Macrotheory ch. 8/9

If y=k^1/2, there is no population growth or technological progress, 5% of capital depreciates each year, and a country saves 20% of output each year, then the steady state level of capital per worker is:

16

In the Solow growth model of an economy with population growth but no technological change, the break-even level of investment must do these 3 things:

keep the level of capital per worker constant, offset the depreciation of existing capital, provide capital for new workers

The assumption that technological progress increases the efficiency of each unit of labor is called:

labor-augmenting technological progress

The Solow model shows that a key determinant of the steady state ratio of capital to labor is the:

saving rate

In the Solow growth model, the steady-state level of output per worker would be higher if the ______ increased or the _______ decreased

saving rate, depreciation rate

What are 3 true statements about the steady state of the basic Solow model?

the investment per worker is always equal to the depreciation per worker, the capital per worker and output per worker are constant, the saving and consumption per worker are constant

If the saving rate increases, the:

capital-labor ratio will eventually decline

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

consumption per effective worker

When is capital-labor ratio k2 is not the steady state?

depreciation is greater than gross investment

Assume that two economies are identical in every way except that one has a higher population growth rate. According to the Solow growth model, in the steady state, the country with the higher population growth rate will have a ___________ level of output per person and _________ rate of growth of output per worker compared to the country with the lower population growth rate

lower, the same

If an economy has a steady state MPK of 0.15 and a depreciation rate of 0.10, then the economy has _______ capital than the golden rule level and a(n) __________ in saving rate will lead to an increase in the consumption per worker in the long run

more, decrease