Question

1) Which of the following variables corrects for the effects of population but no inflation? a)...

1) Which of the following variables corrects for the effects of population but no inflation?

a) Real GDP

b) Real GDP per capita

c) Nominal GDP

d) Nominal GDP per capita

2) Which of the following is TRUE?

a) There was a lot of variation in real GDP per capita across countries in the year 1000

b) There was a lot of variation in real GDP per capita across countries in the year 2016

c) Both a and b

d) Neither a nor b

3) In the Solow growth model, why do countries grow faster when their capital stock is low?

a) Countries invest a larger fraction of output when the capital stock is low

b) When the capital stock is low, it is used less intensively, causing less depreciation

c) A country's economic institutions are stronger when it has a lower capital stock

d) The marginal product of capital is higher when the capital stock is low, increasing the return on investment.

4) Which of the following countries would the Solow growth predict to have the highest growth rate?

a) A poor country with bad economic institutions

b) A poor country with good economic institutions

c) A rich country with bad economic institutions

d) A rich country with good economic institutions

5) In the Solow growth model, what can explain long-run economic growth, such as that experienced in the United States?

a) Increases in technical knowledge

b) Increases in physical capital

c) Increases in human capital

d) Increases in investment rate

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Homework Answers

Answer #1

1. Nominal GDP per capita corrects for the effects of population but no inflation.The formula for calculating nominal GDP per capita is nominal GDP divided by the current population.

2. The answer is D. Neither there was a lot of variation in real GDP per capita across countries in the year 1000 nor in the year 2016.

3. In the Solow growth model, the countries grow faster when their capital stock is low. When the country's capital stock is low, it is used less intensively, causing less depreciation. The greater the capital stock, the greater the depreciation will be.

4. Poor countries with good economic institutions were predicted to have the highest growth rate according to solow growth model.

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