Question 1

Figure 10-5 
-In the figure above, suppose that a "neutral" technological improvement occurs. This causes a movement of the steady-state point such as from points

Accepted Answer

A neutral technological improvement increases productivity without changing the capital-labor ratio, leading to a higher steady-state level of output per worker, moving the economy from point A to point B.

Question 2

The new growth theory that arose in the late 1980s has been described as ________ because it treats technological change as ________.

Accepted Answer

The new growth theory that emerged in the late 1980s is endogenous, meaning that it recognizes technological change as an internal factor that can be developed through market incentives and other non-random factors. Therefore, option D is correct. Option A is incorrect because it suggests that technological change is random and unpredictable, which is not a feature of the new growth theory. Option B is incorrect because it suggests that technological change is generated solely by market incentives, which oversimplifies the complex dynamics of technological change. Option C is incorrect because it suggests that technological change is random, and does not reflect the endogeneity and market-driven nature of the new growth theory.

Question 3

The most plausible way to produce a continuous increase in the standard of living within the Solow growth model is to assume

Accepted Answer

Within the Solow growth model, the only sustainable way to achieve long-term economic growth and a continuous increase in the standard of living is through continuous technological improvement. Other factors, such as population growth, depreciation, and increases in the national saving rate or capital stock may temporarily boost growth or output, but without technological improvement, the model predicts that output and income will eventually reach a steady-state level.

Question 4

The new endogenous growth theory concludes that sustained economic growth in a country comes from the interaction of labor, investments in physical and human capital, and what is perhaps the key ingredient:

Accepted Answer

The new endogenous growth theory highlights that sustained economic growth comes from the production of ideas. This means that a country's investment in research and development, as well as innovation, are essential for growth. While natural resources, post-secondary education, and immigration may all have positive impacts on economic growth, they are not considered the key ingredient by this theory.

Question 5

Suppose that we interpret N as the "effective" labor supply. A "labor-augmenting" technological improvement, when graphed in the Solow growth model, causes (Y/N) to ________ and real GDP per person to ________.

Accepted Answer

The answer of Suppose that we interpret N as the...

Question 6

The "nonconvergence" problem with the Solow growth model is that

Accepted Answer

The "nonconvergence" problem refers to the observation that despite the Solow growth model's prediction of convergence due to higher returns to capital in poorer countries (which should theoretically equalize standards of living across nations), in reality, countries do not exhibit this uniformity in living standards.

Question 7

Less-developed countries that nonetheless have access to the latest technologies must be suffering from a relative shortage of ________ according to the Solow growth model, implying a very ________ rate of return available on additions to capital in those countries.

Accepted Answer

According to the Solow growth model, less-developed countries with access to the latest technologies but still lagging behind are likely suffering from a shortage of capital. This implies a very high rate of return on additional investments in capital, as the model suggests that the marginal productivity of an input (in this case, capital) is inversely related to its abundance.

Question 8

If it is assumed that capital is alike and freely mobile between economies, the Solow growth model

Accepted Answer

The answer of If it is assumed that capital is...

Question 9

Studying the growth of (Y/N) in the United States over the period 1909-1957, Robert Solow found that growth in multifactor productivity accounted for ________ of it.

Accepted Answer

The answer of Studying the growth of (Y/N) in the...

Question 10

Which of the following is not statistically correlated with higher economic growth rates?

Accepted Answer

Higher fertility rates are not statistically correlated with higher economic growth rates. In fact, higher fertility rates can often lead to a larger population dependent on limited resources, which can strain economic growth. This is known as the "population trap." The other options listed are all positively correlated with higher economic growth rates.

Question 11

One of the shortcomings of the Solow growth model is that in it the rate of technological change is

Accepted Answer

The Solow growth model assumes that technology is a constant factor and does not explain the rate of technological growth or change over time. This is considered a major limitation of the model as technological progress is a key driver of economic growth in the long run.

Question 12

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 rise in multifactor productivity index means that we are producing more output (Y) for each unit of capital and labor (K and N). This increases the output per worker (Y/N), which shifts the savings per worker (S/N) curve upward. As a result, the steady-state intersection moves to the right.

Question 13

The crucial incentive to produce new ideas comes from

Accepted Answer

Patents and copyrights provide legal protection and exclusive rights to the creators of new ideas, incentivizing them to invest time and resources in innovation. This protection allows them to earn a return on their investment and secure a competitive advantage in the market.

Quiz 10: The Theory of Economic Growth

Figure 10-5 -In the figure above, suppose that a "neutral" technological improvement occurs. This causes a movement of the steady-state point such as from points

The new growth theory that arose in the late 1980s has been described as because it treats technological change as .