Question 1

One of the main determinants of real GDP per person is the growth of capital per person. Which of the following variables does not determine the growth of capital per person in the long run?

Accepted Answer

A)   average saving rate
B)   output-to-capital ratio
C)   marginal tax rate on investment
D)   depreciation rateE) None of the above
F) C) and D)

Question 2

Figure 10-4 
-Which of the following is not a reason for differences in per capita income in neoclassical growth theory?

Accepted Answer

A)   All countries have the same production function.
B)   Countries have different savings rates.
C)   The slope of the steady-state investment line is different for different countries.
D)   all of the above.E) B) and D)
F) A) and D) A

Question 3

Figure 10-2 
-In the context of growth, the goal of stabilization policy once per capita output is equal to potential per capita output is to

Accepted Answer

A)   insure that the percentage change in per capita output and potential per capita output over time are equal.
B)   raise the growth rate of potential per capita output above that of per capita output.
C)   raise the growth rate of per capita output above that of potential per capita output.
D)   None of the above is correct.E) None of the above
F) B) and D) A

Question 4

When an equal percentage increase in the factors of production raises real GDP by the same percentage, the production function has the characteristic known as

Accepted Answer

A)   constant returns to scale.
B)   constant marginal productivity.
C)   diminishing marginal productivity.
D)   increasing returns to scale.E) A) and B)
F) All of the above

Question 5

A convenient rule of thumb called the "rule of 72" states that a quantity growing at x percent per year doubles in size approximately every (72/x)  years.
-Refer to the information above. An economy's real GDP per person doubles every 18 years when it maintains a growth rate of ________ per year.

Accepted Answer

A)   5.6 percent
B)   4.0 percent
C)   0.25 percent
D)   0.9 percentE) B) and C)
F) All of the above

Question 6

Economic growth theory studies how real GDP changes ________, in other words the growth of ________ real GDP.

Accepted Answer

A)   on average over long periods, natural
B)   on average over long periods, actual
C)   from one year to the next, natural
D)   from one year to the next, actualE) A) and D)
F) All of the above

Question 7

In Chapter 10, depreciation is assumed to be

Accepted Answer

A)   a fixed proportion of real GDP.
B)   a fixed proportion of the capital stock.
C)   a fixed absolute amount.
D)   zero.
E)   a fixed proportion of the capital-labor ratio.F) All of the above
G) B) and C)

Question 8

Which of the following are not examples of "convergence"?

Accepted Answer

A)   Japan and Europe
B)   Individual states within the United States
C)   regions within western Europe
D)   major nations in Latin America and Western EuropeE) A) and D)
F) B) and C)

Question 9

Figure 10-4 
-Which of the following is not a real world factual conflict with the neoclassical growth model?

Accepted Answer

A)   Income per capita varies greatly across countries.
B)   Poor countries do not have a higher rate of return on capital.
C)   Immigrant labor from poor countries experiences very small increases in income when it moves to rich countries.
D)   poor countries' income levels have not converged to the income levels of rich countries.E) None of the above
F) All of the above

Question 10

The application of Solow's growth theory to the explanation of the slowdown in productivity growth in the United States suggests that the slowdown is primarily caused by

Accepted Answer

A)   reduced growth in the capital stock per hour of work.
B)   reduced growth in the technical change or total factor productivity.
C)   slow residual growth of the capital stock.
D)   ignorance since people save and invest less.E) A) and B)
F) B) and C)

Question 11

In the context of the neoclassical growth model, which of the following does not explain the growth rates of countries which are initially poor?

Accepted Answer

A)   nations which are below their steady-state growth paths will grow more slowly until they reach the steady state
B)   the rate of return is higher in poor countries
C)   capital flows from rich countries to poor countries
D)   the passage of time allows poor countries to adopt the productive techniques of rich countries.E) C) and D)
F) None of the above

Question 12

Figure 10-4 
-Initially, the economy is at point G in the figure above An increase in per capita savings from s(0)  to s(1)  will in the short run result in ________ and in the long run result in ________.

Accepted Answer

A)   excess per capita saving; more rapid growth in per capita output
B)   excess per capita saving; less rapid growth in per capita output
C)   more rapid growth in per capita output; more rapid growth in per capita output
D)   more rapid growth in per capita output; no change in the long run rate of growth in per capita outputE) All of the above
F) A) and B)

Question 13

If K = 3000, n = 0.015, and d = 0.082, then investment of ________ will hold (Y/N)  constant.

Accepted Answer

A)   291
B)   201
C)   164
D)   549E) B) and C)
F) C) and D)

Question 14

From an initial steady state, suppose a government policy increases the national saving rate, causing the capital stock to start growing faster than the population. With (K/N)  now rising, the Solow growth model goes on to say that (Y/N)

Accepted Answer

A)   will rise only so far, to where the increased requirement for new capital matches the increased saving.
B)   will rise only temporarily, so long as the population growth rate remains constant.
C)   will rise and keep on rising, so long as the national saving rate exceeds the population growth rate.
D)   never does rise, since the government's policy does not affect either the population growth rate or the depreciation rate.E) None of the above
F) All of the above

Question 15

The per person production function representing both physical capital per person (K/N)  and human capital per person (H/N)  is

Accepted Answer

A)   Y/N = (K/N) b(H/N) c
B)   Y/N = (K/N) b + (H/N) c
C)   Y/N = (K/N) b - (H/N) c
D)   Y/N = (K/N) b/(H/N) cE) All of the above
F) B) and C) A

Question 16

Figure 10-4 
-Given that all countries have the same Cobb-Douglas production function, i.e. Y/N = (K/N) b, a ten-fold difference in per capita income requires a difference in capital per capita by a factor of

Accepted Answer

A)   10.
B)   10b.
C)   101/b.
D)   b.E) B) and C)
F) A) and D)

Question 17

Private investment is equal to the net addition to the capital stock ________ the depreciation of that capital stock.

Accepted Answer

A)   plus
B)   minus
C)   times
D)   divided byE) A) and D)
F) A) and C)

Question 18

Figure 10-5 
-In the figure above, suppose that the population growth rate declines. This causes a movement of the steady-state point such as from points

Accepted Answer

A)   A to B.
B)   D to B.
C)   D to C.
D)   A to C.
E)   A to D.F) A) and D)
G) A) and E)

Question 19

When we study economic growth, we are most concerned about changes in

Accepted Answer

A)   the output ratio.
B)   the level of natural real output.
C)   the absolute difference between natural and actual real output.
D)   None of these.E) A) and B)
F) B) and C)

Question 20

A rise in the multifactor productivity index means that at each (K/N)  we have (Y/N)  ________, which shifts the (S/N)  curve ________, resulting in a movement of the steady-state intersection to the ________.

Accepted Answer

A)   rising, downward, left
B)   rising, upward, right
C)   rising, downward, right
D)   falling, upward, left
E)   falling, downward, leftF) A) and C)
G) A) and B)

Exam 10: The Theory of Economic Growth

One of the main determinants of real GDP per person is the growth of capital per person. Which of the following variables does not determine the growth of capital per person in the long run?

Correct AnswerverifiedShow Answer

Figure 10-4 -Which of the following is not a reason for differences in per capita income in neoclassical growth theory?

Correct AnswerverifiedA

Figure 10-2 -In the context of growth, the goal of stabilization policy once per capita output is equal to potential per capita output is to

Correct AnswerverifiedA

When an equal percentage increase in the factors of production raises real GDP by the same percentage, the production function has the characteristic known as

Correct AnswerverifiedShow Answer

A convenient rule of thumb called the "rule of 72" states that a quantity growing at x percent per year doubles in size approximately every (72/x) years. -Refer to the information above. An economy's real GDP per person doubles every 18 years when it maintains a growth rate of ________ per year.

Correct AnswerverifiedShow Answer

Economic growth theory studies how real GDP changes ________, in other words the growth of ________ real GDP.

Correct AnswerverifiedShow Answer

In Chapter 10, depreciation is assumed to be

Correct AnswerverifiedShow Answer

Which of the following are not examples of "convergence"?

Correct AnswerverifiedShow Answer

Figure 10-4 -Which of the following is not a real world factual conflict with the neoclassical growth model?

Correct AnswerverifiedShow Answer

The application of Solow's growth theory to the explanation of the slowdown in productivity growth in the United States suggests that the slowdown is primarily caused by

Correct AnswerverifiedShow Answer

In the context of the neoclassical growth model, which of the following does not explain the growth rates of countries which are initially poor?

Correct AnswerverifiedShow Answer

Figure 10-4 -Initially, the economy is at point G in the figure above An increase in per capita savings from s(0) to s(1) will in the short run result in ________ and in the long run result in ________.

Correct AnswerverifiedShow Answer

If K = 3000, n = 0.015, and d = 0.082, then investment of ________ will hold (Y/N) constant.

Correct AnswerverifiedShow Answer

From an initial steady state, suppose a government policy increases the national saving rate, causing the capital stock to start growing faster than the population. With (K/N) now rising, the Solow growth model goes on to say that (Y/N)

Correct AnswerverifiedShow Answer

The per person production function representing both physical capital per person (K/N) and human capital per person (H/N) is

Correct AnswerverifiedA

Figure 10-4 -Given that all countries have the same Cobb-Douglas production function, i.e. Y/N = (K/N) b, a ten-fold difference in per capita income requires a difference in capital per capita by a factor of

Correct AnswerverifiedShow Answer

Private investment is equal to the net addition to the capital stock ________ the depreciation of that capital stock.

Correct AnswerverifiedShow Answer

Figure 10-5 -In the figure above, suppose that the population growth rate declines. This causes a movement of the steady-state point such as from points

Correct AnswerverifiedShow Answer

When we study economic growth, we are most concerned about changes in

Correct AnswerverifiedShow Answer

A rise in the multifactor productivity index means that at each (K/N) we have (Y/N) ________, which shifts the (S/N) curve ________, resulting in a movement of the steady-state intersection to the ________.

Correct AnswerverifiedShow Answer

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Economic growth theory studies how real GDP changes , in other words the growth of real GDP.

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Figure 10-4 -Initially, the economy is at point G in the figure above An increase in per capita savings from s(0) to s(1) will in the short run result in and in the long run result in .

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A rise in the multifactor productivity index means that at each (K/N) we have (Y/N) , which shifts the (S/N) curve , resulting in a movement of the steady-state intersection to the .

Correct Answer
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