Question 1

Total investment I is equal to

Accepted Answer

Total investment (I) is often represented as savings (s) multiplied by income (Y), reflecting the idea that investment can be a function of the savings out of income.

Question 2

If s is the proportion of capital stock saved and invested per year and * is the capital stock depreciation rate, then capital stock (K) will change according to which of the following formulas?

Accepted Answer

The answer of If s is the proportion of capital...

Question 3

The capital-output ratio will ________ if the saving rate decreases and the rate of depreciation of the capital stock remains the same.

Accepted Answer

The answer of The capital-output ratio will ________ if the...

Question 4

The capital-output ratio will ________ if the saving rate increases and the rate of depreciation of the capital stock remains the same.

Accepted Answer

The answer of The capital-output ratio will ________ if the...

Question 5

The capital-output ratio will ________ if the saving rate increases and the rate of depreciation of the capital stock increases by the same percentage.

Accepted Answer

The capital-output ratio remains unchanged if both the saving rate and the rate of depreciation of the capital stock increase by the same percentage, as these changes offset each other's effects on the capital-output ratio.

Question 6

The capital-output ratio will ________ if the saving rate increases and the rate of depreciation of the capital stock decreases.

Accepted Answer

The answer of The capital-output ratio will ________ if the...

Question 7

The capital-output ratio is equal to

Accepted Answer

The capital-output ratio is typically defined as the amount of capital needed to produce one unit of output. In economic models, it is often represented as the ratio of capital to output, which can be influenced by the saving rate and depreciation rate, but it is not directly calculated by multiplying, adding, or subtracting these rates. The closest option is dividing the saving rate by the depreciation rate, which can relate to steady-state conditions in growth models.

Question 8

When there is no growth in the labor force nor in the efficiency of labor, the equilibrium condition in the Solow growth model is

Accepted Answer

The answer of When there is no growth in the...

Question 9

If the saving rate is 16%, the capital stock depreciation rate is 4%,    is equal to .5, and E is equal to 20,000, output per worker will be

Accepted Answer

The answer of If the saving rate is 16%, the...

Question 10

If the saving rate is 15%, the capital stock depreciation rate is 5%,    is equal to .5, and E is equal to 15,000, output per worker will be

Accepted Answer

The answer of If the saving rate is 15%, the...

Question 11

If the current level of output in the economy is $10 trillion a year, the current year's capital stock in the economy is $25 trillion, the savings rate is 20 percent and the rate of depreciation of capital stock is 3 percent, next year's capital stock will be _______.

Accepted Answer

The next year's capital stock is calculated by adding this year's savings (investment) to the current capital stock and then subtracting depreciation. Savings are 20% of $10 trillion = $2 trillion. Depreciation is 3% of $25 trillion = $0.75 trillion. So, next year's capital stock = $25 trillion + $2 trillion - $0.75 trillion = $26.25 trillion.

Question 12

Each of the following is a factor in the economy's balanced growth equilibrium except

Accepted Answer

The growth rate of the efficiency of capital is not typically considered a direct factor in the economy's balanced growth equilibrium. Balanced growth equilibrium usually focuses on factors like labor force growth, efficiency of labor (productivity), and the saving-investment rate, which directly influence the economy's capacity to grow in a balanced manner. The efficiency of capital, while important for determining how effectively investments translate into productive capacity, is not a standalone factor in the balanced growth model.

Question 13

Each of the following is a factor in the economy's balanced growth equilibrium except

Accepted Answer

The rate of depreciation of labor is not typically considered a factor in the economy's balanced growth equilibrium. Balanced growth models usually focus on factors like labor force growth, efficiency improvements, and the saving-investment balance, rather than on labor depreciation.

Question 14

Each of the following is a factor in the economy's balanced growth equilibrium except

Accepted Answer

The rate of growth of the money supply is not a direct factor in the economy's balanced growth equilibrium. Balanced growth equilibrium typically focuses on factors like labor force growth, efficiency of labor, and capital stock depreciation, which directly affect the production capacity and potential of an economy. The money supply's growth rate primarily influences inflation and interest rates rather than the economy's balanced growth path.

Question 15

In a steady-state balanced growth equilibrium,

Accepted Answer

In a steady-state balanced growth equilibrium, the capital-output ratio remains constant over time, indicating that capital and output are growing at the same rate.

Question 16

If the labor force growth rate was 1 percent per year, the capital stock depreciation rate was 3 percent per year, the saving rate was 15 percent per year, and growth rate of the efficiency of labor was 1 percent per year,

Accepted Answer

The capital-output ratio can be determined using the Solow growth model formula: $ \frac{s}{n + g + \delta} $, where $ s $ is the saving rate, $ n $ is the labor force growth rate, $ g $ is the growth rate of the efficiency of labor, and $ \delta $ is the depreciation rate of capital. Plugging in the given values: $ \frac{0.15}{0.01 + 0.01 + 0.03} = 3 $.

Question 17

If the labor force growth rate was 2 percent per year, the capital stock depreciation rate was 4 percent per year, the growth rate of the efficiency of labor was 1 percent, and the capital-output ratio was 2,

Accepted Answer

The saving rate can be calculated using the formula: s = (n + g + δ) * (K/Y), where n is the labor force growth rate, g is the growth rate of the efficiency of labor, δ is the depreciation rate, and K/Y is the capital-output ratio. Substituting the given values: s = (0.02 + 0.01 + 0.04) * 2 = 0.14 or 14 percent per year.

Question 18

If growth rate of the efficiency of labor increases, with the labor force growth rate, capital stock depreciation rate, and saving rate held constant,

Accepted Answer

An increase in the efficiency of labor, with other factors held constant, leads to higher output for a given amount of capital. This means the capital-output ratio (capital per unit of output) will decrease because the same amount of capital now produces more output.

Question 19

If saving rate increases, with the labor force growth rate, capital stock depreciation rate, and growth rate of the efficiency of labor held constant,

Accepted Answer

When the saving rate increases, assuming other factors like labor force growth rate, capital stock depreciation rate, and growth rate of the efficiency of labor are constant, more resources are allocated for investment in capital. This leads to an increase in the capital stock over time, raising the capital-output ratio because the output does not increase at the same rate as capital does in the short run.

Question 20

The capital-output ratio is said to be in equilibrium

Accepted Answer

The capital-output ratio is in equilibrium when its rate of change is zero, indicating a stable relationship between the capital stock and the output level.

Quiz 4: The Theory of Economic Growth

Total investment I is equal to

If s is the proportion of capital stock saved and invested per year and * is the capital stock depreciation rate, then capital stock (K) will change according to which of the following formulas?

The capital-output ratio will ________ if the saving rate decreases and the rate of depreciation of the capital stock remains the same.

The capital-output ratio will ________ if the saving rate increases and the rate of depreciation of the capital stock remains the same.

The capital-output ratio will ________ if the saving rate increases and the rate of depreciation of the capital stock increases by the same percentage.

The capital-output ratio will ________ if the saving rate increases and the rate of depreciation of the capital stock decreases.

The capital-output ratio is equal to

When there is no growth in the labor force nor in the efficiency of labor, the equilibrium condition in the Solow growth model is

If the saving rate is 16%, the capital stock depreciation rate is 4%, is equal to .5, and E is equal to 20,000, output per worker will be

If the saving rate is 15%, the capital stock depreciation rate is 5%, is equal to .5, and E is equal to 15,000, output per worker will be

If the current level of output in the economy is $10 trillion a year, the current year's capital stock in the economy is $25 trillion, the savings rate is 20 percent and the rate of depreciation of capital stock is 3 percent, next year's capital stock will be _______.

Each of the following is a factor in the economy's balanced growth equilibrium except

Each of the following is a factor in the economy's balanced growth equilibrium except

Each of the following is a factor in the economy's balanced growth equilibrium except

In a steady-state balanced growth equilibrium,

If the labor force growth rate was 1 percent per year, the capital stock depreciation rate was 3 percent per year, the saving rate was 15 percent per year, and growth rate of the efficiency of labor was 1 percent per year,

If the labor force growth rate was 2 percent per year, the capital stock depreciation rate was 4 percent per year, the growth rate of the efficiency of labor was 1 percent, and the capital-output ratio was 2,

If growth rate of the efficiency of labor increases, with the labor force growth rate, capital stock depreciation rate, and saving rate held constant,

If saving rate increases, with the labor force growth rate, capital stock depreciation rate, and growth rate of the efficiency of labor held constant,

The capital-output ratio is said to be in equilibrium