Question 1

In the Solow growth model, if two countries are otherwise identical (with the same production function, same saving rate, same depreciation rate, and same rate of population growth) except that Country Large has a population of 1 billion workers and Country Small has a population of 10 million workers, then the steady-state level of output per worker will be _____ and the steady-state growth rate of output per worker will be _____.

Accepted Answer

According to the Solow growth model, the steady-state level of output per worker is determined by the production function, saving rate, depreciation rate, and population growth rate. Since the two countries are otherwise identical except for their population size, the production function, saving rate, and depreciation rate are the same in both countries. However, the population growth rate is also the same, which means that the capital stock per worker will be lower in Country Large than in Country Small. As a result, Country Large will have a lower steady-state level of output per worker compared to Country Small. However, since the two countries have the same production function and saving rate, Country Large will also have a higher steady-state growth rate of output per worker because it has a larger population and therefore more potential for technological progress and innovation.

Question 2

In the Solow growth model, the steady state level of output per worker would be higher if the _____ increased or the _____ decreased.

Accepted Answer

According to the Solow growth model, the steady state level of output per worker is given by the equation Y* = (s/(n+δ))^(1/α), where s is the saving rate, n is the population growth rate, δ is the depreciation rate, and α is the elasticity of output with respect to capital. Holding all else constant, an increase in the population growth rate (n) would lead to a lower steady state level of output per worker, while a decrease in the depreciation rate (δ) would lead to a higher steady state level of output per worker. Therefore, choice C is the best answer, as it correctly identifies these two factors and their effect on the steady state level of output per worker.

Question 3

An increase in the rate of population growth with no change in the saving rate:

Accepted Answer

An increase in the rate of population growth with no change in the saving rate does not affect the steady-state level of capital per worker. This is because the increase in population growth will lead to an increase in the demand for capital, which will be offset by the increase in the supply of capital due to the unchanged saving rate.

Question 4

In the Solow growth model with population growth, but no technological progress, the steady-state amount of investment can be thought of as a break-even amount of investment because the quantity of investment just equals the amount of:

Accepted Answer

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

Question 5

In the Solow growth model, with a given production function, depreciation rate, saving rate, and no technological change, lower rates of population growth produce:

Accepted Answer

In the Solow model, lower population growth reduces the growth rate of total output because the growth rate of total output is the sum of the growth rates of output per worker and population.

Question 6

The Solow model with population growth but no technological change cannot explain persistent growth in standards of living because:

Accepted Answer

The answer of The Solow model with population growth but...

Question 7

In the Solow growth model with population growth, but no technological change, a higher level of steady-state output per worker can be obtained by all of the following except:

Accepted Answer

A higher population growth rate means that the number of workers is increasing at a faster rate than the capital stock, which would lead to a lower level of steady-state output per worker. Therefore, increasing the population growth rate does not lead to a higher level of steady-state output per worker in the Solow growth model with population growth, but no technological change. Increasing the saving rate, decreasing the depreciation rate, and increasing the capital per worker ratio can all lead to a higher level of steady-state output per worker, as they increase the amount of capital available per worker.

Question 8

In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, total output grows at rate ______ and output per worker grows at rate ______.

Accepted Answer

The answer of In the Solow growth model of an...

Question 9

Assume two economies are identical in every way except that one has a higher population growth rate. According to the Solow growth model, in the steady state the country with the higher population growth rate will have a ______ level of output per person and ______ rate of growth of output per worker as/than the country with the lower population growth rate.

Accepted Answer

The Solow growth model predicts that in the steady state, the level of output per person will be lower in the country with the higher population growth rate, and the rate of growth of output per worker will be the same in both countries.

Question 10

With population growth at rate n but no technological change, the Golden Rule steady state may be achieved by equating the marginal product of capital (MPK):

Accepted Answer

According to the Solow growth model, in the absence of technological progress, the steady state can be achieved by equating the MPK to the rate of population growth (n). This ensures that the economy can maintain a constant level of capital per worker and output per worker, which is the definition of the Golden Rule steady state. Therefore, choice B is the correct answer.

Question 11

The formula for the steady-state ratio of capital to labor (k*) with population growth at rate n but no technological change, where s is the saving rate, is s:

Accepted Answer

The answer of The formula for the steady-state ratio of...

Question 12

In the Solow growth model of an economy with population growth but no technological change, the break-even level of investment must do all of the following except:

Accepted Answer

The answer of In the Solow growth model of an...

Question 13

Analysis of population growth around the world concludes that countries with high population growth tend to:

Accepted Answer

Countries with high population growth tend to have a lower level of income per worker than other parts of the world. This is because high population growth can put a strain on a country's resources and lead to competition for jobs, resulting in lower wages. Additionally, high population growth can make it difficult for a country to invest in education and infrastructure, which are important for economic growth.

Question 14

The Solow growth model with population growth but no technological progress can explain:

Accepted Answer

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

Question 15

In the Solow growth model with population growth, but no technological progress, if in the steady state the marginal product of capital equals 0.10, the depreciation rate equals 0.05, and the rate of population growth equals 0.03, then the capital per worker ratio ____ the Golden Rule level.

Accepted Answer

The Golden Rule level of capital per worker is where the economy has the highest consumption per worker level in the long run. In the Solow model, this occurs where the marginal product of capital equals the sum of the depreciation rate and the rate of population growth. Therefore, in this scenario, the Golden Rule level of capital per worker is 0.05 + 0.03 = 0.08. Since the marginal product of capital is 0.10, the economy has too much capital per worker in the steady state, which means it is above the Golden Rule level. Therefore, the answer is B, below. The economy will move towards the Golden Rule level, where consumption per worker will be maximized.

Question 16

In an economy with population growth at rate n, the change in capital stock per worker is given by the equation:

Accepted Answer

The correct equation for the change in capital stock per worker in an economy with population growth at rate n is given by the formula: $\Delta k = sf(k) - (\delta + n)k$, where $s$ is the savings rate, $f(k)$ is the production function per worker, $\delta$ is the depreciation rate, and $n$ is the population growth rate. This equation accounts for both the savings contributing to the increase in capital per worker and the combined effects of depreciation and population growth reducing it.

Question 17

In the Solow growth model, with a given production function, depreciation rate, saving rate, and no technological change, higher rates of population growth produce:

Accepted Answer

In the Solow growth model, higher rates of population growth lead to higher steady-state growth rates of total output because more workers contribute to more total production. However, it does not increase the steady-state growth rates of output per worker or the steady-state ratios of capital per worker, as these are determined by savings, depreciation, and technological progress rates, not by population growth.

Question 18

In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, then capital grows at rate ______ and output grows at rate ______.

Accepted Answer

In the Solow model, capital accumulation and population growth are the only drivers of economic growth. There is no technological progress assumed in the model. Therefore, if population grows at rate n and there is no technological progress, capital must also grow at rate n to maintain a constant per capita capital stock. However, since output per capita is determined by the production function, which assumes constant returns to scale, output per capita does not depend on the level of capital per capita, but rather on the efficiency of labor, which is assumed to be constant. Therefore, output per capita does not grow with population growth, and the growth rate of output is zero.

Question 19

In the Solow growth model with population growth but no technological progress, increases in capital have a positive impact on steady-state consumption per worker by _____, but have a negative impact on steady-state consumption per worker by _____.

Accepted Answer

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

Question 20

In the Solow growth model with population growth, but no technological change, which of the following will generate a higher steady-state growth rate of total output?

Accepted Answer

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

Quiz 8: Economic Growth I: Capital Accumulation and Population Growth

In the Solow growth model, the steady state level of output per worker would be higher if the _ increased or the _ decreased.

An increase in the rate of population growth with no change in the saving rate:

In the Solow growth model with population growth, but no technological progress, the steady-state amount of investment can be thought of as a break-even amount of investment because the quantity of investment just equals the amount of:

In the Solow growth model, with a given production function, depreciation rate, saving rate, and no technological change, lower rates of population growth produce:

The Solow model with population growth but no technological change cannot explain persistent growth in standards of living because:

In the Solow growth model with population growth, but no technological change, a higher level of steady-state output per worker can be obtained by all of the following except:

In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, total output grows at rate and output per worker grows at rate .

With population growth at rate n but no technological change, the Golden Rule steady state may be achieved by equating the marginal product of capital (MPK) :

The formula for the steady-state ratio of capital to labor (k*) with population growth at rate n but no technological change, where s is the saving rate, is s:

In the Solow growth model of an economy with population growth but no technological change, the break-even level of investment must do all of the following except:

Analysis of population growth around the world concludes that countries with high population growth tend to:

The Solow growth model with population growth but no technological progress can explain:

In the Solow growth model with population growth, but no technological progress, if in the steady state the marginal product of capital equals 0.10, the depreciation rate equals 0.05, and the rate of population growth equals 0.03, then the capital per worker ratio ____ the Golden Rule level.

In an economy with population growth at rate n, the change in capital stock per worker is given by the equation:

In the Solow growth model, with a given production function, depreciation rate, saving rate, and no technological change, higher rates of population growth produce:

In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, then capital grows at rate and output grows at rate .

In the Solow growth model with population growth but no technological progress, increases in capital have a positive impact on steady-state consumption per worker by _, but have a negative impact on steady-state consumption per worker by _.

In the Solow growth model with population growth, but no technological change, which of the following will generate a higher steady-state growth rate of total output?