Econ chapter 8

If an economy is in a steady state with no population growth or technological change and the capital stock is below the Golden Rule:

If the saving rate is increased, output per capita will rise and consumption per capita will first decline and then rise above its initial level

In the Solow growth model, if investment is less than depreciation, the capital stock will (blank) and the output will (Blank) until the steady state is attained.

decrease; decrease

According to the Solow growth model, high population growth rates

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

If the production function exhibits decrease returns to scale in the steady state, an increase in the rate of population would lead to:

growth in total output but a decrease in output per worker

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

higher steady-state level of output per worker

If a larger share of national output is devoted to investment, starting from an initial steady-state capital stock below the Golden Rule level, then productivity growth will:

increase in the short run but not in the long run

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

lower steady-state growth rates of total output

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

If the per-worker production function is given by y=k 1/2, the saving rate (s) is 0.2 and the depreciation rate is 0.1, then the steady-state ratio of capital to labor is:

4

In the Solow growth model with population growth, but no technological progress, the steady-state amount of investment can bethought of as a break-even amount of investment because the quantity of investment just equals the amount of:

capital needed to replace depreciated capital and to equip new workers

In the Solow growth model, increases in capital (blank) output and (blank) the amount of output used to replace depreciating capital.

increase; increase

Two economies are identical except that the level of capital per worker is higher in Highland than in Lowland. The production in both economies exhibit diminishing marginal product of capital. An extra unit of capital per worker increase output per worker:

more in Lowland

In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, the capital grows at rate (blank) and output grows at rate (blank)

n;n

If an economy is in a steady state with no population growth or technological change and the capital stock is above the Golden Rule level and the saving rate falls:

output, investment, and depreciation will decrease, and consumption will increase and then decrease but finally approach a level above its initial state.