Question 1

One plausible explanation of Canadian productivity slowdown starting in 1973 is measurement problems. This explanation would require which of the following measurement problems?

Accepted Answer

Changes in the quality of goods and services can lead to difficulties in accurately measuring productivity. This can be especially problematic in industries such as healthcare and education where the quality of output is difficult to measure. Overestimating production, goods, or services would not necessarily explain a productivity slowdown, and there is not enough information to determine if only goods or services were overestimated.

Question 2

Which feature of the data can the Solow growth model not replicate?

Accepted Answer

The Solow growth model is unable to replicate the widening income gap across countries, as it assumes that all countries have access to the same technology and can converge to the same steady-state level of income per worker. However, in reality, countries differ in their ability to adopt and develop technology, leading to diverging levels of income per worker.

Question 3

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

Accepted Answer

Growth accounting attempts to separate the changes in aggregate output into changes in productivity and changes in the supply of factors of production. This is represented by the equation: Y = A × F(L, K, H), where Y is output, A is total factor productivity, L is labor, K is capital, and H is human capital. Therefore, option C is the most accurate among the given choices.

Question 4

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

Accepted Answer

In Solow's model, an increase in the population growth rate raises the break-even investment needed to maintain capital per worker, leading to a decrease in both output per worker and capital per worker in the steady state.

Question 5

One plausible explanation of the Canadian productivity slowdown starting in 1973 is that it was a result of the increase in the relative price of energy.This explanation would require that,in light of higher energy costs,the

Accepted Answer

The increase in energy costs would mean that the existing capital stock is less productive than before, leading to an overestimation of its value.

Question 6

One plausible explanation of the Canadian productivity slowdown starting in 1973 is that is was the result of sectoral shifts.The relevant sectoral shift in Canada was a shift from

Accepted Answer

The sectoral shift in Canada during the 1970s was a shift from manufacturing to services, which is a plausible explanation for the productivity slowdown. As Canada transitioned from being a manufacturing-based economy to a service-based economy, there were likely challenges and adjustments that impacted productivity levels.

Question 7

One plausible explanation of the Canadian productivity slowdown starting in 1973 is that it was the result of the time needed to adapt to new technology.This explanation would require that

Accepted Answer

The explanation suggests that the productivity slowdown was due to the time needed for workers to adapt to new technology, which implies that their time at their jobs was diverted from production to learning the technology. Therefore, option D is the best choice.

Question 8

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

Accepted Answer

The golden rule savings rate is achieved when capital is accumulated at a rate that maximizes consumption per worker in the steady state. This means that the savings rate should be such that the economy reaches a steady state where consumption per worker is the highest possible. This ensures that the economy is able to sustain a high level of consumption in the long run without having to sacrifice investment in capital accumulation or population growth.

Question 9

Total factor productivity can be influenced by

Accepted Answer

Total factor productivity is affected by advancements in technology and new inventions. This can lead to improved efficiency and output without increasing the amount of inputs, thus improving productivity. The other choices are incorrect.

Question 10

In the steady state of Solow's exogenous growth model,an increase in total factor productivity

Accepted Answer

In the steady state of Solow's exogenous growth model, an increase in total factor productivity leads to an increase in output per worker and an increase in capital per worker. This is because total factor productivity represents the technological progress that enables workers to produce more output with the same amount of capital and labor input. As a result, firms will have more incentive to invest in capital, leading to an increase in the capital stock per worker in the long run. This, in turn, will further increase the output per worker.

Question 11

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

Accepted Answer

In Solow's model, an increase in the labor force growth rate leads to a higher dilution of capital, reducing capital per worker and thus decreasing output per worker in the steady state.

Question 12

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 steady state, the economy does not have growth in any variable, hence the capital stock, consumption per worker, output per worker, and investment per worker are all constant. Therefore, the marginal product of capital in the steady state is equal to the investment per worker and depreciation rate, which is (s+δ) where s is the savings rate and δ is the depreciation rate. On the other hand, since consumption per worker is maximized, the output per worker is also maximized, and this occurs when the marginal product of labour equals the marginal product of capital. Therefore, (s+δ) must be equal to the population growth rate, g, since the marginal product of labour in the steady state is equal to the per-capita growth rate of the population, n+g. Thus, (s+δ) = g. Therefore, the correct answer is B, population growth rate plus the depreciation rate.

Question 13

The Solow residual attempts to measure the amount of output not explained by

Accepted Answer

The Solow residual is used to measure the amount of output that cannot be explained by the direct contribution of labour and capital. It is sometimes referred to as total factor productivity, as it reflects the efficiency of an economy in using its inputs to produce output. It does not directly measure technological progress, economic projections, the amount of a nation's human capital or business cycles.

Question 14

Which of the following is a possible explanation for why growth in real GDP per-capita in Canada has not returned to its linear trend after the most recent recession?

Accepted Answer

A level adjustment to a lower growth path can occur when there are changes in long-term structural factors that affect the economy, such as demographics, technology, or productivity. These changes can result in a shift from a previous trend to a new, lower growth path.

Question 15

Growth in real GDP per-capita in Canada is roughly consistent with which of the following predictions of the Solow model?

Accepted Answer

The answer of Growth in real GDP per-capita in Canada...

Question 16

Recent evidence shows that there is a

Accepted Answer

Recent evidence suggests that there is a negative correlation between the population growth rate and income per worker across countries. This is because a higher population growth rate leads to more competition for jobs and resources, which can drive down wages and limit resource availability for investment in economic growth.

Question 17

For the production function,Y = ,if measured output is ,measured capital input is ,and measured labor input is ,then the Solow residual would be equal to

Accepted Answer

The answer of For the production function,Y = ,if measured...

Question 18

Growth in the Solow residual was slowest in the

Accepted Answer

The 1970s saw a slowdown in economic growth and productivity growth, caused in part by the oil crisis, inflation, and other economic challenges. This is reflected in the slower growth of the Solow residual during this decade.

Question 19

Growth in the Solow residual was fastest in the

Accepted Answer

The answer of Growth in the Solow residual was fastest...

Question 20

The Golden Rule Quantity of capital per worker maximizes the steady-state level of

Accepted Answer

The Golden Rule level of capital is the amount of capital that maximizes consumption per worker in the steady state.

Quiz 7: Economic Growth: Malthus and Solow