Question 1

If the parameter E of the Cobb-Douglas production function decreases

Accepted Answer

A)   less output per worker can be produced for each possible value of the capital stock per worker.
B)   more output per worker can be produced for each possible value of the capital stock per worker.
C)   that the economy becomes more productive.
D)   the value of capital per worker decreases. A

Question 2

The Solow growth model is

Accepted Answer

A)   a dynamic model of the economy; it describes how the economy reaches an equilibrium at a point in time.
B)   a statice model of the economy; it describes how the economy reaches an equilibrium at a point in time.
C)   a dynamic model of the economy; it describes how the economy moves from one equilibrium point to another equilibrium point.
D)   a dynamic model of the economy; it describes how the economy changes and grows over time. D

Question 3

Each of the following is a factor in the economy's balanced growth equilibrium except

Accepted Answer

A)   the labor force growth rate.
B)   the growth rate of the efficiency of labor.
C)   the capital stock depreciation rate.
D)   the rate of growth of the money supply. D

Question 4

Improvements in technology and in social and business organization increase the economy's

Accepted Answer

A)   efficiency of technology.
B)   capital intensity.
C)   land intensity.
D)   efficiency of labor.

Question 5

If the saving rate is 16%, the capital stock depreciation rate is 4%,    is equal to .5, and E is equal to 20,000, output per worker will be

Accepted Answer

A)   $40,000 per year.
B)   $20,000 per year.
C)   $100,000 per year.
D)   $80,000 per year.

Question 6

If the labor force growth rate was 1 percent per year, the capital stock depreciation rate was 3 percent per year, the saving rate was 15 percent per year, and growth rate of the efficiency of labor was 1 percent per year,

Accepted Answer

A)   the capital-output ratio would be 5.
B)   the capital-output ratio would be 3.
C)   the capital-output ratio would be 4.
D)   the capital-output ratio would be 2.

Question 7

An economy with parameter values of population growth n=0.025, efficiency of labor growth g=0.02, depreciation rate  =0.035, and a diminishing-returns-to-investment parameter  =0.3 would, if off of its steady-state growth path, close a fraction equal to _______ of the gap between its current state and its steady-state each year.

Accepted Answer

A)   5.6 percent
B)   2.8 percent
C)   1.2 percent
D)   2.4 percent

Question 8

Total investment I is equal to

Accepted Answer

A)   s x Y
B)   s x I
C)   s x C
D)   s x G

Question 9

An increase in s (the saving-investment rate) _________ the steady-state capital-output ratio and________ the output per worker in the long-run.

Accepted Answer

A)   decreases; increases
B)   decreases; decreases
C)   increases; increases
D)   increases; decreases

Question 10

The capital-output ratio will ________ if the saving rate increases and the rate of depreciation of the capital stock remains the same.

Accepted Answer

A)   increase
B)   decrease
C)   stay the same
D)   first increase and then decrease

Question 11

An increase in g (the growth rate of the efficiency of labor) _________ the steady-state capital-output ratio and ________ the output per worker in the long-run.

Accepted Answer

A)   decreases; increases
B)   decreases; decreases
C)   increases; increases
D)   increases; decreases

Question 12

The investment effort of the economy is determined by

Accepted Answer

A)   the sum of the labor force growth rate, the efficiency of labor and the depreciation of capital.
B)   the sum of the labor force growth rate and the efficiency of labor minus the depreciation of capital.
C)   the labor force growth rate minus the sum of the efficiency of labor and the depreciation of capital.
D)   the saving rate s.

Question 13

Advances in technology leads to a higher level of

Accepted Answer

A)   the efficiency of labor.
B)   the efficacy of labor.
C)   the utilization of labor.
D)   the hiring of labor.

Question 14

The equation for the investment requirements of the economy is

Accepted Answer

A)   n + g +  .
B)   n + g -  .
C)   n - (g +  ) .
D)   the saving rates.

Question 15

If the savings rate increases and the diminishing-returns-to-investment parameter increases, output per worker will _________

Accepted Answer

A)   decrease if the effect of the savings rate increase is less than the effect of the diminishing-returns-to- investment parameter increase.
B)   decrease.
C)   increase.
D)   decrease if the effect of the savings rate increase is greater than the effect of the diminishing-returns-to- investment parameter increase.

Question 16

Which of the following is the correct form of the Cobb-Douglas production function?

Accepted Answer

A)    
B)     
C)     
D)

Question 17

An increase in n (the labor force growth rate) _________ the steady-state capital-output ratio and________ the output per worker in the long-run.

Accepted Answer

A)   decreases; increases
B)   decreases; decreases
C)   increases; increases
D)   increases; decreases

Question 18

When the capital-output ratio is at its steady state value, output per worker is growing

Accepted Answer

A)   at the same rate as the growth of the capital stock..
B)   at the capital stock depreciation rate.
C)   at the growth rate in the efficiency of labor.
D)   at the savings rate.

Question 19

The capital-output ratio is said to be in equilibrium

Accepted Answer

A)   when its rate of change is zero.
B)   when its rate of change is increasing.
C)   when its rate of change is decreasing.
D)   when the capital-labor ratio is decreasing.

Question 20

In a steady-state balanced-growth equilibrium, each of the following is true except

Accepted Answer

A)   the capital intensity of the economy is stable.
B)   the economy's capital stock and its level of real GDP are growing at the same proportional rate.
C)   the capital-output ratio is constant.
D)   the capital-output ratio is increasing.

Exam 4: The Theory of Economic Growth

If the parameter E of the Cobb-Douglas production function decreases

The Solow growth model is

Each of the following is a factor in the economy's balanced growth equilibrium except

Improvements in technology and in social and business organization increase the economy's

If the saving rate is 16%, the capital stock depreciation rate is 4%, is equal to .5, and E is equal to 20,000, output per worker will be

If the labor force growth rate was 1 percent per year, the capital stock depreciation rate was 3 percent per year, the saving rate was 15 percent per year, and growth rate of the efficiency of labor was 1 percent per year,

Total investment I is equal to

An increase in s (the saving-investment rate) _ the steady-state capital-output ratio and the output per worker in the long-run.

The capital-output ratio will ________ if the saving rate increases and the rate of depreciation of the capital stock remains the same.

An increase in g (the growth rate of the efficiency of labor) _ the steady-state capital-output ratio and the output per worker in the long-run.

The investment effort of the economy is determined by

Advances in technology leads to a higher level of

The equation for the investment requirements of the economy is

If the savings rate increases and the diminishing-returns-to-investment parameter increases, output per worker will _________

Which of the following is the correct form of the Cobb-Douglas production function?

An increase in n (the labor force growth rate) _ the steady-state capital-output ratio and the output per worker in the long-run.

When the capital-output ratio is at its steady state value, output per worker is growing

The capital-output ratio is said to be in equilibrium

In a steady-state balanced-growth equilibrium, each of the following is true except