Question 1

Edward Denison's analysis of the American economy found that

Accepted Answer

The answer of Edward Denison's analysis of the American economy...

Question 2

The computerization of police departments throughout the country has greatly reduced the crime rate.What macroeconomic variable is likely to be directly affected by this change?

Accepted Answer

The computerization of police departments is likely to increase productivity by enabling police officers to more effectively and efficiently handle crime prevention and investigation, resulting in a reduction in the crime rate. Improved productivity can lead to economic growth and development.

Question 3

In the Solow model,if productivity doesn't change,

Accepted Answer

In the Solow model, if productivity doesn't change, then the economy must eventually reach a steady state. This is because the capital stock and output per worker will grow at the same rate as the population and labor force, which means that the capital-labor ratio will remain constant. At the steady state, the economy reaches a balanced growth path where the growth rate is equal to the exogenous rate of technological progress. Thus, there will be no need for the capital-labor ratio to decline or rise, nor will there be any restriction on saving.

Question 4

Use the growth accounting equation to calculate productivity growth,given output growth of 3.5%,capital stock growth of 5%,labor employment growth of 2%,the output elasticity of capital of 0.3,and the output elasticity of labor of 0.7.

Accepted Answer

The answer of Use the growth accounting equation to calculate...

Question 5

The idea that measurement problems could explain the productivity slowdown since 1973 is based on the fact that

Accepted Answer

The idea that measurement problems could explain the productivity slowdown since 1973 is based on the fact that quality improvements aren't fully accounted for in the data. Official output measures make adjustments for inflation, but they do not fully account for quality improvements. This means that even as productivity has improved, the official measures may not fully capture this improvement, leading to an underestimate of productivity growth.

Question 6

Steady-state investment per worker is positively related to the capital-labor ratio because the higher the capital-labor ratio

Accepted Answer

The more investment per worker is required to replace depreciating capital because as the capital-labor ratio increases, maintaining that higher level of capital per worker necessitates more investment to counteract depreciation.

Question 7

A new pollution law requires businesses to pay for inspections of their plants by independent pollution-monitoring firms.What effect is this likely to have?

Accepted Answer

The requirement for businesses to pay for independent pollution-monitoring inspections will likely increase their costs and reduce their productivity. They will need to allocate resources towards complying with the new law, which may lead to lower profits, decreased investment in capital stock, and potentially downsizing their workforce.

Question 8

Steady-state consumption per worker is

Accepted Answer

The answer of Steady-state consumption per worker is
...

Question 9

All of the following are explanations of the post-1973 productivity slowdown except

Accepted Answer

The post-1973 productivity slowdown has been attributed to various factors, but greater competition from foreign imports is not typically considered a direct cause. Instead, it's often seen as a response to or consequence of the slowdown, rather than a primary reason for it. The other options (A, B, C) are commonly cited explanations, including difficulties in measuring productivity accurately, changes in regulations and demographics, and the impact of increased energy costs.

Question 10

From one year to the next,a country's output rose from 4000 to 4500,its capital stock rose from 10,000 to 12,000,and its labor force declined from 2000 to 1750.Suppose a_K = 0.3 and a_N= 0.7. (a)How much did capital contribute to economic growth over the year? (b)How much did labor contribute to economic growth over the year? (c)How much did productivity contribute to economic growth over the year?

Accepted Answer

The answer of From one year to the next,a country's...

Question 11

Why do some people think that the productivity slowdown since 1973 is just a return to normalcy after fast productivity growth during the previous 25 years?

Accepted Answer

During the period from 1948-1973, the US experienced a surge in productivity growth due to several factors such as technological advancements, increased education of the workforce, and stable macroeconomic policies. However, during the 1930s and 1940s, the Great Depression and World War II prevented technological opportunities from being fully exploited. Therefore, the slow productivity growth from 1973 onwards can be seen as a return to normalcy after a period of fast productivity growth.

Question 12

In a steady state

Accepted Answer

In a steady state, both consumption per worker (representing output per worker) and the capital-labor ratio are constant. This is because the economy has reached a balanced state where the production function is maximized, and any change in one of these variables would cause a deviation from the steady state. Therefore, only choice A describes a steady state accurately.

Question 13

In the absence of productivity growth,in a steady-state economy

Accepted Answer

In a steady-state economy, the level of output is constant over time as there is no economic growth. Since productivity growth is not occurring, output per worker will not increase over time. Since the level of output remains constant and the population is also constant, the consumption per worker will also remain constant over time. Therefore, option A is the correct answer.

Question 14

The bowed shape of the per-worker production function is caused by

Accepted Answer

The bowed shape of the per-worker production function is caused by diminishing marginal productivity of capital. As the number of capital increases, the marginal productivity decreases, leading to a diminishing return. This results in a bowed shape of the production function where initially, the marginal productivity increases, but it starts to decrease after a point.

Question 15

The per-worker production function in the Solow model assumes

Accepted Answer

The per-worker production function in the Solow model assumes constant returns to scale, meaning that if the inputs are increased by a certain percentage, the output will also increase by the same percentage. However, it assumes diminishing marginal productivity of capital, meaning that as more capital is added, the additional output produced by each unit of capital decreases. This is because the other inputs, such as labor and technology, are held constant while capital is being increased, leading to a point where the addition of more capital is not as effective in boosting output. Therefore, choice B is the best answer.

Question 16

According to the Solow model,an increase in the capital-labor ratio will

Accepted Answer

According to the Solow model, an increase in the capital-labor ratio will increase steady-state consumption per worker if the capital-labor ratio is below the Golden rule capital stock. This is because increasing the capital-labor ratio below the Golden rule capital stock will lead to an increase in output per worker, which will result in a higher steady-state consumption per worker. However, if the capital-labor ratio is already above the Golden rule capital stock, further increases in the capital-labor ratio will lead to a decrease in steady-state consumption per worker.

Question 17

Over the past year,an economy's labor supply increased from 100 to 102,its capital stock increased from 1000 to 1030,and its output increased from 500 to 525.All measurements are in real terms.Calculate the contributions to economic growth of growth in capital,labor,and productivity if a_K = 0.2 and a_N = 0.8.

Accepted Answer

The answer of Over the past year,an economy's labor supply...

Question 18

Greenwood and Yorukoglu view the post-1973 productivity slowdown as resulting from

Accepted Answer

Greenwood and Yorukoglu attribute the post-1973 productivity slowdown to the information technology revolution, arguing that the initial phases of adopting new technologies, such as IT, can temporarily slow apparent productivity as economies adjust to new ways of working and incorporate these technologies into everyday business practices.

Question 19

Which of the following best describes a steady state?

Accepted Answer

A steady state refers to a situation in which key economic variables such as output per worker, consumption per worker and capital per worker remain constant over time. This occurs when the investment rate is equal to the rate of depreciation of capital, leading to a stable level of output and consumption. Option A refers to political stability, which is a different concept. Option B refers to economic growth, which involves an increase in the output of goods and services over time. Option C is not necessarily true in a steady state as some firms may experience fluctuations in income due to market conditions.

Question 20

Edward Denison found that labor's contribution to output growth in the United States since 1929 was attributable to all the factors below except

Accepted Answer

Edward Denison's analysis attributed labor's contribution to output growth to factors such as rising population, an increase in the labor force participation rate, and higher educational levels, but not to an increase in the number of hours worked per person, which has generally decreased over time.

Quiz 6: Long-Run Economic Growth