Deck 4: Economic Growth Theory in Historical Perspective

Question 1

In the Lewis model,in the capitalist sector,worker are paid the value of marginal product of labor is

A) zero.
B) positive.
C) negative.
D) determined in the labor market.

Answer 1

A

Question 2

In the Harrod-Domar growth model,if the saving rate s increases,what will happen to the long-run growth rate of GDP?

A) it increases
B) it decreases
C) it stays constant
D) we cannot determine the long-run growth rate of GDP without more information

Answer 2

A

Question 3

In the Harrod-Domar growth model,if the depreciation rate d increases,what will happen to the long-run growth rate of GDP?

A) it increases.
B) it decreases.
C) it stays constant.
D) we cannot determine the long-run growth rate of GDP without more information.

Answer 3

B

Question 4

Using the Harrod-Domar growth model,suppose the saving rate for an economy is given.If the aggregate production becomes more capital intensive,the capital-output ratio v will ________ and the long-run growth rate of GDP will ________.

A) increase; increase
B) decrease; increase
C) increase; decrease
D) decrease; decrease

Question 5

Capital fundamentalism refers to the belief that the most important proximate source of economic growth is the accumulation of ________.

A) physical capital
B) human capital
C) labor.
D) technology.

Question 6

Using the Harrod-Domar growth model,suppose one economy has to maintain a growth rate of GDP of 10 percent per year in order to avoid a decline in the average standard of living.Assume in this economy,the saving rate s is fixed at 15%,the capital-output ratio v is 3 and the depreciation rate d is 5%,the gap of ________ in the growth rate of GDP can be provided by foreign aid.

A) 5 percent.
B) 10 percent.
C) 15 percent.
D) Foreign aid has no help in this situation.

Question 7

Dualism refers to the belief that developing economies must be understood as having two sectors,traditional and modern,each with peculiar characteristics and very different growth prospects.Which sector has more potential for improving their productivity?

A) The traditional sector.
B) The modern sector.
C) Both sectors have equal potential.
D) We cannot compare these two sectors.

Question 8

In the Lewis model,after the structural change,the output from the subsistence sector will ________ and the output from the capitalist sector will ________.

A) decrease; increase
B) remain the same; increase
C) increase; increase
D) increase; decrease

Question 9

In an economic model:

A) exogenous variables and endogenous variables are both given from outside the model.
B) exogenous variables and endogenous variables are both determined by solving the system of equations.
C) endogenous variables influence exogenous variables.
D) exogenous variables influence endogenous variables.

Question 10

Using the Harrod-Domar growth model,suppose one economy has to maintain a growth rate of GDP of 10 percent per year in order to avoid a decline in the average standard of living.Assume in this economy,the capital-output ratio v is 3 and the depreciation rate d is 5%,what is the required saving rate?

A) 5 percent.
B) 15 percent.
C) 30 percent.
D) 45 percent.

Question 11

The structural change that accompanies growth in the Lewis model is a shifting of labor from ________ to ________.

A) subsistence sector; capitalist sector
B) capitalist sector; subsistence sector
C) The structural change does not mean labor will shift.
D) it depends on the market supply of labor.

Question 12

According to the Lewis model,workers are paid a wage that is ________ in the capitalist sector.

A) determined in the labor market by labor demand and supply
B) equal to the subsistence wage
C) equal to the subsistence wage plus a premium to compensate workers for moving.
D) they do not get paid in terms of wages

Question 13

According to the Harrod-Domar growth model,suppose that the saving rate is 12 percent,the capital-output ratio is 2,and the depreciation rate d is 4 percent,what is the expected long-run growth rate of GDP?

A) 0 percent.
B) 1 percent.
C) 2 percent.
D) 3 percent.

Question 14

In the Lewis model,in the subsistence sector,the value of marginal product of labor is

A) zero.
B) positive.
C) negative.
D) determined in the labor market.

Question 15

The Neoclassical growth model assumes:

A) diminishing marginal returns.
B) population is constant.
C) endogenous technological improvement.
D) labor is in surplus.

Question 16

What is the main difference between the Harrod-Domar growth model and the Neoclassical growth model?

A) emphasizing on saving and investment.
B) population growth.
C) endogenous technological improvement.
D) fixed proportions production technology.

Question 17

According to the Lewis model,workers are paid a wage that is ________ in the subsistence sector.

A) determined in the labor market by labor demand and supply
B) equal to the marginal product of labor
C) fixed by tradition near the subsistence level
D) they do not get paid in terms of wages

Question 18

Endogenous variables are:

A) given from outside the model.
B) determined by solving the system of equations.
C) assumptions of the model.
D) fixed.

Question 19

What is the main difference between the Harrod-Domar growth model and the Lewis growth model?

A) emphasizing on saving and investment.
B) physical capital is the key to promote economic growth.
C) how to promote saving and investment.
D) empirical support.

Question 20

In the Harrod-Domar growth model,suppose the model is in stable status,which means $$s / v - d$$ is just equal to n,total GDP would ________ and GDP per capita would ________.

A) increase; remain constant
B) increase; increase
C) remain constant; increase
D) remain constant; remain constant

Question 21

What is the significance of possible increasing returns to scale for our understanding of economic growth?

Question 22

In the Neoclassical growth model,the steady state equilibrium level of capital per worker is:

A) growing at a constant rate.
B) decreasing
C) constant.
D) we cannot determine it without more information.

Question 23

In the Neoclassical growth model,if the saving rate s increases,what will happen to the long-run growth rate of GDP?

A) it increases.
B) it decreases.
C) it stays constant.
D) we cannot determine the long-run growth rate of GDP without more information.

Question 24

"Unconditional convergence" indicates

A) poor countries will grow faster than rich countries.
B) rich countries will grow faster than poor countries.
C) poor countries and rich countries will grow at the same growth rate.
D) poor countries will reach a lower level of steady state level of per capita income.

Question 25

What is the knife-edge problem in the Harrod-Domar Growth Model?

Question 26

In the Neoclassical growth model,if the saving rate s increases,what will happen to the long-run steady state equilibrium level of capital per worker?

A) it increases.
B) it decreases.
C) it stays constant.
D) we cannot determine it without more information.