Chapter 9

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.

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

g

English-style legal systems give ______ protections to shareholders and creditors than French Napoleonic Codes, typically resulting in ______ capital markets and faster rates of economic growth.

greater; more developed

Empirical studies indicate that the rate of social return from positive "standing on others' shoulders" externalities of research ______ the negative "stepping on toes" externalities of research.

greatly exceed

The preponderance of empirical evidence supports the hypothesis that economies that are open to trade _____ than comparable closed economies.

grow more rapidly

In the Solow model with technological progress, the steady-state growth rate of total output is:

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.

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

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.

Conditional convergence occurs when economies converge to:

their own, individual steady states.

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

The productivity slowdown that began in the 1970s has been attributed, at least partly, to each of the following except:

a decline in the number of workers in the labor force.

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

assumed; explained

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:

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

Endogenous growth theory rejects the assumption of exogenous:

technological change.

The efficiency of labor is a term that does not reflect the:

high output that comes from labor cooperating with a large amount of capital.

Economic research shows that ______ in explaining international differences in living standards.

human capital is at least as important as physical capital

Which of the following changes would bring the U.S. capital stock, currently below the Golden Rule level, closer to the steady-state, consumption-maximizing level?

increasing the saving rate

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

knowledge.

One explanation for greater economic development in moderate versus tropical climates is that institutions established by colonial settlers in moderate climates ______, while institutions established by colonists in tropical climates ______.

protected property rights; were extractive and authoritarian

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 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.

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.