Question 1

Assume a production function is given by  . If 
And 
, and the steady-state capital stock is 8.0, the steady-state level of output is about:

Accepted Answer

The answer of Assume a production function is given by...

Question 2

An increase in ________ leads to a higher steady-state level of output per worker, and a decline in the ________ leads to a lower steady-state level of output per worker.

Accepted Answer

An increase in productivity leads to a higher steady-state level of output per worker, and a decline in the saving rate leads to a lower steady-state level of output per worker.

Question 3

Refer to the following figure when answering the following questions. Figure 5.3: Solow Diagram -In Figure 5.3, at K₂, capital accumulation is ________, the economy is ________, and consumption is ________.

Accepted Answer

At K₂, capital accumulation is zero because the economy is at a steady state, where investment equals depreciation, and thus, the economy is not growing or contracting. Consumption is positive because individuals still consume goods and services even when the economy is in a steady state.

Question 4

The steady-state level of output per worker in the Solow model, with the production function  , is given by:

Accepted Answer

The answer of The steady-state level of output per worker...

Question 5

In the standard production model's production function, the productivity parameter enters the equation with an exponent of one, while in the Solow model's equation for the steady-state stock of capital it is greater than one because:

Accepted Answer

In the Solow model, the productivity parameter affects the steady-state stock of capital because it influences the level of output and savings, which in turn determine the accumulation of capital. This relationship implies that higher productivity leads to a higher steady-state level of capital, showing the dependency of the capital stock on productivity.

Question 6

In the Solow model, if capital is in the steady state, output:

Accepted Answer

In the steady state, output is also in the steady state. This means that the economy has reached a level of output that is sustainable in the long run, and will not continue to grow or decline indefinitely. Instead, output will remain stable at this level, as long as there are no changes to the underlying variables of the Solow model (such as population growth, technology, or savings rates).

Question 7

Refer to the following figure when answering the following questions. Figure 5.3: Solow Diagram -In Figure 5.3, at K₁, the difference between and Is ________, and the difference between Y and Is ________.

Accepted Answer

The answer of Refer to the following figure when answering...

Question 8

Assume a production function is given by  . If 
, the depreciation rate is 
, and the saving rate is 
The steady-state level of capital is about:

Accepted Answer

In the steady state, capital per worker remains constant. Therefore, we can solve for steady-state capital per worker (k*) by setting investment per worker equal to depreciation per worker: 
sf(k*) = (n + δ)k*
Substituting in the given values: 
0.35k*^(1.5) = (0.05 + 0.07)k*
Simplifying, we get: 
0.35k*^(1.5) = 0.12k*
Multiplying both sides by (1/0.12), we get: 
k*^(0.5) = 0.343
Squaring both sides, we get: 
k* = 0.343^2 = 0.118
Since output per worker is given by: 
y* = Ak*^(0.5) = 2.8
The steady-state level of capital is approximately 0.118 times the level of output per worker, which is approximately 0.118 x 2.8 = 0.330, or about 0.3.

Question 9

Assume a production function is given by  . If 
And 
, the depreciation rate is 
, and the saving rate is 
, the steady-state level of capital is about:

Accepted Answer

The answer of Assume a production function is given by...

Question 10

According to the Solow model, in the steady state, countries with high saving rates should have a:

Accepted Answer

According to the Solow model, the steady state value of the capital stock per worker, k*, is positively related to the saving rate. Therefore, countries with high saving rates should have a high capital-output ratio (Y/K), which means that they are able to produce more output per unit of capital invested.

Question 11

In the Solow model, it is assumed a(n) ________ fraction of capital depreciates each period.

Accepted Answer

The Solow model assumes a constant fraction of capital depreciates each period, which is typically denoted by the symbol "delta".

Question 12

Over the past 30 years, ________ has averaged a saving rate of ________ percent.

Accepted Answer

South Korea has maintained a high savings rate, averaging around 35 percent over the past 30 years, reflecting its strong culture of saving and investment.

Question 13

An increase in ________ leads to a higher steady-state level of output, and an increase in ________ leads to a lower steady-state level of output.

Accepted Answer

An increase in the saving rate allows more capital to be accumulated, raising the steady-state level of output. Conversely, an increase in the depreciation rate means capital depreciates faster than it can be replaced, lowering the steady-state level of output.

Question 14

The key difference between the Solow model and the production model is that the:

Accepted Answer

The Solow model is based on the idea that capital accumulation is an endogenous process, meaning that it is determined within the model. In contrast, the production function model assumes that the level of capital is exogenous, or determined outside the model. Therefore, in the Solow model, changes in the saving rate or technological progress can have a direct impact on the rate of capital accumulation and, by extension, economic growth. This is an important difference between the two models.

Question 15

An increase in ________ leads to a higher steady-state capital stock, and a decline in ________ leads to a lower steady-state capital stock.

Accepted Answer

The answer of An increase in ________ leads to a...

Question 16

Over the past 30 years, ________ has averaged a saving rate of ________ percent.

Accepted Answer

The United States has averaged a saving rate of 25 percent over the past 30 years according to the given information. The other countries mentioned have different average saving rates.

Question 17

In the Solow model, the ________ plays a ________ role than it does in the standard production function model.

Accepted Answer

In the Solow model, the productivity parameter (often represented as technology or total factor productivity) plays a larger role because it affects the long-term growth rate of the economy, unlike in the standard production function model where capital accumulation is the primary focus.

Question 18

If the production function is given by  , the saving rate, s, is 20 percent; the depreciation rate, 
, is 10 percent; and 
, the steady-state level of output is:

Accepted Answer

The answer of If the production function is given by...

Question 19

If a natural disaster destroys a large portion of a country's capital stock but the saving and depreciation rates are unchanged, the Solow model predicts that the economy will grow and eventually reach:

Accepted Answer

The Solow model predicts that the economy will experience a temporary drop in output, but it will eventually return to its previous steady-state level of output because the saving and depreciation rates are unchanged. The capital stock will be rebuilt over time, and once it reaches its previous level, the economy will reach the same steady-state level of output as it would have before the disaster.

Question 20

In the Solow model, if, in the absence of any shocks, the capital stock remains at K* forever, this rest point is called the:

Accepted Answer

The steady state is the long-run equilibrium of the Solow model where the capital stock remains constant over time due to a balance between depreciation and investment. If the capital stock remains at K* forever, this indicates that the economy has reached its steady state.

Quiz 5: The Solow Growth Model

Assume a production function is given by . If And , and the steady-state capital stock is 8.0, the steady-state level of output is about:

An increase in leads to a higher steady-state level of output per worker, and a decline in the leads to a lower steady-state level of output per worker.

Refer to the following figure when answering the following questions. Figure 5.3: Solow Diagram -In Figure 5.3, at K₂, capital accumulation is , the economy is , and consumption is .

The steady-state level of output per worker in the Solow model, with the production function , is given by:

In the standard production model's production function, the productivity parameter enters the equation with an exponent of one, while in the Solow model's equation for the steady-state stock of capital it is greater than one because:

In the Solow model, if capital is in the steady state, output:

Refer to the following figure when answering the following questions. Figure 5.3: Solow Diagram -In Figure 5.3, at K₁, the difference between and Is , and the difference between Y and Is .

Assume a production function is given by . If , the depreciation rate is , and the saving rate is The steady-state level of capital is about:

Assume a production function is given by . If And , the depreciation rate is , and the saving rate is , the steady-state level of capital is about:

According to the Solow model, in the steady state, countries with high saving rates should have a:

In the Solow model, it is assumed a(n) ________ fraction of capital depreciates each period.

Over the past 30 years, has averaged a saving rate of percent.

An increase in leads to a higher steady-state level of output, and an increase in leads to a lower steady-state level of output.

The key difference between the Solow model and the production model is that the:

An increase in leads to a higher steady-state capital stock, and a decline in leads to a lower steady-state capital stock.

Over the past 30 years, has averaged a saving rate of percent.

In the Solow model, the plays a role than it does in the standard production function model.

If the production function is given by , the saving rate, s, is 20 percent; the depreciation rate, , is 10 percent; and , the steady-state level of output is:

If a natural disaster destroys a large portion of a country's capital stock but the saving and depreciation rates are unchanged, the Solow model predicts that the economy will grow and eventually reach:

In the Solow model, if, in the absence of any shocks, the capital stock remains at K* forever, this rest point is called the:

Quiz 5: The Solow Growth Model

Assume a production function is given by . If And , and the steady-state capital stock is 8.0, the steady-state level of output is about:

An increase in ________ leads to a higher steady-state level of output per worker, and a decline in the ________ leads to a lower steady-state level of output per worker.

Refer to the following figure when answering the following questions. Figure 5.3: Solow Diagram -In Figure 5.3, at K2, capital accumulation is ________, the economy is ________, and consumption is ________.

The steady-state level of output per worker in the Solow model, with the production function , is given by:

In the standard production model's production function, the productivity parameter enters the equation with an exponent of one, while in the Solow model's equation for the steady-state stock of capital it is greater than one because:

In the Solow model, if capital is in the steady state, output:

Refer to the following figure when answering the following questions. Figure 5.3: Solow Diagram -In Figure 5.3, at K1, the difference between and Is ________, and the difference between Y and Is ________.

Assume a production function is given by . If , the depreciation rate is , and the saving rate is The steady-state level of capital is about:

Assume a production function is given by . If And , the depreciation rate is , and the saving rate is , the steady-state level of capital is about:

According to the Solow model, in the steady state, countries with high saving rates should have a:

In the Solow model, it is assumed a(n) ________ fraction of capital depreciates each period.

Over the past 30 years, ________ has averaged a saving rate of ________ percent.

An increase in ________ leads to a higher steady-state level of output, and an increase in ________ leads to a lower steady-state level of output.

The key difference between the Solow model and the production model is that the:

An increase in ________ leads to a higher steady-state capital stock, and a decline in ________ leads to a lower steady-state capital stock.

Over the past 30 years, ________ has averaged a saving rate of ________ percent.

In the Solow model, the ________ plays a ________ role than it does in the standard production function model.

If the production function is given by , the saving rate, s, is 20 percent; the depreciation rate, , is 10 percent; and , the steady-state level of output is:

If a natural disaster destroys a large portion of a country's capital stock but the saving and depreciation rates are unchanged, the Solow model predicts that the economy will grow and eventually reach:

In the Solow model, if, in the absence of any shocks, the capital stock remains at K* forever, this rest point is called the:

An increase in leads to a higher steady-state level of output per worker, and a decline in the leads to a lower steady-state level of output per worker.

Refer to the following figure when answering the following questions. Figure 5.3: Solow Diagram -In Figure 5.3, at K₂, capital accumulation is , the economy is , and consumption is .

Refer to the following figure when answering the following questions. Figure 5.3: Solow Diagram -In Figure 5.3, at K₁, the difference between and Is , and the difference between Y and Is .

Over the past 30 years, has averaged a saving rate of percent.

An increase in leads to a higher steady-state level of output, and an increase in leads to a lower steady-state level of output.

An increase in leads to a higher steady-state capital stock, and a decline in leads to a lower steady-state capital stock.

Over the past 30 years, has averaged a saving rate of percent.

In the Solow model, the plays a role than it does in the standard production function model.