Pool Canvas

Add, modify, and remove questions. Select a question type from the Add Question drop-down list and click Go to add questions. Use Creation Settings to establish which default options, such as feedback and images, are available for question creation.

 

 

 

Name       Testbank Chapter 7: Economic Growth I

Description Question pool for Testbank Chapter 7: Economic Growth I

Question 1     

The Solow growth model describes:

 

Question 2     

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

Question 3     

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

Question 4     

The production function y = f(k)  means :

Question 5     

When f(k) is drawn on a graph with increases in k noted along the horizontal axis, the:

Question 6     

When f(k) is drawn on a graph with increases in k noted along the horizontal axis, the slope of the line denotes:

Question 7     

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:

Question 8     

The consumption function in the Solow model assumes that society saves a:

Question 9     

In the Solow growth model of Chapter 7, the demand for goods equals investment:

Question 10   

In the Solow growth model of Chapter 7, the saving rate determines the allocation of output between:

Question 11   

In the Solow growth model of Chapter 7, where s is the saving rate, y is output per worker, and i is investment per worker, consumption per worker (c)  equals :

Question 12   

In the Solow growth model of Chapter 7, investment equals:

Question 13   

In the Solow growth model of Chapter 7, for any given capital stock, the ______ determines how much output the economy produces, and the ______ determines the allocation of output between consumption and investment.

 

Question 14   

______ cause(s) the capital stock to rise, while ______ cause(s) the capital stock to fall.

Question 15   

Investment per worker (i) as a function of the saving ratio (s) and output per worker (f(k))  may be expressed as :

Question 16   

In this graph, when the capital-labor ratio is OA, AB represents:

 

 

Question 17   

If capital lasts an average of 25 years, the depreciation rate is ______ percent per year.

 

Question 18   

In the Solow model, it is assumed that a(n) ______ fraction of capital wears out as the capital-labor ratio increases.

Question 19   

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 —the depreciation rate, by the equation:

Question 20   

The steady-state level of capital occurs when the change in the capital stock (Δk)  equals :

Question 21   

In the steady state, the capital stock does not change because investment equals:

Question 22   

In the Solow growth model of Chapter 7, the economy ends up with a steady-state level of capital:

 

  Question 23   

In the Solow growth model, the steady-state occurs when: dd Question Here

Question 24   

Exhibit: Capital-Labor Ratio and the Steady State

 

In this graph, capital-labor ratio ^k₂ is not the steady-state capital-labor ratio because:

 

Question 25

Multiple Choice

Question

Exhibit: Steady-State Capital-Labor Ratio

 

In this graph, the capital-labor ratio that represents the steady-state capital-labor ratio is:

Question 26   

Exhibit: The Capital-Labor Ratio

 

In this graph, starting from capital-labor ratio ^k₁, the capital-labor ratio will:

Question 27   

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

Question 28   

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

Question 29   

An economy in the steady state will have:

Question 30   

In the Solow growth model of an economy with no population growth and no technological progress, the higher the steady capital-perworker ratio, the higher the steady-state:

Question 31   

The formula for the steady-state ratio of capital to labor (k*), with no population growth or technological change, is s:

Question 32   

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 steadystate ratio of capital to labor is:

Question 33   

If the per-worker production function is given by y = k^1/2, the saving ratio is 0.3, and the depreciation rate is 0.1, then the steady-state ratio of capital to labor is:

 

Question 34   

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

Question 35   

If the per-worker production function is given by y = k^1/2, the saving ratio is 0.3, and the depreciation rate is 0.1, then the steady-state ratio of output per worker (y)  is :

Question 36   

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

Question 37   

Among the four countries—the United States, the United Kingdom, Germany, and Japan—the one that experienced the most rapid growth rate of output per person between 1948 and 1972 was:

Question 38   

If the national saving rate increases, the:

Question 39   

Starting from a steady-state situation, if the saving rate increases, the rate of growth of capital per worker will:

Question 40   

The Solow model shows that a key determinant of the steady-state ratio of capital to labor is the:

Question 41   

A higher saving rate leads to a:

Question 42   

Assume two economies are identical in every way except that one has a higher saving rate. According to the Solow growth model, in the steady state the country with the higher saving rate will have ______ level of total output and ______ rate of growth of output per worker as/than the country with the lower saving rate.

Question 43   

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

Question 44   

Examination of recent data for many countries shows that countries with high saving rates generally have high levels of output per person because:

Question 45   

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

Question 46   

The formula for steady-state consumption per worker (c*) as a function of output per worker and investment per worker is:

Question 47   

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

Question 48   

Exhibit: Steady-State Consumption I

 

The Golden Rule level of the capital-labor ratio is:

 

 

Question 49

Exhibit: Steady-State Consumption II

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

 

Question 50

Question

Exhibit: Steady-State Consumption II

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

 

Question 51   

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:

Question 52   

The Golden Rule level of the steady-state capital stock:

Question 53   

If an economy is in a steady state with no population growth or technological change and the marginal product of capital is less than the depreciation rate:

Question 54   

If an economy with no population growth or technological change has a steady-state MPK saving rate of 0.225, then the steady-state capital stock: Question 55

If an economy with no population growth or technological change has a steady-state MPK of 0.1, a depreciation rate of 0.1, and a saving rate of 0.2, then the steady-state capital stock:

Question 56   

With a per-worker production function y = k^1/2, the steady-state capital stock per worker (k*) as a function of the saving rate (s) is given by:

Question 57   

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

Question 58   

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:

Question 59   

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:

Question 60   

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

Question 61   

When an economy begins above the Golden Rule, reaching the Golden Rule:

Question 62   

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:

Question 63   

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

Question 64   

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

Question 65   

When an economy begins below the Golden Rule, reaching the Golden Rule:

Question 66   

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

Question 67   

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

Question 68   

The formula for the steady-state ratio of capital to labor (k*) with population growth at rate n but no technological change, where s is the saving rate, is s:

Question 69   

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:

Question 70   

In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, then capital grows at rate ______ and output grows at rate ______.

Question 71   

In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, total output grows at rate ______ and output per worker grows at rate ______.

Question 72   

Assume two economies are identical in every way except that one has a higher population growth rate. According to the Solow growth model, in the steady state the country with the higher population growth rate will have a ______ level of total output and ______ rate of growth of output per worker as/than the country with the lower population growth rate.

Question 73   

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:

Question 74     

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 total output at rate:

Question 75     

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

Question 76     

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

Question 77     

In the Solow growth model, the steady-state level of output per worker would be higher if the ______ increased or the ______ decreased.

Question 78     

In the Solow growth model of an economy with population growth but no technological change, a higher level of steady-state output per worker can be obtained by all of the following except:

Question 79     

In the Solow growth model of an economy with population growth but no technological change, which of the following will generate a higher steady-state growth rate of total output?

Question 80     

The Solow growth model of an economy with population growth but no technological progress can explain:

Question 81     

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

 

Question 82     

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

Question 83     

The Solow model of an economy with population growth but no technological change cannot explain persistent growth in standards of living because:

Question 84     

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):

Question 85     

In the Solow growth model of an economy with population growth but no technological progress, in the Golden Rule steady state, the marginal product of capital minus the rate of depreciation equals:

Question 86     

In the Solow growth model of an economy with population growth but no technological progress, if in the steady state the marginal product of capital equals 0.10, the depreciation rate equals 0.05, and the rate of population growth equals 0.03, then the capital per worker ratio ______ the Golden Rule level.

Question 87     

In the Solow growth model of an economy with population growth but no technological progress, increases in capital have a positive impact on steady-state consumption per worker by ______, but have a negative impact on steady-state consumption per worker by ______.

Question 88     

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

Question 89     

Analysis of population growth around the world concludes that countries with high population growth tend to:

Question 90     

According to Kremer, large populations:

Question 91     

According to Malthus, large populations:

Question 92     

According to the Solow growth model, large populations:

Question 93     

The Malthusian model that predicts mankind will remain in poverty forever:

Question 94     

According to the Kremerian model, large populations improve living standards because:

Question 95     

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

Question 96     

If y = k^1/2, there is no population growth or technological progress, 5 percent of capital depreciates each year, and a country saves 20 percent of output each year, then the steady-state level of capital per worker is:

Question 97     

If y = k^1/2, the country saves 10 percent of its output each year, and the steady-state level of capital per worker is 4, then the steadystate levels of output per worker and consumption per worker are:

Question 98     

Assume that two countries both have the per-worker production function y = k^1/2, neither has population growth or technological progress, depreciation is 5 percent of capital in both countries, and country A saves 10 percent of output whereas country B saves 20 percent. If A starts out with a capital-labor ratio of 4 and B starts out with a capital-labor ratio of 2, in the long run:

Question 99     

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:

Question 100    

Assume that a war reduces a country's labor force but does not directly affect its capital stock. If the economy was in a steady state before the war and the saving rate does not change after the war, then, over time, capital per worker will ______ and output per worker will grow ______ than it did before the war.

Question 101    

If a larger share of national output is devoted to investment, then living standards will:

Question 102    

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:

Question 103    

If the U.S. production function is Cobb-Douglas with capital share 0.3, output growth is 3 percent per year, depreciation is 4 percent per year, and the Golden Rule steady-state capital-output ratio is 4.29, to reach the Golden Rule steady state, the saving rate must be:

Question 104    

If all wage income is consumed, all capital income is saved, and all factors of production earn their marginal products, then:

Question 105    

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 ______.

Question 106    

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

Question 107    

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

Question 108    

Assume that a country's production function is Y = K^1/2L^1/2.

1. What is the per-worker production function y = f(k) ?
2. Assume that the country possesses 40,000 units of capital and 10,000 units of labor. What is Y? What is labor productivity computed from the per-worker production function? Is this value the same as labor productivity computed from the original production function?
3. Assume that 10 percent of capital depreciates each year. What gross saving rate is necessary to make the given capital-labor ratio the steady-state capital-labor ratio? (Hint: In a steady state with no population growth or technological change, the saving rate multiplied by per-worker output must equal the depreciation rate multiplied by the capital-labor ratio.)
4. If the saving rate equals the steady-state level, what is consumption per worker?

Question 109    

Assume that a country's per-worker production is y = k^1/2, where y is output per worker and k is capital per worker. Assume also that 10 percent of capital depreciates per year (= 0.10).

1. If the saving rate (s) is 0.4, what are capital per worker, production per worker, and consumption per worker in the steady state? (Hint: Use sy = k and y = k^1/2 to get an equation in s, , k, and k^1/2, and then solve for k.)
2. Solve for steady-state capital per worker, production per worker, and consumption per worker with s = 0.6.
3. Solve for steady-state capital per worker, production per worker, and consumption per worker with s = 0.8.
4. Is it possible to save too much? Why? 

Question 110    

Suppose that two countries are exactly alike in every respect except that the citizens of country A have a higher saving rate than the citizens of country B.    

1. Which country will have the higher level of output per worker in the steady state? Illustrate graphically.
2. Which country will have the faster rate of growth of output per worker in the steady state?

Question 111    

Suppose that two countries are exactly alike in every respect except that population grows at a faster rate in country A than in country B.

1. Which country will have the higher level of output per worker in the steady state? Illustrate graphically.
2. Which country will have the faster rate of growth of output per worker in the steady state?

Question 112    

It rains so much in the country of Tropicana that capital equipment rusts out (depreciates) at a much faster rate than it does in the country of Sahara. If the countries are otherwise identical, in which country will the Golden Rule level of capital per worker be higher? Illustrate graphically.

Question 113    

The economy of Alpha can be described by the Solow growth model. The following are some characteristics of the Alpha economy: saving rate (s)  0.20 depreciation rate () 0.12

steady-state capital per worker (k)      4

population growth rate (n)      0.02 steady-state output per worker        20,000

a. What is the steady-state growth rate of output per worker in Alpha?