth model?
Total savings is steady
A steady state is
a long-run equilibrium
In a Malthusian world, what event would improve temporarily the standard of living, as measured by output per capita?
an increase in violent crime
In a Malthusian world, what would improve the standard of living permanently?
birth control
The biggest contribution to real U.S. GDP growth in the 1970s was due to growth in
both the capital stock and the labor force
The Solow model emphasizes the role of which of the following factors of production?
capital
In Solow's exogenous growth model, the steady-state growth rate of capital can be increased by
higher population growth
In the Malthusian model, an improvement in the technology of growing food is likely to
increase the equilibrium size of the population and have no effect on the equilibrium level of consumption per worker
In the steady state of Solow's exogenous growth model, an increase in the savings rate
increases output per worker and increases capital per worker
In the steady state of Solow's exogenous growth model, an increase in total factor productivity
increases output per worker and increases capital per worker
In the Golden Rule steady state, the marginal product of capital is equal to the
population growth rate plus the depreciation rate
In the Malthusian model, the population growth rate is
positively related to consumption per worker
Recent evidence suggests that output per worker is
positively related to the rate of investment and negatively related to the rate of population growth
Growth in the Solow residual was fastest in the
1960s
Since 1900, real GDP per capita in the United States has increased by
2% per year
If changes in economic policy could cause the growth rate of real GDP to increase by 1% per year for 100 years, then GDP would be ________ % higher after 100 years than it would have been otherwise.
2.7
Which of the following, if implemented in the Solow growth model, would not lead to a steady state?
A constant marginal product of capital
The Golden Rule of capital accumulation maximizes the steady-state level of
consumption per worker
In more modern times as opposed to the times of Malthus, higher standards of living appear to
decrease death rates and also decrease birth rates
In the Malthusian model, state-mandated population control policies are likely to
decrease the equilibrium size of the population and increase the equilibrium level of consumption per worker
In an exogenous growth model, growth is caused by
forces that are not explained by the model itself
In the Malthusian model of economic growth, an increase in the quantity of land
has no effect on steady state per capita consumption, and increases the steady state population
In the Malthusian model, improvements in health care lead to
higher population and lower per-capita production
The saving rate has the following characteristic in Solow's exogenous growth model
it is constant
It is useful to study the Solow growth model because
it is useful in understanding the sources of economic growth after 1800
The slope of the output per worker function is equal to the
marginal product of capital
Which of the following increases total factor productivity?
new production procedures
If an epidemic hits a Malthusian economy, the long-term consequence is
no change in the standard of living
If the savings rate falls in the Solow growth model
per worker output falls in the steady state
In Solow's model of economic growth, suppose that s represents the savings rate, z represents total factor productivity, k represents the level of capital per worker, and f(k) represents the per-worker production function. Also suppose that n represents the population growth rate and d represents the depreciation rate of capital. The equilibrium level of capital per worker, k*, will satisfy the equation
szf(k*) = (n + d)k*
In the Solow growth model, long run growth in the standard of living is propelled by
technological change
In the Malthusian model, population growth is endogenous because
the birth and death rates are endogenous
We can express the per-worker production function as a function of only per-worker capital thanks to
the constant returns to scale
In Solow's exogenous growth model, the principal obstacle to continuous growth in output per capita is due to
the declining marginal product of capital
The Solow residual attempts to measure the amount of output not explained by
the direct contribution of labor and capital