Chp 8 and Chp 9 macroecon hw

The Golden Rule level of capital accumulation is the steady state with the highest level of

consumption per worker.

The production function y = f(k) means

output per worker is a function of capital per worker.

In the Solow growth model, the assumption of constant returns to scale means that

the number of workers in an economy does not affect the relationship between output per worker and capital per worker.

If an economy is in a steady state with a saving rate below the Golden Rule level, efforts to increase the saving rate result in

both higher per-capita output and higher per-capita depreciation, but the increase in per-capita output would be greater.

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

capital does not exhibit diminishing returns.

In the Solow growth model, the steady-state occurs when

capital per worker is constant.

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

decrease; decrease

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.

Exhibit: Capital-Labor Ratio and the Steady State. In this graph, capital-labor ratio k2 is not the steady-state capital-labor ratio because:

depreciation is greater than gross investment.

Unlike the long-run classical model in Chapter 3, the Solow growth model

describes changes in the economy over time.

In the Solow growth model of an economy with population growth but no technological change, the break-even level of investment must do all of the following except

equal the marginal productivity of capital (MPK).

According to the Solow growth model, high population growth rates

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

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 rate of social return from (+) "standing on others' shoulders" externalities of research ______ (-) "stepping on toes" externalities of research

greatly exceed

The rate of labor-augmenting technological progress (g) is the growth rate of

the efficiency of labor.

If a war destroys a large portion of a country's capital stock but the saving rate is unchanged, the Solow model predicts that output will grow and that the new steady state will approach

the same level of output per person as before.

If the per-worker production function is given by y = k1/2, the saving ratio is 0.3, and the depreciation rate is 0.1, then the steady-state ratio of capital to labor is

9

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

grow more rapidly

International data suggest 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.

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.

In the Solow growth model of Chapter 8, where s is the saving rate, y is output per worker, and i is investment per worker, consumption per worker (c) equals

(1 - s)y

In a Solow model with technological change, if population grows at a 2% rate and the efficiency of labor grows at a 3% rate, then in the steady state, output per effective worker grows at a ______ percent rate

0

In the Solow growth model, an economy in the steady state with a population growth rate of n but no technological growth will exhibit a growth rate of output per worker at rate

0.

If the capital stock equals 200 units in year 1 and the depreciation rate is 5 percent per year, then in year 2, assuming no new or replacement investment, the capital stock would equal _____ units

190

Exhibit- Steady-State Consumption II; (Exhibit Steady-State Consumption II) The Golden Rule level of steady-state consumption per worker is:

AB

If Y = K0.3L0.7, then the per-worker production function is

Y/L = (K/L)0.3.

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.

In the Solow growth model, with a given production function, depreciation rate, saving rate, and no technological change, higher rates of population growth produce

higher steady-state growth rates of total output.

Economic research shows that ___what is as important as what___ in explaining international differences in living standards

human capital is at least as important as physical capital

Which change 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

If an economy with no population growth or technological change has a steady-state MPK of 0.125, a depreciation rate of 0.1, and a saving rate of 0.225, then the steady-state capital stock

is less than the Golden Rule level.

Endogenous growth model's assumption of constant returns to capital is more plausible if capital includes

knowledge.

A higher saving rate leads to a

larger capital stock and a higher level of output in the long run.

According to Malthus, large populations

place great strains on an economy's productive resources, resulting in perpetual poverty.

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

protected property rights; were extractive and authoritarian

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

rate of technological progress.

In the Solow growth model, if 2 countries are identical (with the same production function, saving rate, same depreciation rate, and rate of population growth) except that Country Large has a population of 1 billion workers and Country Small has a population of 10 million workers, then steady-state level of output per worker will be _____ and steady-state growth rate of output per worker will be _____

same in both countries; same in both countries

In steady-state economy with a saving rate s, population growth n, and labor-augmenting technological progress g, the formula for 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.

Endogenous growth theory rejects the assumption of exogenous

technological change.

If 2 economies are identical ( the same saving rates, population growth rates, and efficiency of labor), but one economy has a smaller capital stock, then steady-state level of income per worker in economy with the smaller capital stock

will be at same level as in steady state of the high capital economy.

In an economy with population growth at rate n, the change in capital stock per worker is given by the equation

Δk = sf(k) - (δ + n)k.

The change in capital stock per worker (Δk) may be expressed as a function of s = the saving ratio, f(k) = output per worker, k = capital per worker, and δ = the depreciation rate, by the equation

Δk = sf(k) - δk.

Empirical investigations into whether differences in income per person are the result of differences in the quantities of factors of production available or differences in the efficiency with which the factors are employed typically find

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

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.

Suppose an economy is initially in a steady state with capital per worker exceeding the Golden Rule level. If the saving rate falls to a rate consistent with the Golden Rule, then in the transition to the new steady state, consumption per worker will

always exceed the initial level.

According to Kremer, large populations

are a prerequisite for technological advances and higher living standards.

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

assumed; explained

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.

If an economy moves from a steady state with positive population growth to a zero population growth rate, then in the new steady state, total output growth will be ______ and growth of output per person will be ______

lower; the same as it was before

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

more in Lowland.

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

n + g.

With population growth at rate n but no technological change, the Golden Rule steady state may be achieved by equating the marginal product of capital (MPK)

net of depreciation to n.

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