Question 1

If depreciation is equal to investment ________.
A)capital per-worker rises over time
B)capital per-worker is stable
C)capital per-worker falls over time
D)capital per worker equals saving

Accepted Answer

When depreciation is equal to investment, the capital stock remains constant. Since the capital per worker is a ratio of the total capital stock to the number of workers, if both the capital stock and the number of workers remain constant, the capital per worker remains stable.

Question 2

In the past 50 years,per capita income in some countries such as ________ and ________ has hardly changed relative to per capita income in the United States.
A)Mexico;Argentina
B)Kenya;Nigeria
C)South Korea;India
D)France;United Kingdom

Accepted Answer

Mexico and Argentina have experienced relatively stagnant per capita income growth compared to the United States over the past 50 years, unlike South Korea and India, which have seen significant growth, and France and the United Kingdom, which are developed economies with different economic trajectories.

Question 3

If an economy invests more than it loses through depreciation ________.
A)the saving rate will fall
B)the saving rate will rise
C)the quantity of labor will fall
D)the capital stock will expand

Accepted Answer

When an economy invests more than it loses through depreciation, it means that the net investment is positive. This contributes to the expansion of the capital stock, as new investment in capital goods increases the economy's productive capacity. Therefore, the correct answer is D - the capital stock will expand.

Question 4

The loss of capital due to the wearing out of machines is known as ________.
A)saving
B)investment
C)consumption
D)depreciation

Accepted Answer

Depreciation refers to the decline in the value of assets over time due to wear and tear or obsolescence. It is a non-cash expense that reduces the value of an asset on the balance sheet and is accounted for in the income statement as an expense. Therefore, depreciation is the loss of capital due to the wearing out of machines.

Question 5

If depreciation is less than investment ________.
A)capital per-worker is falling
B)capital per-worker is rising
C)capital per-worker is constant
D)capital per worker is greater than saving

Accepted Answer

Depreciation is a decrease in the value of capital due to wear and tear, obsolescence, and other factors. If depreciation is less than investment, it means that more capital is being added to the economy than is being lost due to depreciation. This will cause the capital stock per worker to increase, resulting in "capital per-worker is rising."

Question 6

The economic growth of the United States over the last half-century ________.
A)is best understood as the result of high levels of saving and investment
B)is quite unlike the experience of most other economies
C)was driven by rising import purchases
D)has been faster than in any other economy

Accepted Answer

The answer of The economic growth of the United States...

Question 7

The per-worker production function is ________.
A)upward-sloping
B)downward-sloping
C)vertical
D)horizontal

Accepted Answer

The per-worker production function is upward-sloping, meaning that when an additional unit of labor is added, output also increases. This is because the marginal product of labor is positive, at least initially.

Question 8

The positive slope of the per-worker production function illustrates the relationship between per-worker output and ________.
A)diminishing marginal returns
B)the capital-labor ratio
C)the rate of inflation
D)the rate of unemployment

Accepted Answer

The per-worker production function relates the level of output to the amount of capital per worker. The positive slope represents the fact that an increase in the capital-labor ratio results in an increase in per-worker output. Therefore, choice (B) is the correct answer. Choices (A), (C), and (D) are incorrect because they are not related to the concept of the per-worker production function.

Question 9

Changes in the capital stock are caused by changes in ________.
A)the quantity of labor
B)depreciation and investment
C)depreciation and entrepreneurship
D)depreciation and the quantity of labor

Accepted Answer

Changes in the capital stock are caused by depreciation and investment. Depreciation represents the decrease in the value of existing capital stock, while investment represents the addition of new capital stock to the economy.

Question 10

In a closed economy ________.
A)investment equals consumption
B)investment equals savings
C)saving equals consumption
D)exports are greater than imports

Accepted Answer

In a closed economy, there are no international transactions of goods, services, or capital. Therefore, the only two components of aggregate demand are consumption and investment. Savings refer to the portion of income that is not consumed, and investment is the amount spent on capital goods. As savings are the source of funds for investment, in a closed economy, investment would have to equal savings. Therefore, option B is the correct choice.

Question 11

The per-worker production function flattens out due to ________.
A)the negative relationship between price and quantity demanded
B)the positive relationship between price and quantity demanded
C)the diminishing marginal product of capital
D)an increase in the general level of prices

Accepted Answer

The per-worker production function flattens out due to the diminishing marginal product of capital. As more capital is added to the production process, the additional output generated by each additional unit of capital gradually decreases. This is known as the law of diminishing marginal returns. Eventually, the point is reached where adding more capital no longer results in significant increases in output per worker, and the per-worker production function flattens out.

Question 12

In the Solow model,which of the following is an endogenous variable?
A)output per worker
B)government spending
C)the saving rate
D)the depreciation rate

Accepted Answer

Endogenous variables are those that are determined within the model itself, and output per worker is one of the key endogenous variables in the Solow model. The other choices, including government spending, the saving rate, and the depreciation rate, are all exogenous variables that are determined outside of the model.

Question 13

If capital per-worker is rising,then ________.
A)depreciation is equal to investment
B)depreciation is greater than investment
C)depreciation is less than investment
D)depreciation is less than consumption

Accepted Answer

When capital per-worker is rising, it means that investment is greater than depreciation. Hence, depreciation is less than investment. Therefore, the correct answer is C, depreciation is less than investment. Option A is incorrect because the question doesn't provide enough information to determine whether depreciation is equal to investment. Option B is incorrect because, in this case, investment is greater than depreciation, not the other way around. Option D is incorrect because consumption is not mentioned in the given information.

Question 14

In the bathtub analogy,which of the following is a stock variable?
A)the amount of investment
B)the rate of depreciation
C)the amount of capital-per worker
D)the Cobb-Douglass value

Accepted Answer

A stock variable is a variable measured at a specific point in time. In the bathtub analogy, the amount of capital-per worker is a stock variable because it represents a specific amount of capital at a specific point in time (per worker). The amount of investment and rate of depreciation are flow variables because they represent changes over time. The Cobb-Douglass value is a function used to describe the relationship between inputs and output in production, but it is not a variable measured at a specific point in time.

Question 15

The Solow model is ________.
A)the basic model of how technology changes over time
B)the foundation for the classical economic thought of Adam Smith
C)one of the dominant explanations of the business cycle
D)based on the notion of diminishing marginal product of capital and labor

Accepted Answer

The Solow model is based on the notion of diminishing marginal product of capital and labor. It shows how capital and labor interact to determine the level of output in an economy over time. It is a model of economic growth, not a model of technology change or the business cycle, nor is it the foundation for classical economic thought.

Question 16

Countries with different initial levels of per capita income may gravitate to a similar level of per capita income.Economists call this phenomenon ________.
A)convergence
B)simulation
C)gravitation
D)depreciation

Accepted Answer

The phenomenon described is known as convergence. This is the idea that poorer countries will tend to experience faster economic growth rates than richer countries, and will eventually reach a similar level of income per capita over time.

Question 17

With a closed economy and no government spending,the total demand for output is equal to ________.
A)consumption per-worker plus investment per-worker
B)consumption per-worker minus investment per-worker
C)consumption per-worker times investment per-worker
D)consumption per worker divided by investment per-worker

Accepted Answer

In a closed economy with no government spending, the total demand for output is comprised of consumption and investment. Thus, the total demand for output is equal to consumption per-worker plus investment per-worker.

Question 18

In the Solow model,which of the following is an exogenous variable?
A)productivity
B)the capital-labor ratio
C)consumption per worker
D)investment per worker

Accepted Answer

In the Solow model, productivity is treated as an exogenous variable, which means it is not determined by any factors within the model but is instead assumed to be determined by factors outside the model, such as technological progress or government policy. The other variables listed (capital-labor ratio, consumption per worker, investment per worker) are endogenous variables, which means they are determined within the model based on the interactions between other variables in the model.

Question 19

If investment per-worker equals some value X,and depreciation per-worker equals some value Z,then the change in the capital stock per-worker is equal to ________.
A)X+Z
B)X-Z
C)X times Z
D)X divided by Z

Accepted Answer

The change in the capital stock per-worker is determined by subtracting the amount of depreciation per-worker from the amount of investment per-worker. Therefore, the formula for change in capital stock per worker is:

Change in capital stock per worker = Investment per worker - Depreciation per worker

Substituting the values given, we get:

Change in capital stock per worker = X - Z

Therefore, the correct answer is B) X-Z.

Question 20

The economic growth of the United States over the last half-century ________.
A)is best understood as the result of high levels of saving and investment
B)is quite similar to the experience of most other economies
C)was driven by rising import purchases
D)has been slower than growth in several other economies

Accepted Answer

The economic growth of the United States over the last half-century has been slower than growth in several other economies. While the US has certainly experienced growth, it has not been as high as in some other countries.

Quiz 6: The Sources of Growth and the Solow Model

If depreciation is equal to investment ________.

In the past 50 years,per capita income in some countries such as and has hardly changed relative to per capita income in the United States.

If an economy invests more than it loses through depreciation ________.

The loss of capital due to the wearing out of machines is known as ________.

If depreciation is less than investment ________.

The economic growth of the United States over the last half-century ________.

The per-worker production function is ________.

The positive slope of the per-worker production function illustrates the relationship between per-worker output and ________.

Changes in the capital stock are caused by changes in ________.

In a closed economy ________.

The per-worker production function flattens out due to ________.

In the Solow model,which of the following is an endogenous variable?

If capital per-worker is rising,then ________.

In the bathtub analogy,which of the following is a stock variable?

The Solow model is ________.

Countries with different initial levels of per capita income may gravitate to a similar level of per capita income.Economists call this phenomenon ________.

With a closed economy and no government spending,the total demand for output is equal to ________.

In the Solow model,which of the following is an exogenous variable?

If investment per-worker equals some value X,and depreciation per-worker equals some value Z,then the change in the capital stock per-worker is equal to ________.

The economic growth of the United States over the last half-century ________.