Economics 4323 Chapter 9

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

g

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

human capital is at least as important as physical capital

Other things being equal, all of the following government policies are likely to increase national saving except:

running a budget deficit

International data suggest that economies of countries with different steady states will converge to

their own steady state

Hypotheses to explain the positive correlation between factor accumulation and production efficiency include each of the following except

efficient economies make capital accumulation unnecessary

In the two-sector endogenous growth model, the saving rate (s) affects the steady-state

level of income.

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

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

capital does not exhibit diminishing returns

Changes that can increase measured total factor productivity include:

increased expenditures on education

Empirical evidence supports the theory that free trade

increases economic growth

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

In the two-sector endogenous growth model, the fraction of labor in universities (u) affects the steady-state

level of income, growth rate of income, and growth rate of the stock of knowledge

A possible externality associated with the process of accumulating new capital is that:

new production processes may be devised.

The rate of growth of labor productivity (Y/L) may be expressed as the rate of growth of total factor productivity

plus the capital share multiplied by the rate of growth of the capital-labor ratio

Public policies in the United States designed to stimulate technological progress do not include

tax breaks to encourage homeownership

According to the Solow model, persistently rising living standards can only be explained by

technological progress

Prescott interpreted fluctuations in the Solow residual as evidence that:

technology shocks are an important source of short-run economic fluctuations

In the two-sector endogenous growth model, income growth persists because

the creation of knowledge in universities never slows down

In a steady state with population growth and technological progress

the real rental price of capital is constant and the real wage grows at the rate of technological progress