Question 1

A company is considering building a new factory in one of two locations: the United States or Haiti. According to the Solow growth model, in which location would you expect the factory to yield a higher return? Explain.

Accepted Answer

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Question 2

Why does the Solow growth model predict that per capita gross domestic product GDP) levels across nations will equalize as nations approach the steady state?

Accepted Answer

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Question 3

Net investment can be positive, negative, or zero. Is this true or false? Explain why.

Accepted Answer

Net investment is equal to investment minus depreciation,so depending on whether investment or depreciation is larger,net investment can be positive or negative.

Question 4

Five college students share a house. As the number of computers owned by these students increases from one to five, what happens to the total number of hours they spend using a computer? As each computer is purchased, what happens to the marginal product, in terms of additional hours spent using the computer?

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Question 5

How does the aggregate production function measure the labor input used to produce goods and services? Explain.

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Question 6

The primary reason why countries around the world have not converged to the same level of income is that they
A) do not have access to the same resources.
B) do not have the same level of the capital stock.
C) have different numbers of people.
D) have different institutions.
E) do not have access to the same technology.

Accepted Answer

The differences in institutions such as governance, property rights, rule of law, and economic policy play a major role in determining a country's economic growth and development. Countries with better institutions tend to have more inclusive economic growth and better outcomes, while countries with weak or corrupt institutions struggle to sustain growth and development. The other factors listed can also play a role, but institutions are often the most important determinant of long-term economic success.

Question 7

What policy prescriptions follow from the Solow growth model?

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Question 8

Identify and describe each of the three factors of production as stated by the aggregate production function.

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Question 9

Juan has been doing some research on countries in Europe and Africa. Juan has observed that European countries are wealthier and that they have a higher percentage of workers who are college educated. Therefore, Juan concludes that sending more Africans to college will increase economic growth and wealth in Africa. Discuss the validity of this conclusion.

Accepted Answer

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Question 10

Consider a country in which most of the productive resources are collectively owned by the state. As this country moves toward a system of private property rights, we can expect economic growth to ______due to a(n)_____ the production function.
A) decrease; downward movement along
B) increase; upward movement along
C) decrease; downward shift of the
D) increase; upward shift of
E) decrease; movement up along

Accepted Answer

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Question 11

An island nation is in a steady state. A major hurricane passes over the nation and destroys 25 percent of the physical capital. In the years that follow the storm, one would expect investment to _______and net investment to_____ .
A) decrease; decrease
B) increase; increase
C) decrease; increase
D) increase; decrease
E) decrease; remain the same

Accepted Answer

In the aftermath of a disaster that destroys a significant portion of physical capital, investment is likely to increase as efforts are made to repair, rebuild, and possibly improve upon the damaged infrastructure and capital assets. Net investment, which is the difference between gross investment and depreciation, is also expected to increase as the rate of new investment outpaces the depreciation of the remaining, undamaged capital.

Question 12

Why are institutions so important for economic growth?

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Question 13

To what extent is it possible to achieve sustained economic growth by replicating what has already been done in terms of, for example, building more roads, factories, and office buildings)? Explain by referring to the concepts of diminishing returns and steady state.

Accepted Answer

The answer of To what extent is it possible to...

Question 14

If investment is larger than net investment, then the value of capital will increase. Is this true or false? Explain why.

Accepted Answer

If net investment is negative,then the value of capital will decrease.Investment is always larger than net investment unless depreciation is negative,which is not possible.

Question 15

According to the Solow growth model, when wealthy countries donate funds to poorer countries, this will _______investment, ______the capital stock, and ________economic growth.
A) increase; increase; increase
B) increase; increase; decrease
C) decrease; increase; increase
D) decrease; decrease; decrease
E) increase; decrease; decrease

Accepted Answer

According to the Solow growth model, when wealthy countries donate funds to poorer countries, this will increase investment in those countries, which in turn increases the capital stock, and as a result, increases economic growth. This is because the model suggests that higher investment leads to more capital accumulation, which is a key driver of economic growth.

Question 16

Explain the difference between investment and net investment.

Accepted Answer

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Question 17

Consider a marketing research company that offers consulting services to companies to help them increase sales. Would one expect to find that the marketing research company has diminishing marginal product of labor? How about diminishing marginal product of physical capital?

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Question 18

If country X has a higher growth rate of real investment than country Y, then it must have a higher level of real gross domestic product GDP) than country Y. Is this true or false? Explain why.

Accepted Answer

Country X could have a lower level of real GDP (for example,China as compared to the United States),but it has a higher growth rate of real GDP than country Y.

Question 19

Explain the difference between physical capital and human capital.

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Question 20

What does it mean to say capital is the result of economic growth rather than it being the cause of economic growth?

Accepted Answer

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Quiz 12: Growth Theory

A company is considering building a new factory in one of two locations: the United States or Haiti. According to the Solow growth model, in which location would you expect the factory to yield a higher return? Explain.

Why does the Solow growth model predict that per capita gross domestic product GDP) levels across nations will equalize as nations approach the steady state?

Net investment can be positive, negative, or zero. Is this true or false? Explain why.

How does the aggregate production function measure the labor input used to produce goods and services? Explain.

The primary reason why countries around the world have not converged to the same level of income is that they

What policy prescriptions follow from the Solow growth model?

Identify and describe each of the three factors of production as stated by the aggregate production function.

Consider a country in which most of the productive resources are collectively owned by the state. As this country moves toward a system of private property rights, we can expect economic growth to __due to a(n) _ the production function.

An island nation is in a steady state. A major hurricane passes over the nation and destroys 25 percent of the physical capital. In the years that follow the storm, one would expect investment to ___and net investment to_ .

Why are institutions so important for economic growth?

To what extent is it possible to achieve sustained economic growth by replicating what has already been done in terms of, for example, building more roads, factories, and office buildings)? Explain by referring to the concepts of diminishing returns and steady state.

If investment is larger than net investment, then the value of capital will increase. Is this true or false? Explain why.

According to the Solow growth model, when wealthy countries donate funds to poorer countries, this will _investment, the capital stock, and ____economic growth.

Explain the difference between investment and net investment.

Consider a marketing research company that offers consulting services to companies to help them increase sales. Would one expect to find that the marketing research company has diminishing marginal product of labor? How about diminishing marginal product of physical capital?

If country X has a higher growth rate of real investment than country Y, then it must have a higher level of real gross domestic product GDP) than country Y. Is this true or false? Explain why.

Explain the difference between physical capital and human capital.

What does it mean to say capital is the result of economic growth rather than it being the cause of economic growth?

Quiz 12: Growth Theory

A company is considering building a new factory in one of two locations: the United States or Haiti. According to the Solow growth model, in which location would you expect the factory to yield a higher return? Explain.

Why does the Solow growth model predict that per capita gross domestic product GDP) levels across nations will equalize as nations approach the steady state?

Net investment can be positive, negative, or zero. Is this true or false? Explain why.

How does the aggregate production function measure the labor input used to produce goods and services? Explain.

The primary reason why countries around the world have not converged to the same level of income is that they

What policy prescriptions follow from the Solow growth model?

Identify and describe each of the three factors of production as stated by the aggregate production function.

Consider a country in which most of the productive resources are collectively owned by the state. As this country moves toward a system of private property rights, we can expect economic growth to ______due to a(n) _____ the production function.

An island nation is in a steady state. A major hurricane passes over the nation and destroys 25 percent of the physical capital. In the years that follow the storm, one would expect investment to _______and net investment to_____ .

Why are institutions so important for economic growth?

To what extent is it possible to achieve sustained economic growth by replicating what has already been done in terms of, for example, building more roads, factories, and office buildings)? Explain by referring to the concepts of diminishing returns and steady state.

If investment is larger than net investment, then the value of capital will increase. Is this true or false? Explain why.

According to the Solow growth model, when wealthy countries donate funds to poorer countries, this will _______investment, ______the capital stock, and ________economic growth.

Explain the difference between investment and net investment.

Consider a marketing research company that offers consulting services to companies to help them increase sales. Would one expect to find that the marketing research company has diminishing marginal product of labor? How about diminishing marginal product of physical capital?

If country X has a higher growth rate of real investment than country Y, then it must have a higher level of real gross domestic product GDP) than country Y. Is this true or false? Explain why.

Explain the difference between physical capital and human capital.

What does it mean to say capital is the result of economic growth rather than it being the cause of economic growth?

Consider a country in which most of the productive resources are collectively owned by the state. As this country moves toward a system of private property rights, we can expect economic growth to __due to a(n) _ the production function.

An island nation is in a steady state. A major hurricane passes over the nation and destroys 25 percent of the physical capital. In the years that follow the storm, one would expect investment to ___and net investment to_ .

According to the Solow growth model, when wealthy countries donate funds to poorer countries, this will _investment, the capital stock, and ____economic growth.