Question

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
models do so by questioning the Solow model's assumption of
**increasing/diminishing/constant** returns to
capital.

4) Models of Schumpeterian *creative destruction* aim to
explain:

(a) how old capital is best retired and replaced with new capital.

(b) why seeming technological progress can reduce average incomes.

(c) how entrepreneurs with new products displace incumbent producers.

(d) why economies grow quickly after suffering the ravages of war.

Answer #1

Question 1) option c)

In steady state , per capita output is constant ., Hence real rental price , which is MPK , also constant.

Since k is constabt, hence y is constant, thus capital to output ratio is constant.

Real wage which is MPL , is not constant ,bcoz it depends on Labor which is not constantvin steady state

Q2)) less & increase

As lower capital level, so increase saving rate to increase investment

Q3) endogenous & diminishing.

Solow model assumes diminishing returns to capital.

Q4) option c)

Creative destruction theory imply growth via displacements from technical progress.

It says that introduction of new products is good for Consumers, but may be bad for incumbent producers, who may be forced to leave the market.

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.
A) is above
B) is below
C) is equal to
D) will move to

1. In the Solow model without exogenous technological change,
per capita income will grow in the long term as
long as the country has an initial level of capital below the
steady state level of capital (k o < k ⋅)
TRUE OR FALSE?
2. In the Solow model without exogenous technological change, per
capita income will grow in the short term as long
as the country has an initial level of capital below the steady
state level of capital...

Which of the following statements about the Solow growth model
is FALSE?
A. The higher steady-state capital per capita, the higher the
output/income per capita.
B. The higher output/income per capita, the higher consumption
per capita.
C. Golden-rule capital per capita must be a steady state, but
not all steady-state is also a golden-rule.
D. Golden-rule capital per capita can be achieved by setting
the saving rate at the appropriate level.

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...

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.)
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...

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