Question 1

According to Kremer, large populations:

Accepted Answer

A)   require the capital stock to be spread thinly, thereby reducing living standards.
B)   place great strains on an economy's productive resources, resulting in perpetual poverty.
C)   are a prerequisite for technological advances and higher living standards.
D)   are not a factor in determining living standards.E) C) and D)
F) None of the above

Question 2

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

Accepted Answer

A)   Inflation; deflation
B)   Interest rates; the discount rate
C)   Investment; depreciation
D)   International trade; depressionsE) A) and B)
F) B) and C)

Question 3

The production function y = f(k)  means:

Accepted Answer

A)   labor is not a factor of production.
B)   output per worker is a function of labor productivity.
C)   output per worker is a function of capital per worker.
D)   the production function exhibits increasing returns to scale.E) None of the above
F) All of the above

Question 4

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:

Accepted Answer

A)   is greater than the Golden Rule level.
B)   is less than the Golden Rule level.
C)   equals the Golden Rule level.
D)   could be either above or below the Golden Rule level.E) A) and D)
F) C) and D)

Question 5

In the steady state with no population growth or technological change, the capital stock does not change because investment equals:

Accepted Answer

A)   output per worker.
B)   the marginal product of capital.
C)   depreciation.
D)   consumption.E) C) and D)
F) B) and D)

Question 6

Consider two countries that are otherwise identical (have the same saving rates and depreciation rates), but the population of Country Large is 100 million, while the population of Country Small is 10 million. Use the Solow model with no technological change to compare the steady-state levels of output per worker if: a. the population growth rates are the same in the two countries.
b. the population growth rate is higher in Country Large.

Accepted Answer

a. The steady-state levels of output per...

Question 7

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 1 billion workers and Country Small has a population of 10 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 _____.

Accepted Answer

A)   the same in both countries; the same in both countries
B)   higher in Country Large; higher in Country Large
C)   higher in Country Small; higher in Country Small
D)   higher in Country Large; higher in Country SmallE) A) and B)
F) A) and C)

Question 8

The initial steady-state level of capital per worker in Macroland is 5. The Golden Rule level of capital per worker in Macroland is 8. a. What must change in Macroland to achieve the Golden Rule steady state?
b. Why might the Golden Rule steady state be preferred to the initial steady state?
c. Why might some current workers in $M$ acroland prefer the initial steady state to the Golden Rule steady state?

Accepted Answer

a. The saving rate in Macrol and must be...

Question 9

How does population growth help explain why some countries are poor and some are rich?

Accepted Answer

An increase in the rate of population gr...

Question 10

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

Accepted Answer

A)   output per worker.
B)   output per unit of capital.
C)   the marginal product of labor.
D)   the marginal product of capital.E) A) and B)
F) B) and D)

Question 11

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.

Accepted Answer

The Golden Rule leve...

Question 12

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

Accepted Answer

A)   increases the steady-state level of capital per worker.
B)   decreases the steady-state level of capital per worker.
C)   does not affect the steady-state level of capital per worker.
D)   decreases the rate of output growth in the short run.E) B) and C)
F) B) and D)

Question 13

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

Accepted Answer

A)   the economy will reach a steady-state level of capital stock below the Golden Rule level.
B)   the economy will reach a steady-state level of capital stock above the Golden Rule level.
C)   wherever the economy starts out, it will not grow.
D)   wherever the economy starts out, it will reach a steady-state level of capital stock equal to the Golden Rule level.E) A) and D)
F) A) and C)

Question 14

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

Accepted Answer

A)   output per worker.
B)   capital per worker.
C)   savings per worker.
D)   consumption per worker.E) B) and D)
F) A) and C)

Question 15

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:

Accepted Answer

A)   offset the depreciation of existing capital.
B)   provide capital for new workers.
C)   equal the marginal productivity of capital (MPK) .
D)   keep the level of capital per worker constant.E) A) and D)
F) All of the above

Question 16

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

Accepted Answer

A)   will be reached automatically if the saving rate remains constant over a long period of time.
B)   will be reached automatically if each person saves enough to provide for his or her retirement.
C)   implies a choice of a particular saving rate.
D)   should be avoided by an enlightened government.E) A) and D)
F) C) and D)

Question 17

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

Accepted Answer

A)    Δ\DeltaΔ k = sf(k) /  δ\deltaδ k.
B)    Δ\DeltaΔ k = sf(k)  ×   δ\deltaδ k.
C)    Δ\DeltaΔ k = sf(k)  +   δ\deltaδ k.
D)    Δ\DeltaΔ k = sf(k)  -   δ\deltaδ k. E) B) and C)
F) All of the above

Question 18

In the Solow growth model of Chapter 8, for any given capital stock, the ______ determines how much output the economy produces and the ______ determines the allocation of output between consumption and investment.

Accepted Answer

A)   saving rate; production function
B)   depreciation rate; population growth rate
C)   production function; saving rate
D)   population growth rate; saving rateE) A) and B)
F) A) and C)

Question 19

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

Accepted Answer

A)   a policymaker should definitely take all possible steps to increase the saving rate.
B)   if the saving rate is increased, output and consumption per capita will both rise, both in the short and long runs.
C)   if the saving rate is increased, output per capita will at first decline and then rise above its initial level, and consumption per capita will rise both in the short and long runs.
D)   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.E) A) and B)
F) B) and C)

Question 20

What does the Solow model predict?

Accepted Answer

The Solow model predicts:
a. Increasing ...

Exam 8: Economic Growth I: Capital Accumulation and Population Growth

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:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
a. The saving rate in Macrol and must be...
View Answer

In the steady state with no population growth or technological change, the capital stock does not change because investment equals:

Correct Answer
verified

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

Correct Answer
verified

In the Solow growth model of Chapter 8, for any given capital stock, the determines how much output the economy produces and the determines the allocation of output between consumption and investment.

Correct Answer
verified

The production function y = f(k) means:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

How does population growth help explain why some countries are poor and some are rich?

Correct Answer
verified
An increase in the rate of population gr...
View Answer

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

Correct Answer
verified

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:

Correct Answer
verified

According to Kremer, large populations:

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

What does the Solow model predict?

Correct Answer
verified
The Solow model predicts:
a. Increasing ...
View Answer

Correct Answer
verified
a. The steady-state levels of output per...
View Answer

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.

Correct Answer
verified
The Golden Rule leve...
View Answer

Exam 8: Economic Growth I: Capital Accumulation and Population Growth

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:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answerverifieda. The saving rate in Macrol and must be...View AnswerShow Answer

In the steady state with no population growth or technological change, the capital stock does not change because investment equals:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the Solow growth model of Chapter 8, for any given capital stock, the ______ determines how much output the economy produces and the ______ determines the allocation of output between consumption and investment.

Correct AnswerverifiedShow Answer

The production function y = f(k) means:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

How does population growth help explain why some countries are poor and some are rich?

Correct AnswerverifiedAn increase in the rate of population gr...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

According to Kremer, large populations:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What does the Solow model predict?

Correct AnswerverifiedThe Solow model predicts:a. Increasing ...View AnswerShow Answer

Correct Answerverifieda. The steady-state levels of output per...View AnswerShow Answer

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.

Correct AnswerverifiedThe Golden Rule leve...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. The saving rate in Macrol and must be...
View Answer

Correct Answer
verified

Correct Answer
verified

In the Solow growth model of Chapter 8, for any given capital stock, the determines how much output the economy produces and the determines the allocation of output between consumption and investment.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
An increase in the rate of population gr...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
The Solow model predicts:
a. Increasing ...
View Answer

Correct Answer
verified
a. The steady-state levels of output per...
View Answer

Correct Answer
verified
The Golden Rule leve...
View Answer