Question 1

If the saving rate is 1 (i.e.,s = 1),we know that
A)K / N will be at its highest level.
B)Y / N will be at its highest level.
C)C / N = 0.
D)all of the above

Accepted Answer

When the saving rate is 1 (s = 1), it means all output is saved and none is consumed. This leads to the highest level of capital accumulation per worker (K/N), the highest level of output per worker (Y/N) because of the increased capital, and consumption per worker (C/N) is zero because all output is saved, not consumed.

Question 2

Suppose an economy experiences a 5% increase in human capital.We know that this will cause
A)Y / N to increase by more than 5%.
B)Y / N to increase by exactly 5%.
C)Y / N to increase by less than 5%.
D)no change in Y / N.
E) a reduction in output per worker.

Accepted Answer

The increase in human capital typically leads to an increase in productivity, but due to diminishing returns to human capital, the output per worker (Y/N) increases by less than the percentage increase in human capital.

Question 3

Suppose there are two countries that are identical in every way with the following exception: Country A has a higher saving rate than country B.Given this information,we know with certainty that
A)the growth rate will be higher in A than in B.
B)the growth rate will be the same in the two countries.
C)the level of consumption per worker will be higher in A.
D)the level of consumption per worker will be higher in B.

Accepted Answer

The answer of Suppose there are two countries that are...

Question 4

Explain the difference between fully funded social security system and pay-as-you-go social security system.

Accepted Answer

The answer of Explain the difference between fully funded social...

Question 5

Suppose an economy experience a 4% increase in each of the following variables: N,K,and H (human capital).Given this information,we know with certainty that
A)Y will increase by more than 4%.
B)Y will increase by exactly 4%.
C)Y will increase by less than 4%.
D)Y will increase by less than 12% but by more than 4%.
E) none of the above

Accepted Answer

In the context of an economy, Y typically represents output or GDP. According to the Cobb-Douglas production function, output (Y) is a function of labor (N), capital (K), and human capital (H), among other factors. An increase in any of these inputs generally leads to an increase in output. However, due to diminishing returns and the way these inputs interact, the increase in Y is unlikely to be exactly proportional to the increases in N, K, and H. Therefore, if N, K, and H each increase by 4%, Y is expected to increase but not exactly by 4% or by the sum of the increases (12%). The correct answer suggests that Y will increase by more than 4% because all inputs are increasing, enhancing productivity and output, but by less than 12% due to the non-linear relationship between inputs and output.

Question 6

Graphically illustrate and explain the effects of an increase in the rate of depreciation (δ)on the Solow growth model.In your graph,clearly label all curves and equilibria.

Accepted Answer

The answer of Graphically illustrate and explain the effects of...

Question 7

Suppose there is a reduction in the saving rate.Explain what effect this will have on output,output per worker,the rate of growth of output,and the rate of growth of output per worker.

Accepted Answer

The answer of Suppose there is a reduction in the...

Question 8

Graphically illustrate and explain the effects of a decrease in the saving rate on the Solow growth model.In your graph,clearly label all curves and equilibria.

Accepted Answer

The answer of Graphically illustrate and explain the effects of...

Question 9

Suppose the saving rate is greater than the golden rule saving rate (sG).First,explain what must happen to the saving rate in order to increase steady state consumption.Second,what are the advantages and disadvantages of this policy to increase steady state consumption.

Accepted Answer

The answer of Suppose the saving rate is greater than...

Question 10

Suppose policy makers wish to increase steady state consumption per worker.Explain what must happen to the saving rate to achieve this objective.

Accepted Answer

The answer of Suppose policy makers wish to increase steady...

Question 11

Explain the two relations that determine the evolution of output in the long run.

Accepted Answer

The answer of Explain the two relations that determine the...

Question 12

Graphically illustrate and explain the effects of a decrease in the rate of depreciation (δ)on the Solow growth model.In your graph,clearly label all curves and equilibria.

Accepted Answer

The answer of Graphically illustrate and explain the effects of...

Question 13

Suppose there are two countries that are identical in every way with the following exception: Country A has a higher stock of human capital than country B.Given this information,we know with certainty that
A)the growth rate will be higher in A than in B.
B)the growth rate will be the same in the two countries.
C)output per worker will be the same in the two countries.
D)K / N will be higher in B.

Accepted Answer

The answer of Suppose there are two countries that are...

Question 14

Explain what human capital is and discuss how changes in human capital can affect output per worker.

Accepted Answer

The answer of Explain what human capital is and discuss...

Quiz 11: Saving, capital Accumulation, and Output

If the saving rate is 1 (i.e.,s = 1) ,we know that

Suppose an economy experiences a 5% increase in human capital.We know that this will cause

Suppose there are two countries that are identical in every way with the following exception: Country A has a higher saving rate than country B.Given this information,we know with certainty that

Explain the difference between fully funded social security system and pay-as-you-go social security system.

Suppose an economy experience a 4% increase in each of the following variables: N,K,and H (human capital) .Given this information,we know with certainty that

Graphically illustrate and explain the effects of an increase in the rate of depreciation (δ)on the Solow growth model.In your graph,clearly label all curves and equilibria.

Suppose there is a reduction in the saving rate.Explain what effect this will have on output,output per worker,the rate of growth of output,and the rate of growth of output per worker.

Graphically illustrate and explain the effects of a decrease in the saving rate on the Solow growth model.In your graph,clearly label all curves and equilibria.

Suppose the saving rate is greater than the golden rule saving rate (sG).First,explain what must happen to the saving rate in order to increase steady state consumption.Second,what are the advantages and disadvantages of this policy to increase steady state consumption.

Suppose policy makers wish to increase steady state consumption per worker.Explain what must happen to the saving rate to achieve this objective.

Explain the two relations that determine the evolution of output in the long run.

Graphically illustrate and explain the effects of a decrease in the rate of depreciation (δ)on the Solow growth model.In your graph,clearly label all curves and equilibria.

Suppose there are two countries that are identical in every way with the following exception: Country A has a higher stock of human capital than country B.Given this information,we know with certainty that

Explain what human capital is and discuss how changes in human capital can affect output per worker.