Question 1

When capital is accumulated at the rate that maximizes consumption per worker in the steady state, the marginal product of capital is equal to the

Accepted Answer

In the Solow growth model, the condition for the steady state where consumption per worker is maximized (the Golden Rule level of capital) is when the marginal product of capital (MPK) equals the sum of the population growth rate and the depreciation rate. This ensures that the amount of capital per worker is optimal for maximizing consumption.

Question 2

The Solow model suggests that, to improve a country's standard of living in the long run

Accepted Answer

The Solow model emphasizes the importance of technological progress as the main driver of long-term economic growth. Improved technology leads to an increase in productivity and output, which in turn raises the standard of living. Therefore, choice A, which suggests that production technology must become more efficient, is the best choice. Choices B, C, D, and E are all incorrect as they do not directly address the role of technology in the Solow model.

Question 3

In the Malthusian model, when z increases, initially consumption

Accepted Answer

In the Malthusian model, when z increases, population growth increases and leads to a temporary increase in consumption. However, as the population continues to grow, food production eventually becomes insufficient to feed everyone and consumption falls back to its steady state level. This is because the Malthusian model assumes that food production can only increase arithmetically, while population growth can increase exponentially, leading to a point where resources become scarce and consumption must fall.

Question 4

In the United States, the skill premium has contributed to

Accepted Answer

The skill premium, which is the wage differential between skilled and unskilled workers, has contributed to an increase in income inequality since the 1980s. Skilled workers have seen their wages increase at a much faster rate than unskilled workers, leading to a widening gap between the two groups. This has been a major factor in the rising Gini coefficient, which measures income inequality.

Question 5

In Canada during the 1870-2017 period, the average annual growth in per capita income

Accepted Answer

According to historical data, the average annual growth in per capita income in Canada remained steady at about 2% during the period of 1870-2017.

Question 6

Recent evidence suggests that the level of output per worker is

Accepted Answer

The answer of Recent evidence suggests that the level of...

Question 7

Long-run growth in the standard of living in the Solow growth model is explained by

Accepted Answer

The Solow growth model suggests that long-run growth in the standard of living is explained by technological change. While growth in the capital stock initially contributes to economic growth, eventually diminishing returns set in and the rate of growth slows. Technological progress, on the other hand, can continue to drive economic growth even as the capital stock reaches a steady state. Consumption spending, government sector changes, and growth in government do not play a significant role in the Solow growth model.

Question 8

In the steady state of Solow's exogenous growth model, an increase in the population growth rate

Accepted Answer

In the Solow model, an increase in the population growth rate leads to a decrease in output per worker and a decrease in capital per worker because the same amount of capital is spread more thinly across a larger population, reducing the capital-to-labor ratio and thus both the output per worker and capital per worker.

Question 9

In the Malthusian model, the steady state effects of an increase in z are to

Accepted Answer

According to the Malthusian model, an increase in z (which represents technological progress or an increase in land productivity) will lead to an increase in population due to the availability of more food and resources. However, the quantity of land per worker will decrease as the population grows, leading to diminishing returns to labor and ultimately leaving consumption per worker unchanged in the steady state. Therefore, the best choice is E.

Question 10

In the steady state of Solow's exogenous growth model, an increase in the savings rate

Accepted Answer

In the steady state of Solow's exogenous growth model, an increase in the savings rate leads to an increase in investment and as a result, an increase in the capital stock per worker. This increase in capital stock leads to an increase in output per worker. Therefore, an increase in savings rate increases both output per worker and capital stock per worker.

Question 11

Growth accounting attributes growth in real GDP to

Accepted Answer

Growth accounting attributes growth in real GDP to growth in the capital and labour inputs to production, and growth in total factor productivity. It does not explicitly consider international trade, consumption expenditure, investment expenditure, government expenditure, or government programs that increase research and development.

Question 12

For the production function, $Y = z K 0.36 N 0.64$, if measured output is $\hat { Y }$, measured capital input is $\hat { K }$, and measured labour input is $\hat { N }$, then the Solow residual would be equal to

Accepted Answer

The Solow residual is equal to the total factor productivity (TFP), which is the part of output that cannot be explained by the inputs of capital and labor. We can calculate the TFP as the ratio of measured output to the predicted output based on the inputs of capital and labor: $\frac{\hat{Y}}{z\hat{K}^{0.36}\hat{N}^{0.64}}$. Rearranging this equation, we get the formula for the Solow residual: $\frac{z\hat{K}^{0.36}\hat{N}^{0.64}}{\hat{Y}}$. Thus, the answer is C.

Question 13

The golden rule savings rate is achieved when capital is accumulated at a rate that

Accepted Answer

The golden rule savings rate is the rate of savings which maximizes consumption per worker in the steady state. This concept is important in the context of the Solow growth model, where it is used to determine the optimal level of savings that maximizes long-term consumption per capita, balancing investment in new capital and the dilution of capital due to population growth.

Question 14

The idea that an improvement in technology causes an increase in population but causes no increase in the average standard of living is attributed to

Accepted Answer

This idea is known as the Malthusian Trap, named after Thomas Malthus, an English economist who believed that population growth would outstrip food production, leading to famine and a decline in living standards. Malthus believed that improvements in technology would only lead to a temporary increase in living standards, as population growth would eventually catch up and lead to even greater strain on resources.

Question 15

Countries in which a relatively small fraction of output is channeled into investment tend to have a

Accepted Answer

When a relatively small fraction of output is channeled into investment, the country tends to have a low level of capital stock, which leads to a lower level of productivity and ultimately a lower standard of living.

Question 16

Malthus was too pessimistic because he did not foresee the effects of

Accepted Answer

Malthus did not anticipate the technological advancements and increases in capital stock that would significantly boost production and productivity, countering his predictions of resource scarcity.

Question 17

The Lorenz curve illustrates

Accepted Answer

The Lorenz curve is a graphical representation of the distribution of income in a country. It shows the cumulative percentage of the total income that is earned by each fraction of the population. The curve is a way to measure income inequality, with a perfectly equal distribution of income represented by a diagonal line and a completely unequal distribution represented by a curve that hugs the horizontal axis.

Question 18

Growth accounting, popularized by Robert Solow, attempts to attribute a change in aggregate output

Accepted Answer

The growth accounting method separates the sources of economic growth between changes in total factor productivity (TFP) and changes in the supplies of factors of production, such as labor and capital. This method does not factor in government policy as a separate category. Thus, option A is the correct choice.

Question 19

In Solow's exogenous growth model, the principal obstacle to continuous growth in output per capita is due to

Accepted Answer

In Solow's exogenous growth model, the principal obstacle to continuous growth in output per capita is the declining marginal product of capital. As more capital is accumulated, the additional output produced by an extra unit of capital decreases, leading to a convergence to a steady-state level of output per capita where growth can no longer be sustained by capital accumulation alone.

Question 20

The Malthusian model performs poorly in explaining economic growth after the

Accepted Answer

The Malthusian model argues that population growth will eventually outstrip food production, leading to a collapse in living standards. However, this model fails to explain the sustained economic growth that occurred after the Industrial Revolution in the 18th and 19th centuries. The other options listed are also after the Industrial Revolution and therefore not relevant to the question.

Quiz 7: Economic Growth: Malthus and Solow

When capital is accumulated at the rate that maximizes consumption per worker in the steady state, the marginal product of capital is equal to the

The Solow model suggests that, to improve a country's standard of living in the long run

In the Malthusian model, when z increases, initially consumption

In the United States, the skill premium has contributed to

In Canada during the 1870-2017 period, the average annual growth in per capita income

Recent evidence suggests that the level of output per worker is

Long-run growth in the standard of living in the Solow growth model is explained by

In the steady state of Solow's exogenous growth model, an increase in the population growth rate

In the Malthusian model, the steady state effects of an increase in z are to

In the steady state of Solow's exogenous growth model, an increase in the savings rate

Growth accounting attributes growth in real GDP to

For the production function, $Y = z K 0.36 N 0.64$ , if measured output is $\hat { Y }$ , measured capital input is $\hat { K }$ , and measured labour input is $\hat { N }$ , then the Solow residual would be equal to

The golden rule savings rate is achieved when capital is accumulated at a rate that

The idea that an improvement in technology causes an increase in population but causes no increase in the average standard of living is attributed to

Countries in which a relatively small fraction of output is channeled into investment tend to have a

Malthus was too pessimistic because he did not foresee the effects of

The Lorenz curve illustrates

Growth accounting, popularized by Robert Solow, attempts to attribute a change in aggregate output

In Solow's exogenous growth model, the principal obstacle to continuous growth in output per capita is due to

The Malthusian model performs poorly in explaining economic growth after the

Quiz 7: Economic Growth: Malthus and Solow

When capital is accumulated at the rate that maximizes consumption per worker in the steady state, the marginal product of capital is equal to the

The Solow model suggests that, to improve a country's standard of living in the long run

In the Malthusian model, when z increases, initially consumption

In the United States, the skill premium has contributed to

In Canada during the 1870-2017 period, the average annual growth in per capita income

Recent evidence suggests that the level of output per worker is

Long-run growth in the standard of living in the Solow growth model is explained by

In the steady state of Solow's exogenous growth model, an increase in the population growth rate

In the Malthusian model, the steady state effects of an increase in z are to

In the steady state of Solow's exogenous growth model, an increase in the savings rate

Growth accounting attributes growth in real GDP to

For the production function, Y=zK0.36N0.64Y = z K 0.36 N 0.64Y=zK0.36N0.64 , if measured output is Y^\hat { Y }Y^ , measured capital input is K^\hat { K }K^ , and measured labour input is N^\hat { N }N^ , then the Solow residual would be equal to

The golden rule savings rate is achieved when capital is accumulated at a rate that

The idea that an improvement in technology causes an increase in population but causes no increase in the average standard of living is attributed to

Countries in which a relatively small fraction of output is channeled into investment tend to have a

Malthus was too pessimistic because he did not foresee the effects of

The Lorenz curve illustrates

Growth accounting, popularized by Robert Solow, attempts to attribute a change in aggregate output

In Solow's exogenous growth model, the principal obstacle to continuous growth in output per capita is due to

The Malthusian model performs poorly in explaining economic growth after the

For the production function, $Y = z K 0.36 N 0.64$ , if measured output is $\hat { Y }$ , measured capital input is $\hat { K }$ , and measured labour input is $\hat { N }$ , then the Solow residual would be equal to