Question 1

With population growth at rate n and labor-augmenting technological progress at rate g, the Golden Rule steady state requires that the marginal product of capital (MPK):
A)net of depreciation be equal to n + g.
B)net of depreciation be equal to the depreciation rate plus n + g.
C)plus n be equal to the depreciation rate plus g.
D)plus g be equal to the depreciation rate plus n.

Accepted Answer

A

Question 2

In a Solow model with technological change, if population grows at a 2 percent rate and the efficiency of labor grows at a 3 percent rate, then in the steady state, output per effective worker grows at a percent rate.
A)0
B)2
C)3
D)5

Accepted Answer

A

Question 3

In a steady-state economy with population growth n and labor-augmenting technological progress g, persistent increases in standard of living are possible because the:
A)capital stock grows faster than does the labor force.
B)capital stock grows faster than does the number of effective workers.
C)capital stock grows faster than does depreciation.
D)saving rate constantly increases.

Accepted Answer

A

Question 4

The efficiency of labor is a term that does not reflect the:
A)high output that comes from labor cooperating with a large amount of capital.
B)health of the labor force.
C)education of the labor force.
D)skills of the labor force acquired through on-the-job training.

Accepted Answer

The efficiency of labor primarily reflects factors such as the health, education, and skills of the labor force, rather than the amount of capital it cooperates with.

Question 5

The rate of labor-augmenting technological progress (g) is the growth rate of:
A)labor.
B)the efficiency of labor.
C)capital.
D)output.

Accepted Answer

Labor-augmenting technological progress refers to improvements in technology that increase the productivity or efficiency of labor, rather than capital. Therefore, the growth rate of labor-augmenting technological progress is the growth rate of the efficiency of labor.

Question 6

In a Solow model with technological change, if population grows at a 2 percent rate and the efficiency of labor grows at a 3 percent rate, then in the steady state, output per actual worker grows at a percent rate.
A)0
B)2
C)3
D)5

Accepted Answer

In the Solow model with technological change, output per actual worker in the steady state depends on the growth rate of efficiency of labor. As the given efficiency of labor grows at a 3 percent rate, output per actual worker also grows at the same rate, which is 3 percent. Therefore, the correct answer is (C).

Question 7

If the labor force is growing at a 3 percent rate and the efficiency of a unit of labor is growing at a 2 percent rate, then the number of effective workers is growing at a rate of:
A)2 percent.
B)3 percent.
C)5 percent.
D)6 percent.

Accepted Answer

The number of effective workers is the product of the labor force growth rate and the efficiency growth rate, so 3% * 2% = 0.06 or 6%. However, the question asks for the rate at which the number of effective workers is growing, so the answer is 6% or choice letter D.

Question 8

According to the Solow model, persistently rising living standards can only be explained by:
A)population growth.
B)capital accumulation.
C)saving rates.
D)technological progress.

Accepted Answer

According to the Solow model, persistent rising living standards can only be explained by technological progress. While population growth, capital accumulation, and saving rates can all contribute to economic growth in the short run, they cannot sustain it in the long run without technological progress.

Question 9

In the Solow model with technological progress, the steady-state growth rate of capital per effective worker is:
A)0.
B)g.
C)n.
D)n + g.

Accepted Answer

The answer of In the Solow model with technological progress,...

Question 10

In the Solow growth model with population growth and technological change, the break-even level of investment must cover:
A)depreciating capital.
B)depreciating capital and capital for new workers.
C)depreciating capital and capital for new effective workers.
D)depreciating capital, capital for new workers, and capital for new effective workers.

Accepted Answer

In the Solow growth model with population growth and technological change, the break-even level of investment must cover depreciating capital, capital for new workers, and capital for new effective workers. This accounts for maintaining the capital stock, expanding it to accommodate a growing workforce, and enhancing it to keep up with technological advancements, ensuring that the economy can sustain its growth trajectory.

Question 11

Over the past 50 years in the United States:
A)output per worker hour, capital stock per worker hour, the real wage, and the real rental price of capital have all increased about 2 percent per year.
B)output per worker hour, the real wage, and the real rental price of capital have all increased about 2 percent per year, whereas capital stock per worker hour has increased faster.
C)output per worker hour and the real wage have both increased about 2 percent per year, whereas capital stock per worker hour has increased faster and the real rental price of capital has remained about the same.
D)output per worker hour, the real wage, and capital stock per worker hour have all increased about 2 percent per year, whereas the real rental price of capital has remained about the same.

Accepted Answer

According to the statement, output per worker hour, real wage, and capital stock per worker hour have all increased about 2 percent per year. This indicates a growth in productivity and investment in capital. However, the real rental price of capital has remained about the same, indicating that the supply of capital has kept pace with the demand for it, resulting in no change in the rental price.

Question 12

In the Solow growth model with population growth and technological change, the steady-state growth rate of income per person depends on:
A)the rate of population growth.
B)the saving rate.
C)the rate of technological progress.
D)the rate of population growth plus the rate of technological progress.

Accepted Answer

The answer of In the Solow growth model with population...

Question 13

Assuming that technological progress increases the efficiency of labor at a constant rate is called:
A)endogenous technological progress.
B)the efficiency-wage model of economic growth.
C)labor-augmenting technological progress.
D)the Golden Rule model of economic growth.

Accepted Answer

Labor-augmenting technological progress assumes that advances in technology result in an increase in the productivity of labor at a constant rate. This is different from endogenous technological progress, which suggests that innovations are a result of investments in research and development. The efficiency-wage model and Golden Rule model are both theoretical frameworks for understanding economic growth, but they are not directly related to assumptions about technological progress.

Question 14

In the Solow model with technological progress, the steady-state growth rate of output per effective worker is:
A)0.
B)g.
C)n.
D)n + g.

Accepted Answer

The answer of In the Solow model with technological progress,...

Question 15

In the Solow model with technological progress, the steady-state growth rate of total output is:
A)0.
B)g.
C)n.
D)n + g.

Accepted Answer

In the Solow model with technological progress, the steady-state growth rate of total output is equal to the sum of the growth rate of labor input and the growth rate of technology, which is n + g.

Question 16

In the Solow growth model, the steady-state growth rate of output per effective worker is , and the steady-state growth rate of output per actual worker is .
A)the sum of the rate of technological progress plus the rate of population growth; zero
B)zero; the rate of technological progress
C)zero; zero
D)the rate of technological progress; the rate of population growth

Accepted Answer

The answer of In the Solow growth model, the steady-state...

Question 17

In the Solow model with technological change, the Golden Rule level of capital is the steady state that maximizes:
A)output per worker.
B)output per effective worker.
C)consumption per worker.
D)consumption per effective worker.

Accepted Answer

The Golden Rule level of capital in the Solow model with technological change maximizes consumption per effective worker, as it balances the rate of saving and investment to ensure the highest possible standard of living in the long run.

Question 18

In a Solow model with technological change, if population grows at a 2 percent rate and the efficiency of labor grows at a 3 percent rate, then in the steady state, total output grows at a percent rate.
A)0
B)2
C)3
D)5

Accepted Answer

The answer of In a Solow model with technological change,...

Question 19

In the Solow model with technological progress, the steady-state growth rate of output per (actual) worker is:
A)0.
B)g.
C)n.
D)n + g.

Accepted Answer

The answer of In the Solow model with technological progress,...

Question 20

The efficiency of labor:
A)is the marginal product of labor.
B)is the rate of growth of the labor force.
C)includes the knowledge, health, and skills of labor.
D)equals output per worker.

Accepted Answer

The answer of The efficiency of labor:
A)is the marginal product...

Quiz 8: Application: The Costs of Taxation

With population growth at rate n and labor-augmenting technological progress at rate g, the Golden Rule steady state requires that the marginal product of capital (MPK) :

In a Solow model with technological change, if population grows at a 2 percent rate and the efficiency of labor grows at a 3 percent rate, then in the steady state, output per effective worker grows at a percent rate.

In a steady-state economy with population growth n and labor-augmenting technological progress g, persistent increases in standard of living are possible because the:

The efficiency of labor is a term that does not reflect the:

The rate of labor-augmenting technological progress (g) is the growth rate of:

In a Solow model with technological change, if population grows at a 2 percent rate and the efficiency of labor grows at a 3 percent rate, then in the steady state, output per actual worker grows at a percent rate.

If the labor force is growing at a 3 percent rate and the efficiency of a unit of labor is growing at a 2 percent rate, then the number of effective workers is growing at a rate of:

According to the Solow model, persistently rising living standards can only be explained by:

In the Solow model with technological progress, the steady-state growth rate of capital per effective worker is:

In the Solow growth model with population growth and technological change, the break-even level of investment must cover:

Over the past 50 years in the United States:

In the Solow growth model with population growth and technological change, the steady-state growth rate of income per person depends on:

Assuming that technological progress increases the efficiency of labor at a constant rate is called:

In the Solow model with technological progress, the steady-state growth rate of output per effective worker is:

In the Solow model with technological progress, the steady-state growth rate of total output is:

In the Solow growth model, the steady-state growth rate of output per effective worker is , and the steady-state growth rate of output per actual worker is .

In the Solow model with technological change, the Golden Rule level of capital is the steady state that maximizes:

In a Solow model with technological change, if population grows at a 2 percent rate and the efficiency of labor grows at a 3 percent rate, then in the steady state, total output grows at a percent rate.

In the Solow model with technological progress, the steady-state growth rate of output per (actual) worker is:

The efficiency of labor: