Question

1. According to the new growth theory

		the rate of technological progress is determined by chance.
		the concept of a labor market is not necessary.
		the labor demand curve does not shift rightward over time.
		knowledge is not subject to diminishing returns.

2. If a rich country grows at a faster rate than a poor one, then

		the gap in their standard of living will close over time.
		the gap in their standard of living will widen over time.
		whether or not the living standards gap widens or closes over time depends on the absolute size of the relative growth rates.
		the difference in their living standards will not change over time.

3. If a rich country grows at a faster rate than a poor one, then

		the gap in their standard of living will widen over time.
		whether or not the living standards gap widens or closes over time depends on the absolute size of the relative growth rates.
		the gap in their standard of living will close over time.
		the difference in their living standards will not change over time.

4. Greater labor force participation for households at higher real wage rate is one reason that

		the demand for labor curve is upward sloping.
		the supply of labor curve is downward sloping.
		the supply of labor curve is upward sloping.
		the demand for labor curve is downward sloping.

5. The real wage rate will fall if the

		labor demand curve shifts rightward more than the labor supply curve shifts rightward.
		labor demand curve shifts rightward and the labor supply curve does not shift.
		labor supply curve shifts rightward and the labor demand curve does not shift.
		labor supply curve shifts leftward and the labor demand curve does not shift.

Answer 1

1. knowledge is not subject to diminishing returns.
(According to new growth theory, knowledge is necessary for growth so it is not finite or subject to diminishing returns.)

2. and 3. whether or not the living standards gap widens or closes over time depends on the absolute size of the relative growth rates.
(The gap in their standard of living will depend on the absolute size of the relative growth rates.)

4. the supply of labor curve is upward sloping.
(Supply of labor is upward sloping because of greater labor force participation at higher real wage rate.)

5. labor supply curve shifts leftward and the labor demand curve does not shift.
(In this case, real wage will increase.)