Question 1

The difference between investment and depreciation determines capital growth.

Accepted Answer

A) True 
 B)False

Question 2

The most important incentive for research and development of new ideas is government funding.

Accepted Answer

A) True 
 B)False

Question 3

In the context of the Solow model,new ideas shift the production function upward.

Accepted Answer

A) True 
 B)False

Question 4

A patient with a rare disease has the same chance of survival as one with a common disease,thanks to the spillover effect.

Accepted Answer

A) True 
 B)False

Question 5

What is the name for the tendency-among countries with similar steady-state levels of output-for poorer countries to grow faster than richer countries until they reach the same income levels?

Accepted Answer

A)  the diminishing rate of return 
B)  the marginal law of supply 
C)  conditional convergence 
D)  growth capitalization 
A)  the diminishing rate of return 
B)  the marginal law of supply 
C)  conditional convergence 
D)  growth capitalization

Question 6

The social benefits of research and development are equal to the private benefits.

Accepted Answer

A) True 
 B)False

Question 7

Consider an economy that is operating at its steady state.An increase in the investment rate in this economy will lead to:

Accepted Answer

A)  an increase in the growth rate of output in both the short run and long run. 
B)  no change in the growth rates of either capital or output in either the short run or the long run,since the economy is already in the steady state. 
C)  an increase in the growth rate of output in the short run but lower overall growth in the long run as a result of increased depreciation. 
D)  an increase in the growth rate of output in the short run but zero growth in output in the long run. 
A)  an increase in the growth rate of output in both the short run and long run. 
B)  no change in the growth rates of either capital or output in either the short run or the long run,since the economy is already in the steady state. 
C)  an increase in the growth rate of output in the short run but lower overall growth in the long run as a result of increased depreciation. 
D)  an increase in the growth rate of output in the short run but zero growth in output in the long run.

Question 8

Conditional convergence refers to the tendency for:

Accepted Answer

A)  poorer countries to grow faster than richer countries,but only if they receive sufficient foreign investment. 
B)  richer countries to grow faster than poorer countries given similar steady-state capital stocks,so the poor countries never catch up with the rich countries. 
C)  poorer countries to grow faster than richer countries given similar steady-state capital stocks,but the poor countries will never catch up with the rich countries. 
D)  countries with similar steady-state levels of output to grow faster when they're poor than when they're rich until their per capita GDP levels converge. 
A)  poorer countries to grow faster than richer countries,but only if they receive sufficient foreign investment. 
B)  richer countries to grow faster than poorer countries given similar steady-state capital stocks,so the poor countries never catch up with the rich countries. 
C)  poorer countries to grow faster than richer countries given similar steady-state capital stocks,but the poor countries will never catch up with the rich countries. 
D)  countries with similar steady-state levels of output to grow faster when they're poor than when they're rich until their per capita GDP levels converge.

Question 9

The formula that represents the generation of ideas (A)is:

Accepted Answer

A)  population - incentives - ideas per hour. 
B)  population × incentives × ideas per hour. 
C)  capital × (population ÷ ideas per hour). 
D)  capital ÷ population - ideas per hour. 
A)  population - incentives - ideas per hour. 
B)  population × incentives × ideas per hour. 
C)  capital × (population ÷ ideas per hour). 
D)  capital ÷ population - ideas per hour.

Question 10

Governments can play a role in supporting the production of new ideas by:

Accepted Answer

A)  taxing industries that become too competitive. 
B)  enforcing antimonopoly laws. 
C)  directing the immediate exchange of all scientific ideas. 
D)  protecting intellectual property. 
A)  taxing industries that become too competitive. 
B)  enforcing antimonopoly laws. 
C)  directing the immediate exchange of all scientific ideas. 
D)  protecting intellectual property.

Question 11

The simplest form of the Solow model with no advances in technology predicts that economic growth will continue indefinitely in the long run.

Accepted Answer

A) True 
 B)False

Question 12

Depreciation is defined as the wear and tear on capital goods.

Accepted Answer

A) True 
 B)False

Question 13

Solow estimated that better ideas are responsible for about _____ of the U.S.standard of living.

Accepted Answer

A)  one-fourth 
B)  one-half 
C)  three-fourths 
D)  all 
A)  one-fourth 
B)  one-half 
C)  three-fourths 
D)  all

Question 14

Among countries with similar Solow steady states,poorer countries tend to grow _____ rich countries.

Accepted Answer

A)  more slowly than 
B)  at the same rate as 
C)  faster than 
D)  sometimes faster and sometimes more slowly than 
A)  more slowly than 
B)  at the same rate as 
C)  faster than 
D)  sometimes faster and sometimes more slowly than

Question 15

-(Figure: The Solow Model)Which of the following events would NOT shift the production function from Y1 to Y2 in the accompanying diagram of the Solow model?

Accepted Answer

A)  increases in productivity 
B)  better ideas 
C)  physical capital accumulation 
D)  advances in technological knowledge 
A)  increases in productivity 
B)  better ideas 
C)  physical capital accumulation 
D)  advances in technological knowledge

Question 16

In the Solow model,output increases when investment is greater than depreciation.

Accepted Answer

A) True 
 B)False

Question 17

Imagine an economy with production function Y = F(K)= and 400 units of capital.If the fraction of output invested in new capital is F1F1F1S1F1F1F10 = 0.2,the depreciation rate is F1F1F1S1F1F1F10 = .05,and the economy starts with output of 20,what does the Solow model predict will happen to output in the long run?

Accepted Answer

A)  It will remain at 20. 
B)  It will decline. 
C)  It will increase. 
D)  It will increase for a time and then return to 20. 
A)  It will remain at 20. 
B)  It will decline. 
C)  It will increase. 
D)  It will increase for a time and then return to 20.

Question 18

The Solow model predicts that a country will grow more rapidly the:

Accepted Answer

A)  further its capital stock is above its steady-state value. 
B)  further its capital stock is below its steady-state value. 
C)  closer its capital stock is to its steady-state value from above. 
D)  closer its capital stock is to its steady-state value from below. 
A)  further its capital stock is above its steady-state value. 
B)  further its capital stock is below its steady-state value. 
C)  closer its capital stock is to its steady-state value from above. 
D)  closer its capital stock is to its steady-state value from below.

Question 19

In the past several hundred years,economic growth has been:

Accepted Answer

A)  decreasing. 
B)  staying the same. 
C)  increasing. 
D)  nonexistent. 
A)  decreasing. 
B)  staying the same. 
C)  increasing. 
D)  nonexistent.

Question 20

Patents encourage new idea creation by temporarily granting monopoly status to inventors.

Accepted Answer

A) True 
 B)False

Exam 8: Growth,capital Accumulation

The difference between investment and depreciation determines capital growth.

The most important incentive for research and development of new ideas is government funding.

In the context of the Solow model,new ideas shift the production function upward.

A patient with a rare disease has the same chance of survival as one with a common disease,thanks to the spillover effect.

What is the name for the tendency-among countries with similar steady-state levels of output-for poorer countries to grow faster than richer countries until they reach the same income levels?

The social benefits of research and development are equal to the private benefits.

Consider an economy that is operating at its steady state.An increase in the investment rate in this economy will lead to:

Conditional convergence refers to the tendency for:

The formula that represents the generation of ideas (A)is:

Governments can play a role in supporting the production of new ideas by:

The simplest form of the Solow model with no advances in technology predicts that economic growth will continue indefinitely in the long run.

Depreciation is defined as the wear and tear on capital goods.

Solow estimated that better ideas are responsible for about _____ of the U.S.standard of living.

Among countries with similar Solow steady states,poorer countries tend to grow _____ rich countries.

-(Figure: The Solow Model)Which of the following events would NOT shift the production function from Y1 to Y2 in the accompanying diagram of the Solow model?

In the Solow model,output increases when investment is greater than depreciation.

Imagine an economy with production function Y = F(K)= and 400 units of capital.If the fraction of output invested in new capital is  = 0.2,the depreciation rate is  = .05,and the economy starts with output of 20,what does the Solow model predict will happen to output in the long run?

The Solow model predicts that a country will grow more rapidly the:

In the past several hundred years,economic growth has been:

Patents encourage new idea creation by temporarily granting monopoly status to inventors.

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

-(Figure: The Solow Model)Which of the following events would NOT shift the production function from Y₁ to Y₂ in the accompanying diagram of the Solow model?