Deck 20: Long-Run Economic Growth: Origins of the Wealth of Nations

Question 1

Steady-state growth refers to

A)intermediate-run periods.
B)long-run equilibrium growth.
C)output determination in the short run.
D)None of the above

Answer 1

long-run equilibrium growth.

Question 2

The fact that long-run growth in the U.S.has been relatively stable is consistent with the ______ model.

A)endogenous growth.
B)supply-side.
C)Keynesian.
D)neoclassical growth.
E)none of the above.

Answer 2

neoclassical growth.

Question 3

Which of the following statements is (are)correct? According to United States data,

A)growth in the labor force has steadily increased since 1960.
B)capital formation has slowly increased since the 1960s.
C)the rate of growth in output and labor productivity has remained relatively steady.
D)the rate of growth in output and labor productivity sped up since 1960.
E)none of the above.

Answer 3

none of the above.

Question 4

Between 1929 and 1982,according to Edward Denison,approximately

A)one-fourth of the growth in output was due to the increase in the quantity of labor.
B)one-third of the growth in output came from an increase in the quantity of labor.
C)forty-five percent of the growth in output was credited to an increase in the quantity of labor.
D)ten percent of the growth in output was responsible for the increase in the quantity of labor.

Question 5

Reconsider question #5.Would you get the same answer in a model of endogenous growth? Would you expect convergence to occur? Explain.

Question 6

In the neoclassical model,explain the difference between a transition period and a steady state.What are the primary sources of growth in the transition period,and how does it differ from the steady state?

Question 7

Capital deepening occurs when

A)the per capita income increases over time.
B)real GNP increases over time.
C)the capital/labor ratio does not change.
D)the capital/labor ratio increases over time.

Question 8

Consider two countries that are exactly the same except that one country A has a higher savings rate than country B.Which country will grow faster in the long-run? Which country will be richer in the long-run? Use a graph of the aggregate production function to illustrate your answer.

Question 9

Recent research in growth theory extends the traditional analysis by making the rates of

A)technological change and/or population growth exogenous.
B)technological change exogenous and population growth endogenous.
C)population growth and/or technological change endogenous.
D)population growth exogenous and technological change endogenous.

Question 10

In the neoclassical growth model,n increase in the saving rate results in

A)faster permanent growth without a resultant effect on the equilibrium growth rate.
B)faster temporary growth without an effect on the long-run equilibrium growth rate.
C)faster temporary growth with a resultant effect on the equilibrium growth rate.
D)None of the above

Question 11

Would you get the same answer in a model of endogenous growth? Would you expect convergence to occur? Explain.

Question 12

According to Edward Denison's estimates,the largest proportion of economic growth during the 1929-82 period was

A)growth in the labor input.
B)growth in output per unit of input.
C)growth in the capital input.
D)economies of scale.
E)education.

Question 13

Assuming constant returns to scale,the equation,Y = A(t)F(K,N)can be rewritten as

A)Y/N = A(t)ƒ(K/N).
B)q = A(t)ƒ(k).
C)Y/N = A(t)ƒ(K* N).
D)Both a and b
E)Both b and c

Question 14

According to Edward Denison,what were the main sources of U.S.growth between 1929 and 1982? Which were the most important?

Question 15

Consider two countries that are exactly the same except that one country A has a higher depreciation rate than country B.Which country will grow faster in the long-run? Which country will be richer in the long-run? Use a graph of the aggregate production function to illustrate your answer.

Question 16

Explain the term "constant returns to scale." Define the term "diminishing marginal returns".Can a production function exhibit both of these properties?

Question 17

According to growth accounting estimates,during the 1929-1982 period,increases in capital and labor account for about ______ of total growth.

A)0 percent.
B)25 percent.
C)50 percent.
D)90 percent.
E)none of the above.

Question 18

Consider two countries that are exactly the same except that one country A has a higher rate of technology growth than country B.Which country will grow faster in the long-run? Which country will be richer in the long-run? Use a graph of the aggregate production function to illustrate your answer.

Question 19

According to the neoclassical growth model,economic growth occurs because of

A)increasing returns to scale.
B)exogenous increases in technology.
C)international trade that can increase knowledge.
D)government policy which encourages savings.
E)all of the above.

Question 20

In the neoclassical model,an increase in the savings rate

A)causes a more than proportionate increase in the capital to labor ratio.
B)results in a less than proportionate increase in the capital to labor ratio.
C)results in a proportionate increase in the growth rate of output.
D)None of the above

Question 21

In the neoclassical growth model,if two countries are exactly the same but one has a lower depreciation rate,we would expect that country to have

A)higher output,a higher capital-to-labor ratio,and the same per capita output growth in the steady state.
B)higher output,a higher capital-to-labor ratio,and higher per capita output growth in the steady state.
C)the same output and capital-to-labor ratio,but higher per capita output growth in the steady state.
D)higher output,the same capital-to-labor ratio,and the same per capita output growth in the steady state.

Question 22

Many rapidly developing countries in East Asia have pursued government policies,which encourage savings.According to the neoclassical growth model,if these policies stimulate savings but do not encourage technology growth,then these policies

A)will have no effect on the level of output.
B)will increase output growth permanently.
C)will increase output growth in the short-run,but not in the long-run.
D)will have no effect on the growth of output in the short-run or the long-run.
E)none of the above.

Question 23

International data suggests that countries with different steady states will

A)converge to the same growth rates of output.
B)converge to the same per-capita output levels.
C)not converge.
D)converge to the same steady state in the long-run.

Question 24

Robert Solow is one of the developers of

A)classical economics.
B)the neoclassical growth model.
C)real business cycle theory.
D)new classical economics.

Question 25

In a steady-state,sustained increases in the capital-to-labor ratio are only possible if

A)the savings rate increases.
B)population growth decreases.
C)depreciation decreases.
D)technology increases.
E)all of the above.

Question 26

According to Edward Denison,the United States has experienced

A)diseconomies of scale.
B)economies of scale.
C)constant returns to scale.
D)None of the above

Question 27

In the neoclassical growth model,if two countries are exactly the same but one has a lower permanent budget deficit,we would expect that country to have

A)higher output,a higher capital-to-labor ratio,and higher output growth in the steady state.
B)the same output and capital-to-labor ratio,but higher output growth in the steady state.
C)higher output,the same capital-to-labor ratio,and the same output growth in the steady state.
D)higher output,a higher capital-to-labor ratio,and the same output growth in the steady state.

Question 28

Economies of scale refer to

A)costs rising as the scale of production increases.
B)costs falling as the scale of production increases.
C)output rising as the level of inputs rises.
D)the marginal product of labor diminishes as the quantity of labor increases.

Question 29

In the neoclassical growth model without technological progress,in the steady-state the level of capital increases at

A)the growth of technology plus the growth of population.
B)the growth of technology plus the growth of population plus depreciation.
C)the growth of technology.
D)the growth of population.

Question 30

According to Edward Denison,during the 1929 and 1982 period,capital formation

A)was responsible for 25 percent of U.S.economic growth.
B)amounted to 19 percent of U.S.economic growth.
C)was considered the smallest source of U.S.economic growth.
D)was the most important source of U.S.economic growth.

Question 31

International data suggests that

A)convergence is not taking place.
B)convergence is taking place among poor countries but not among rich countries.
C)convergence is taking place among all countries.
D)convergence is taking place among rich countries but not among poor countries.

Question 32

Which of the following policies are likely to increase national savings?

A)running larger government budget deficits.
B)decreasing taxes on stock dividends.
C)reducing taxes on consumption.
D)having to pay higher interest rates on the national debt.
E)none of the above.

Question 33

A constant returns to scale production function means that if all inputs are halved then output will

A)double.
B)increase,but not double.
C)fall by half.
D)fall,but not by half.
E)none of the above.

Question 34

According to the neoclassical growth model,economic growth in the steady state occurs because of

A)increasing populations,which increase the demand for consumption.
B)exogenous increases in technology.
C)international trade.
D)active governments,which stimulate consumption through government spending.
E)all of the above.

Question 35

In the neoclassical growth model,break-even investment must cover

A)the depreciation in capital.
B)the rate of technology growth.
C)depreciation and capital for new workers (population growth).
D)capital for new workers (population growth)and technology growth.
E)none of the above.

Question 36

Which of the following policies is not aimed at stimulating technological progress?

A)subsidies to public universities.
B)tax breaks on stock gains.
C)tax breaks on research and development.
D)the granting of patents.

Question 37

In the neoclassical growth model without technological progress,the steady-state growth rate of per capita output is

A)the growth of technology plus the growth of population.
B)the growth of population.
C)the growth of technology.
D)the growth of technology plus population plus depreciation.

Question 38

Over the last 40 years in the U.S.

A)output and real wages have increased,while the capital-to-labor ratio has remained constant.
B)output,real wages,and the capital-to-labor ratio have all increased.
C)output has increased while real wages and the capital-to-labor ratio has remained constant.
D)output and real wages have increased,while the capital-to-labor ratio has fallen.

Question 39

In the neoclassical growth model,if two countries are exactly the same but one has a higher savings rate,we would expect that country to have

A)higher output,a higher capital-to-labor ratio,and higher output growth in the steady state.
B)higher output,a higher capital-to-labor ratio,and the same output growth in the steady state.
C)the same output and capital-to-labor ratio,but higher output growth in the steady state.
D)higher output,the same capital-to-labor ratio,and the same output growth in the steady state.

Question 40

The neoclassical growth model argues that the only way to increase growth in the long-run is

A)increase savings rates.
B)reduce depreciation rates.
C)reduce population growth.
D)increase technology growth.

Question 41

Endogenous growth models

A)predict absolute convergence.
B)predict conditional convergence.
C)do not predict convergence.
D)predict convergence among rich countries but not poor countries.

Question 42

Data on convergence suggests:

A)poor countries are converging with the median country.
B)rich countries are converging with other rich countries.
C)only countries with the same populations are convergine.
D)none of the above.

Question 43

According to Edward Denison,during the 1929-1982 period,real output grew at an annual rate of

A)1.4 percent.
B)0.6 percent.
C)2.9 percent.
D)just below 1 percent.
E)exactly one-half percent.

Question 44

The "A" in the neoclassical production function incorporates

A)new inventions.
B)changes in efficiency.
C)more productive capital.
D)more efficient labor organization.
E)all of the above.

Question 45

In the neoclassical growth model,convergence is conditional upon two countries having

A)the same savings rates.
B)the same depreciation rates.
C)the same technology growth rates.
D)the same population growth rates.
E)all of the above.

Question 46

If an economy is growing at 2 percent a year but its rate of technology growth is 1 percent a year,then this country must be:

A)below its steady state level of capital per worker.
B)expected to grow slower in the future.
C)has a savings rate that is too low.
D)none of the above.

Question 47

In the neoclassical growth model,the rate of technological process is:

A)2 percent.
B)0 percent.
C)exogenous and not explained.
D)endogenous and explained by human capital accumulation.

Question 48

According to Edward Denison,the major source of labor productivity is

A)improvements in labor quality.
B)economies of scale.
C)the changing composition of the labor force.
D)technological progress.
E)education per worker.

Question 49

According to the neoclassical growth model,in a steady state with no technology growth:

A)the amount of capital per worker is constant over time.
B)investment equals total depreciation.
C)savings equals total depreciation.
D)all of the above.
E)none of the above.

Question 50

In the neoclassical growth model,an increase in the saving rate will

A)increase the long-run equilibrium rate of growth in output.
B)reduce the long-run equilibrium rate of growth in output.
C)leave the long-run equilibrium rate of growth in output unchanged.
D)affect the long-run equilibrium rate of growth in output but the direction of the effect is uncertain.

Question 51

According to the neoclassical growth model,if a country makes a policy change to increase its savings rate,in the new steady state:

A)output per worker will grow faster than before.
B)output per worker will grow at the rate of technology growth.
C)capital per worker will be permanently higher.
D)all of the above.