Solow Growth Model

If the labor force is growing at a 3 percent rate and the efficiency of a unit of labor is growing at a 2 percent rate, then the number of effective workers is growing at a rate of:

5 percent

If Y=K^0.3N^0.7, then the per-worker production function is

Y/L=(K/L)^0.3

An increase in the savings rate starting from a steady state with less capital than the Golden Rule causes investment to ____ in the transition to the new steady state

increase

Malthus model

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

To determine whether an economy is operating at its Golden Rule level of capital stock, a policymaker must determine its steady state savings rate that produces the:

largest consumption per worker

If an economy has a steady state MPK of 0.15 and a depreciation rate of 0.10, the the economy has ____ capital than the Golden Rule level and an ____ in the savings rate will lead to an increase in the consumption/worker in the long run.

less; increase

In the Solow model, the assumption of constant returns to scale implies that the output/worker is a function of only the:

stock of capital/worker

If the per-worker production function is given by y = k1/2, 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, an economy in the steady state with a population growth rate n, but no technological growth will exhibit a growth rate of output per worker at rate:

0

In the Solow model with technological progress, the steady-state growth rate of capital per effective worker is:

0

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

0

If the per worker production function for an economy is given by y=k^1/2, the savings rate is 0.3, and the economy has 25 units of capital/worker, the the total consumption per worker is___units and the total investment per worker is___units

3.5; 1.5

In an economy with no population growth and no technological change, steady state consumption is at its greatest possible level when the marginal product of:

capital equals the depreciation rate

Suppose the economy is originally at a steady state where marginal product of capital is equal to deprecation. If the savings rate of the economy increases , then at the new steady state:

consumption per worker will be lower compared to the original steady state

Assume that two countries have the same per-worker production function y=k^1/2, neither has population growth nor technological progress, depreciation is 5% of capital in both countries, and country A saves 10% of output whereas country B saves 20%. If country A starts out with a capital-labor ratio of 4 and B's ratio is 2, in the long run:

country A's capital-labor ratio will be 4, whereas country B's will be 16

A reduction in the savings rate starting from a steady state with more capital than the Golden Rule causes investment to___in the transition to the new steady state

decrease

An increase in the rate of population growth with no change in the savings rate:

decreases the steady state level of capital per worker

In the Solow model with population growth and labor-augmenting technological change, the break-even level of investment must cover:

depreciating capital, capital for new workers, and capital for new effective workers

The number of effective workers takes into account the number of workers and the:

efficiency of each worker

In the Solow growth model with population growth but no tech change, the break-even level of investment doesn't need to:

equal marginal productivity of capital

Assume that two economies are identical in every way except one has higher population growth. 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____same growth of output per worker compared to the country with the lower population growth rate

lower; the same

In the Solow growth model, an economy in the steady state with a population growth rate n but no tech growth will exhibit a total output at rate:

n

A permanent increase in the savings rate of an economy has:

no growth effect but a level effect

When an economy's capital is below the Golden Rule level, reaching the Golden Rule level:

requires initially reducing consumption to increase future consumption

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 as before

What is a statement that ISN'T true about the steady state in the Solow Model with population growth and technological progress:

total capital stock and total output grow at the rate of population growth

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

∆k = sf (k) - (δ + n) k