Macroeconomics, 3e (Williamson) Chapter 6 Economic Growth: Malthus and Solow

1) If changes in economic policy could cause the growth rate of real GDP to increase by 1% per year for 100 years, then GDP would be ________ % higher after 100 years than it would have been otherwise. A) 1.3

B)

2.0

C)

2.7

D)

3.8

Answer:

Question Status:

Previous Edition

2) In an exogenous growth model, growth is caused by A) capital accumulation. B) government policies. C) human capital accumulation. D) forces that are not explained by the model itself. Answer: D

Question Status: Previous Edition

3) 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 A) Adam Smith. B) Thomas Malthus. C) Robert Solow. D) Milton Friedman. Answer: B

Question Status:

Previous Edition

4) The Malthusian model performs poorly in explaining economic growth after the A) French Revolution. B) American Revolution. C) Industrial Revolution. D) Bio-technology Revolution. Answer: C

Question Status:

Previous Edition

5) The Solow model emphasizes the role of which of the following factors of production? A) land B) labor C) capital D) natural resources Answer: C

Question Status:

Previous Edition

6) Before the Industrial Revolution, standards of living differed A) greatly over time and across countries. B) little over time, but differed greatly across countries. C) greatly over time, but differed little across countries. D) little over time and across countries. Answer: D

Question Status:

Previous Edition

7) Recent evidence suggests that output per worker is A) positively related to both the rate of investment and to the rate of population growth. B) positively related to the rate of investment and negatively related to the rate of population growth. C) negatively related to the rate of investment and positively related to the rate of population growth. D) negatively related to both the rate of investment and to the rate of population growth. Answer: B

Question Status:

Previous Edition

8) There is evidence that income per worker is converging in

A) the richest countries and the poorest countries. B) the richest countries, but not the poorest countries. C) the poorest countries, but not the richest countries. D) neither the richest nor the poorest countries. Answer: B

Question Status:

Previous Edition

9) Conditional convergence means that A) the distance between poor and rich countries increases. B) the distance between poor and rich countries stays the same. C) the distance between poor and rich countries decreases. D) there is no systematic pattern in how poor and rich countries grow. Answer: C

Question Status:

New

10) For conditional convergence to hold, it is required that A) poor countries grow. B)

poor countries grow faster and faster. C) poor countries grow faster than rich countries. D) poor countries become richer than currently rich countries. Answer: C

Question Status:

New

11) Conditional convergence means that A) poorer countries have higher growth rates. B) poorer countries have lower growth rates. C) poorer countries have very diverse growth rates. D) poorer countries have uniform growth rates. Answer: A

Question Status:

New

12) In the Malthusian model, the population growth rate is A) exogenous. B) positively related to consumption per worker. C) negatively related to consumption per worker. D) assumed to be constant. Answer: B

Question Status:

Previous Edition

13) The Malthusian model emphasizes fixity in which of the following factors of production? A) labor

B)

land

C)

energy

D)

none of the above Answer: B

Question Status:

Previous Edition

14) In the Malthusian model, an improvement in the technology of growing food is likely to A)

increase the equilibrium size of the population and increase the equilibrium level of consumption per worker. B) increase the equilibrium size of the population and decrease the equilibrium level of consumption per worker. C) increase the equilibrium size of the population and have no effect on the equilibrium level of consumption per worker. D) have no effect on the equilibrium size of the population and increase the equilibrium level of consumption per worker. Answer: C

Question Status:

Previous Edition

15) The Malthusian model predicts that A) population will keep increasing. B) the standard of living will keep increasing. C) health improvements increase the standard of living. D) population control improves the standard of living. Answer: D

Question Status:

New

16) In a Malthusian world, why is misery recurrent? A) The marginal returns of capital are decreasing.

B) Fertility is endogenous. C) Output is increasing in labor. D) Mortality depends on the standard of living. Answer: D

Question Status:

New

17) In a Malthusian world, what would improve the standard of living permanently? A) a war B) a new medical drug C) birth control D) democracy Answer: C

Question Status:

New

18) In a Malthusian world, what would improve the standard of living temporarily? A) a war B) a new virus C) birth control D) democracy Answer: A

Question Status:

New

19) In the Malthusian model, state-mandated population control policies are likely to A) decrease the equilibrium size of the population and increase the equilibrium level of consumption per worker. B) decrease the equilibrium size of the population and have no effect on the equilibrium level of consumption per worker. C) have no effect on the equilibrium size of the population and increase the equilibrium level of consumption per worker. D) have no effect on either the equilibrium size of the population or the equilibrium level of consumption per worker. Answer: A

Question Status:

Previous Edition

20)

In the Malthusian model, improvements in health care lead to A) higher population and higher per-capita production. B) higher population and lower per-capita production. C) lower population and higher per-capita production. D) lower population and lower per-capita production. Answer: B

Question Status:

New

21) If an epidemic hits a Malthusian economy, the immediate consequence is A) an increase in the standard of living. B) a reduction in the standard of living. C) no change in the standard of living. D) dependent on the population growth rate. Answer: A

Question Status:

New

22) If an epidemic hits a Malthusian economy, the long-term consequence is A) an increase in the standard of living.

B) a reduction in the standard of living. C) no change in the standard of living. D) dependent on the population growth rate. Answer: C

Question Status:

New

23) In a Malthusian world, what events would improve temporarily the standard of living, as measured by output per capita? A) a peace keeping mission B) an increase in violent crime C) a new mutation of germs D) a new sewer system Answer: B

Question Status:

New

24) In a Malthusian world, what events would improve permanently the standard of living, as measured by output per capita? A) a peace keeping mission B) an increase in violent crime C) a new mutation of germs D) a new sewer system Answer: C

Question Status:

New

25) In more modern times as opposed to the times of Malthus, higher standards of living appear to A) decrease death rates and increase birth rates. B) decrease death rates and also decrease birth rates. C) decrease death rates and have no effect on birth rates. D) have had effects on neither death rates nor birth rates. Answer: B

Question Status:

Previous Edition

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

A) ever increasing amounts of land for cultivation. B) increases in the capital stock and the effects of such increases on production. C) improved nutrition and health care. D) improved family planning practices. Answer: B

Question Status:

Previous Edition

27) The Solow residual attempts to measure the amount of output not explained by A) technological progress. B) the direct contribution of labor and capital. C) economic projections. D) the amount of a nation's human capital. Answer: B

Question Status:

Previous Edition

28) Growth accounting, popularized by Robert Solow, attempts to attribute a change in aggregate output A) to its most important single cause.

B) separately between changes in government policy and changes in total factor productivity. C) separately between changes in total factor productivity and changes in the supplies of factors of production. D) separately between changes in the supplies of factors of production and changes in government policy. Answer: C

Question Status:

Previous Edition

29) measured capital For the production function, Y = zK0.36N0.64, if measured output is, Y input is K , and measured labor input is N , then the Solow residual would be equal to A) 0.36 N 0.64 K . Y

B)

0.36 K . Y 0.64 N C) 0.64 N . Y 0.36 K D) Y

. 0.36 N 0.64 K Answer: D

Question Status:

Previous Edition

30) All of the following increase total factor productivity except A) new inventions. B) more capital. C) new management techniques. D) favorable changes in government regulations. Answer: B

Question Status:

Previous Edition

31) Which of the following increases total factor productivity? A) investment in machinery B) a harsh winter C) better access to credit D) new production procedures Answer: D

Question Status:

New

32) Growth in the Solow residual was slowest in the A) 1950s.

B)

1960s.

C)

1970s.

D)

1980s.

Answer:

Question Status:

Previous Edition

33) Growth in the Solow residual was fastest in the

A) 1950s.

B)

1960s.

C)

1970s.

D)

1980s.

Answer:

Question Status:

Previous Edition

34) One plausible explanation of the U.S. productivity slowdown starting in 1973 is that it is an artifact of mismeasurement. This explanation would require that production of A) goods is underestimated. B) goods is overestimated. C) services is underestimated. D) services is overestimated. Answer: C

Question Status:

Previous Edition

35) One plausible explanation of the U.S. 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 A) capital stock is overestimated. B) capital stock is underestimated. C) labor force is overestimated. D) labor force is underestimated. Answer: A

Question Status:

Previous Edition

36) One plausible explanation of the U.S. 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 A) workers withdraw from the labor force to learn about the new technology. B) a large number of new entrants be attracted to the labor force. C) managers be reluctant to adopt changes. D) workers time at their jobs be diverted from production to learning the technology. Answer: D

Question Status:

Previous Edition

37) Percentage deviations from trend in the Solow residual are A) unrelated to the business cycle. B) procyclical and smaller than percentage deviations from trend in GDP. C) procyclical and have about equal magnitude as percentage deviations from trend in GDP. D) procyclical and larger than percentage deviations from trend in GDP. Answer: C

Question Status:

Previous Edition

38) The biggest contribution to real U.S. GDP growth in the 1970s was due to growth in A)

total factor productivity. B) the capital stock. C) the labor force. D) both the capital stock and the labor force. Answer: D

Question Status:

Previous Edition

39) The biggest contribution to real GDP growth in the "East Asian Tigers" during the period 1966-1991 was due to growth in A) total factor productivity. B) the capital stock. C) the labor force. D) international trade. Answer: B

Question Status:

Previous Edition

40) The per-worker production function relates output per worker A) to capital per worker. B) to the participation rate. C) to production per worker. D) in different countries. Answer: A

Question Status:

Previous Edition

41) We can express the per-worker production function as a function of only per-worker capital thanks to

A) the decreasing marginal return of capital. B) the decreasing marginal return of labor. C) the constant returns to scale. D) the impatience of households. Answer: C

Question Status:

New

42) The slope of the output per worker function is equal to the A) marginal product of capital. B) marginal product of labor. C) savings rate. D) growth rate of the population. Answer: A

Question Status:

Previous Edition

43) In Solow's model of economic growth, suppose that s represents the savings rate, z represents total factor productivity, k represents the level of capital per worker, and f(k) represents the per-worker production function. Also suppose that n represents the population growth rate and d represents the depreciation rate of capital. The equilibrium level of capital per worker, k*, will satisfy the equation A)

szf(k*) = (n + d)k*. B)

= (n + d)f(k*). C)

nf(k*) =

sk * . (s + d ) D)

f(k*) =

s k*. (n + d ) Answer:

Question Status:

Previous Edition

44) The saving rate has the following characteristic in Solow's exogenous growth model A) it increases with output. B) it first decreases, then increases with output. C) it first increases, then decreases with output. D) it is constant. Answer: D

Question Status:

New

45) In Solow's exogenous growth model, the principal obstacle to continuous growth in output per capita is due to A) the declining marginal product of labor. B) the declining marginal product of capital. C) limits in the ability of government policymakers. D) too little savings. Answer: B

Question Status:

Previous Edition

46) In Solow's exogenous growth model, the economy reaches a stable steady state because A)

the marginal return of capital is decreasing. B) capital is growing at a constant rate. C) the substitution effect is stronger than the income effect. D) conditional convergence holds. Answer: A

Question Status:

New

47) In the steady state of Solow's exogenous growth model, an increase in the savings rate A) increases output per worker and increases capital per worker. B) increases output per worker and decreases capital per worker. C) decreases output per worker and increases capital per worker. D) decreases output per worker and decreases capital per worker. Answer: A

Question Status:

Previous Edition

48) Which of the following is not a feature of the steady state in Solow's exogenous growth model? A) The capital/output ratio is steady. B)

Capital grows continuously. C) Consumption per worker is steady. D) Total saving is steady. Answer: D

Question Status:

New

49) If the population growth rate increases by the same percentage points as the depreciation rate, what happens to the steady-state, per-worker output in Solow's exogenous growth model? A) It increases. B) It decreases. C) It does not change. D) It cannot exist anymore. Answer: B

Question Status:

New

50) If the population growth rate increases by the same percentage points as the depreciation rate decreases, what happens to the steady-state, per-worker consumption in Solow's exogenous growth model? A) It increases. B) It decreases. C) It does not change. D) It cannot exist anymore. Answer: C

Question Status:

New

51) In Solow's exogenous growth model, the steady-state growth rate of capital can be increased by A) higher population growth. B) higher depreciation rate. C) higher saving rate. D) higher interest rate. Answer: A

Question Status:

New

52) The Golden Rule of capital accumulation maximizes the steady-state level of

A) output per worker. B) capital per worker. C) consumption per worker. D) investment per worker. Answer: C

Question Status:

Previous Edition

53) In the Golden Rule steady state, the marginal product of capital is equal to the A) savings rate plus the population growth rate. B) population growth rate plus the depreciation rate. C) depreciation rate plus the savings rate. D) savings rate divided by the marginal product of labor. Answer: B

Question Status:

Previous Edition

54) With the Golden Rule, A) savings maximize output. B)

savings maximize consumption. C) savings minimize costs. D) savings optimize the population level. Answer: B

Question Status:

New

55) The Golden Rule says that A) one should save as much as possible. B) one should save as little as possible. C) one should save something between A and B. D) savings are irrelevant. Answer: C

Question Status:

New

56) In the steady state of Solow's exogenous growth model, an increase in the growth rate of labor force A) increases output per worker and increases capital per worker. B) increases output per worker and decreases capital per worker. C) decreases output per worker and increases capital per worker. D) decreases output per worker and decreases capital per worker. Answer: D

Question Status:

Previous Edition

57) In the steady state of Solow's exogenous growth model, an increase in total factor productivity A) increases output per worker and increases capital per worker. B) increases output per worker and decreases capital per worker. C) decreases output per worker and increases capital per worker. D) decreases output per worker and decreases capital per worker. Answer: A

Question Status:

Previous Edition