Question

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) will cause

no change in the growth rate of Y/N

a reduction in K/N.

a reduction in Y/N.

all of the other answers are correct

a reduction in C/N.

15.

In an open economy under flexible exchange rates, an increase in wealth that causes an increase in consumption will cause which of the following?

A decrease in output.

An increase in net exports.

A decrease in taxes.

An appreciation of the domestic currency.

A decrease in the exchange rate.

16.

Suppose there are two countries that are identical with the following exception: the saving rate in country A is greater than the saving rate in country B. Given this information, according to Solow model without technological progress, we know that in the long run:

economic growth will be higher in A than in B.

output per capita will be greater in A than in B.

output per capita will be the same in the two countries.

output per capita will be greater in B than in A.

economic growth will be higher in B than in A

17. In Solow model where it is assumed that the state of technology does not change, what parameters and/or variables cause changes in steady state output per worker?

all of other answers are correct

savings rate

human capital per worker

production function parameters

depreciation rate

Answer #1

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 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...

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...

Q1
A permanent reduction in the saving rate will:
A. increase the growth of output per worker only
temporarily.
B. increase the steady state growth of output per worker.
C. decrease the growth of output per worker only
temporarily.
D. decrease the steady state growth of output per worker.
E. increase or decrease the steady state growth of output per
worker, depending on the level of saving to begin with.
Q2
Suppose the Phillips curve is represented by πt
-...

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...

As an economy adjusts to a decrease in the saving rate,
according to Solow model, we would expect output per worker
-none of the other answers is correct.
-to decrease at a permanently higher rate.
-to return to its original level.
-to increase at a permanently higher rate.
-to decrease at a constant rate and continue decreasing at that
rate in the steady state.

Assume that an economy is described by the Solow growth model as
below:
Production Function: y=50K^0.4 (LE)^0.6
Depreciation rate: S
Population growth rate: n
Technological growth rate:g
Savings rate: s
a. What is the per effective worker production function?
b. Show that the per effective worker production function
derived in part a above exhibits diminishing marginal returns in
capital per effective worker
C.Solve for the steady state output per effective worker as a
function of s,n,g, and S
d. A...

Please EXPLAIN why each answer was chosen
1. reduction in the saving rate will NOT affect which of the
following variables in the long run?
A. the amount of capital in the economy. B. output per worker.
C. capital per worker. D. the growth rate of output per worker. E.
none of the above
2. Which of the following will cause an increase in output per
effective worker?
A. an increase in the rate of depreciation. B. an increase in...

QUESTION 1
Suppose an economy can be characterized by a Cobb-Douglas
production function with capital share of 1/3, and A =
200. The investment rate is 0.12 (12%), the annual rate of growth
of the labor force is 0.02 (2%), and the annual depreciation rate
of capital is 0.04 (4%). According to the Solow growth model, this
economy's steady state capital/labor ratio (capital per worker,
k) is
4,000
8,000
10,000
12,000
None of the above.
QUESTION 2
The steady state...

An economy has the following Cobb-Douglas production
function:
Y = Ka(LE)1-a
The economy has a capital share of 1/3, a saving rate of 24
percent, a depreciation rate of 3 percent, a rate of population
growth of 2 percent, and a rate of labor-augmenting technological
change of 1 percent. It is in steady state.
a. Does the economy have more or less capital than at the Golden
Rule steady state? How do you know? To achieve the Golden Rule
steady...

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