Question

1.

In Solow model without technological progress, a 5% increase in
capital stock *K*

will cause:

Group of answer choices

*Y* to increase by exactly 5%.

a decrease in *K*/*N*.

a decrease in *Y*/*N*.

no change in *Y*/*N*.

*Y* to increase by less than 5%.

2.

Assume that an economy experiences both positive population growth and technological progress. Once the economy has achieved balanced growth, according to Solow model with technological progress, we know that the output per effective worker ratio (Y/NA) is

Group of answer choices

none of the other answers is correct.

growing at a rate of g_{A} + g_{N.}

growing at a rate of g_{A.}

growing at a rate of 0.

growing at a rate of g_{N.}

3.

When the economy is in a liquidity trap with a zero interest rate:

Group of answer choices

the central bank is unable to raise interest rates in response to falling prices.

the central bank abandons monetary policy altogether.

the central bank is unable to raise interest rates in response to rising prices.

the central bank is unable to lower interest rates in response to rising prices.

the central bank is unable to lower interest rates in response to falling prices.

4.

Use the information provided below to answer the following
question.

δ = 0.11

g_{A}= 0.03

g_{N} = 0.02

Refer to the information above. According to Solow model, which of
the following represents the steady-state growth rate of standard
of living in this economy?

Group of answer choices

3%.

12%.

2%.

18%.

5%.

5.

Based on our understanding of Solow model, which of the following will cause a permanent increase in growth?

Group of answer choices

none of the other answers is correct

an increase in the saving rate

an increase in education spending

a decrease in the depreciation rate

an increase in capital accumulation

6.

Suppose nominal GDP in 2011 increased by 5% (over its previous level in 2010). Given this information we know with certainty that

Group of answer choices

real GDP increased during 2010

the price level increased during 2010

either the price level or real GDP increased during 2010

more information is needed to answer this question.

both the price level and the real GDP increased during 2010

Answer #1

1) option 5)

Y will rise by less than 5%

2) option 4)

Per capita effective output grows at rate of zero, at steady state

3) option 5)

In case of liquidity trap, monetray policy becomes ineffective in reducing the price level to stimulate Economy

So, interest rates can't be lowered in case of falling prices

4) option 1) 3%

5) option 2)

Increase in education spending leads to permanent rise in y

6) option 3)

As nominal GDP = real GDP* Price

So either Real GDP or price could rise

In the Solow growth model of an economy with population growth
and technological progress, the steady-state growth rate in output
per worker is equal to:
(a) zero
(b) the rate of technological progress g.
(c) the growth rate of population n plus the rate of technological
progress g. (d) the rate of technological progress g minus the
growth rate of population n.
In the Solow growth model of an economy with population growth
and technological progress, the steady-state growth rate...

1) In the steady state of the Solow model with technological
progress, which of the following variables is not
constant?
(a) capital per effective worker
(b) the real rental price of capital
(c) the real wage
(d) the capital-output ratio
2) The U.S. economy has more/less capital than at
the Golden Rule steady state, suggesting that it may be desirable
to
increase/decrease the rate of saving.
3) The purpose of exogenous/endogenous
growth theory is to explain technological progress. Some of these...

Answer the following questions using the basic Solow growth
model, without population growth or technological progress.
(a) Draw a diagram with per worker output, y, consumption, c,
saving, s and investment, i, on the vertical axis and capital per
worker, k, on the horizontal condition. On this diagram, clearly
indicate steady-state values for c, i, and y. Briefly outline the
condition that holds in the steady- state (i.e. what is the
relationship between investment and the depreciation of
capital?).
(b)...

1. For the following, assuming that there is no population
growth or technological progress.
a) What is the equation that defines the steady-state level of
capital per worker?
b) How would you determine the steady state level or output per
worker (i.e., real GDP per capita) from (a).
c) Explain, in words, how an economy that starts with too much
capita per worker gets to its steady state.
2. Many demographers predict that the United States will have
zero annual...

1.)
In the Solow model with constant technological knowledge (A), when
the economy reaches a steady state:
A) catching-up growth occurs.
B) cutting-edge growth occurs.
C) growth stops.
D) both catching-up and cutting-edge growth occur.
2.) Capital is output that is:
A) invested in the stock market.
B) used to produce other goods.
C) invested in the bond market.
D.) consumed.
3.) Better ideas or technological knowledge causes:
A) the production function to shift upward.
B) the investment function to...

13. Suppose there is an increase in government spending in a
closed economy. In medium-run such a fiscal policy will cause:
none of the other answers is correct.
ambiguous effects on the neutral real interest rate
the nominal wage to rise
no change in the neutral real interest rate
the neutral real interest rate to rise
14. Suppose the economy is initially in the steady state.
According to Solow model without technological progress, an
increase in the depreciation rate (δ)...

(a) [20 marks] Define and explain the term “technological
progress”. Illustrate your definition as appropriate. How can
technological progress be measured? Illustrate your answer with two
examples.
(b) [20 marks in total] Explain how economic growth can be related
to technological progress. Which theoretical growth model best
applies to each of the facts outlined in points (i) – (iv), below?
Explain. i. [5 marks] Real wages were at the same level in England
in the year 1280 as in the...

In the Phillips curve equation, which of the following will NOT
cause an increase in the current inflation rate?
A a reduction in the unemployment rate
B an increase in the markup of prices over wages
C a decrease in the strength of the effect of unemployment on
the wage, α.
D an increase in the expected inflation rate
E a decrease in the catch-all variable z
22.Suppose there are two countries that are identical with the
following exception. The...

(Hybrid Harrod-Domar-Solow Model)
An economy has a population of 2 million, the current capital
stock of $6 billion, and a current GDP of $3 billion. The savings
rate is a constant 8% and depreciation rate is 3%. The population
growth rate is 0. Its production function is given by
Yt=AtKt, where Yt
denotes GDP, Kt denotes capital stock and At
denotes productivity of capital in year t. Capital productivity
will remain at its current level until the economy achieves a...

1. A higher savings rate that leads to an increase in the
capital stock
leads to increases in labor productivity.
is associated with a decrease in the rate of growth of the
population.
immediately decreases investment.
leads to higher interest rates.
2. Factors that influence labor productivity include
________.
physical capital, human capital, and technology
the inflation rate, the real wage rate, and the exchange
rate
physical capital, the real wage rate, and technology
the labor demand curve
3. The...

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