True/False Indicate whether the
statement is true or false.


1.

An increase in the depreciation rate affects the steadystate capital per worker
the same way as an increase in the population growth rate.


2.

If the saving rate increases, then the optimum level of capital per worker
falls.


3.

An increase in technology causes the real GDP per worker to increase during the
transition to the steadystate.


4.

An increase in technology cause the growth in real output per worker to be
higher in the long run or steadystate.


5.

The Solow model of growth says that poorer economies should over time converge
towards richer ones in terms of real output put worker.

Multiple Choice Identify the
choice that best completes the statement or answers the question.


6.

In the revised version of the Solow growth model the optimal level of capital
stock per worker depends on:
a.  the saving rating.  b.  the depreciation rate.  c.  population growth
rate.  d.  all of the above. 


7.

In the revised version of the Solow growth model the optimal level of the
capital stock per worker depends on:
a.  monetary growth.  b.  government spending.  c.  the saving
rate.  d.  all of the above. 


8.

In the revised version of the Solow growth model the optimal level of the
capital stock per worker depends on:
a.  monetary growth.  b.  the depreciation rate.  c.  appreciation in the
stock market.  d.  all of the above. 


9.

In the revised version of the Solow growth model the optimal level of the
capital stock per worker depends on:
a.  the population growth rate.  b.  government spending.  c.  inflation.  d.  all of the
above. 


10.

In the Solow growth model as a growing economy transitions to the steady
state:
a.  the average product of capital falls.  b.  output per worker is
constant.  c.  the average product of labor falls.  d.  the growth rate of capital is equal to
zero. 


11.

In the Solow growth model in the steady state the growth rate of capital per
worker, , is:
a.  rising.  b.  falling.  c.  fluctuating.  d.  zero. 


12.

In the Solow growth model, if technology, A, improves, then in the steady
state:
a.  output per worker grows faster.  b.  output per worker grows at the same rate,
zero.  c.  capital per worker grows faster.  d.  all of the
above. 


13.

In the Solow growth model, if the population growth rate, n, increases, then in
the steady state:
a.  output per worker grows slower.  b.  capital per worker grows
slower.  c.  capital per worker grows at the same rate, zero.  d.  all of the
above. 


14.

In the Solow growth model, if the depreciation rate, , increases, then in the
steady state:
a.  output per worker grows at the same rate, zero.  b.  output per worker
grows faster.  c.  capital per worker grows faster.  d.  all of the
above. 


15.

In the Solow growth model, if labor input, L(0), increases, then in the steady
state:
a.  output per worker grows faster.  b.  capital per worker grows at the same rate,
zero.  c.  capital per worker grows faster.  d.  all of the
above. 


16.

In the Solow growth model in the steady state the growth rate of output per
worker, y*, is:
a.  rising.  b.  falling.  c.  constant at
zero.  d.  fluctuating. 


17.

If the saving rate increases in the Solow growth model, then during the
transition to the steady state:
a.  the growth rate of capital per worker will increase.  b.  the growth rate of
capital per worker will decrease.  c.  the growth rate of capital per worker is
constant.  d.  the growth rate of capital per worker is zero. 


18.

If the saving rate increases in the Solow growth model, then in the steady state
the growth rate of capital per worker is:
a.  constant.  b.  unchanged.  c.  zero.  d.  all of the
above. 


19.

If the saving rate increases in the Solow growth model, then in the steady state
the growth rate of capital per worker is:
a.  higher.  b.  unchanged.  c.  lower.  d.  rising. 


20.

If the saving rate increases in the Solow growth model, then in the steady
state:
a.  capital per worker and the growth of capital will be higher.  b.  capital per worker
will be higher but the growth rate of capital will remain the same at zero.  c.  capital per worker
will be higher but the growth rate of capital will be lower.  d.  capital per worker
will be lower but the growth rate of capital will be higher. 


21.

In the Solow growth model during the transition an increase in
technology:
a.  lowers the growth rate of capital per worker.  b.  does not change the
growth rate of capital per worker.  c.  raises the growth rate of capital per
worker.  d.  causes the growth rate of capital to fall to zero per
worker. 


22.

In the Solow growth model during the transition an increase in
technology:
a.  lowers the growth rate of output per worker.  b.  does not change the
growth rate of output per worker.  c.  raises the growth rate of output per
worker.  d.  causes the growth rate of output per worker to fall to
zero. 


23.

In the Solow growth model during the transition an increase in
technology:
a.  lowers the growth rate of capital and output per worker.  b.  raises the growth
rate of capital per worker and lowers the growth rate of output per worker.  c.  raises the growth
rate of capital and output per worker.  d.  lowers the growth rate of capital per worker
and raises the growth rate of output per worker. 


24.

In the Solow growth model in the short run, an increase in the labor input
L(0):
a.  increases the growth rate of real output per worker.  b.  increases s•(y/k).  c.  reduces the growth rate of capital per
worker.  d.  decreases . 


25.

In the Solow growth model in the short run, an increase in the labor input L(0),
a.  decrease the growth rate of real output per worker.  b.  increases s•(y/k).  c.  increase the growth rate of capital per
worker.  d.  decrease . 


26.

In the Solow growth model in the long run or steady state, an increase in the
labor input L(0) will,
a.  increase the capital stock.  b.  lead to a growth of the capital stock per
worker of zero.  c.  not affect real output per worker.  d.  all of the
above. 


27.

In the Solow growth model in the long run or steady state, an increase in the
labor input L(0) will,
a.  decrease the capital stock.  b.  lead to a positive growth of the capital stock
per worker.  c.  not change real output per worker.  d.  all of the
above. 



Determinants of k/k


28.

In Figure 4.1 the distance between s•(y/k) and s + n is the
growth of capital per worker:
a.  in the transition.  b.  in the longrun.  c.  in the steady
state.  d.  none of the above. 


29.

In Figure 4.1 if the saving rate increases, then
a.  the curve increases.  b.  the curve becomes
steeper.  c.  the curve decreases.  d.  the curve becomes
flatter. 


30.

In Figure 4.1, if the saving rate increase, then:
a.  s•(y/k) increases.  b.  s•(y/k) gets steeper.  c.  s•(y/k)
decreases.  d.  s•(y/k) becomes
vertical. 


31.

In Figure 4.1, if the saving rate increase, then:
a.  s•(y/k) and
increase.  b.  s•(y/k) increases while decreases.  c.  s•(y/k) and
decrease.  d.  s•(y/k) decreases while
increase. 


32.

In Figure 4.1, if the technology improves, then:
a.  s•(y/k) increases.  b. 
increases.  c.  s•(y/k) decreases.  d. 
decreases. 


33.

In Figure 4.1, if the initial amount of labor increases, then:
a.  s•(y/k) increases.  b.  K/L moves away from
the optimum.  c.  increases.  d.  the growth rate of population
increases. 


34.

In Figure 4.1, if the initial amount of labor increases, then in the steady
state:
a.  the growth rate of capital per worker increases.  b.  the growth rate of
output per worker rises.  c.  the growth rate of output per worker is the
same.  d.  the population growth rate rises. 


35.

In Figure 4.1, if the initial amount of labor increases, then during the
transition to they steady state:
a.  the growth rate of capital per worker and output per worker
increase.  b.  the growth rate of capital per worker and output per
worker.decrease.  c.  the growth rate of capital per worker increases and output per worker
decrease.  d.  the growth rate of capital per worker decreases and output per worker
increases. 


36.

In Figure 4.1, if the population growth rate increases, then:
a.  s•(y/k) increases.  b.  K/L moves away from
the optimum.  c.  increases.  d.  the initial amount of labor
increases. 


37.

In Figure 4.1, an increase in productivity:
a.  raises the steady state growth rate of capital per worker.  b.  does not change
steadystate growth rates of output or capital per worker.  c.  lowers the steady
state growth rate of output per worker  d.  lowers the steadystate level of
capital. 


38.

In Figure 4.1, an increase in the depreciation rate has the same effects
as:
a.  an increase in the savings rate.  b.  an increase in the initial amount of
labor.  c.  an increase in the population growth rate.  d.  all of the
above. 


39.

In Figure 4.1, an increase in technology:
a.  increases s•(y/k)  b.  decreases s•(y/k)  c.  increases  d.  decreases 


40.

In Figure 4.1, an increase in technology:
a.  increases k*.  b.  does not affect k*.  c.  decreases
k*.  d.  makes k* zero. 


41.

In Figure 4.1, an increase in the population growth rate:
a.  increases k*.  b.  does not affect k*.  c.  decreases
k*.  d.  makes k* zero. 


42.

In Figure 4.1, an increase in the depreciation rate:
a.  increases k*.  b.  does not affect k*.  c.  decreases
k*.  d.  makes k* zero. 


43.

In Figure 4.1, if the technology improves, then:
a.  the steadystate capital stock increases.  b.  the steadystate
growth in capital per worker increases.  c.  the steadystate growth in output per worker
increases.  d.  the population growth rate increases. 


44.

Convergence of economies is the tendency according to the Solow growth model
for:
a.  richer countries to buy up all the capital in poorer countries.  b.  richer countries to
tend decline as pollution damage increases.  c.  poorer economies to grow faster in terms of
real GDP per capital than richer countries.  d.  the tendency for richer economies to shrink to
the size of poorer economies. 


45.

Since 1960 the data show a tendency of output per worker to converge:
a.  in all countries in the world.  b.  countries with different savings
rates.  c.  in OECD countries.  d.  none of the
above. 


46.

The data show a tendency of output per worker to converge:
a.  among US States from 1880 to 2000.  b.  countries with similar
economies.  c.  in OECD countries from 1960 to 2000.  d.  all of the
above. 


47.

Convergence will not happen if economies around the world have:
a.  different saving rates.  b.  different technologies.  c.  different population
growth rates.  d.  all of the above. 


48.

Convergence will not happen if economies around the world have:
a.  different saving rates.  b.  different average products of capital in the
transition.  c.  different levels out labor input.  d.  all of the
above. 


49.

Convergence will not happen if economies around the world have:
a.  different capital labor ratios in during the transition.  b.  different population
growth rates.  c.  different levels out labor input.  d.  all of the
above. 


50.

Convergence will not happen if economies around the world have:
a.  different average products of capital during the transition.  b.  different initial
levels of labor input.  c.  different levels of
technology.  d.  all of the above. 


51.

Convergence will not happen if economies around the world have:
a.  different average products of capital during the transition.  b.  different initial
levels of labor input.  c.  different optimum levels of capital per worker,
k*.  d.  all of the above. 


52.

Economies are said to have converged if they:
a.  have the same growth rate in the transition.  b.  have the same
capital per worker, k*, in the steady state.  c.  have the same saving rate.  d.  all of the
above. 


53.

When converging economies:
a.  have the same growth rate of capital per worker.  b.  the same steady
state capital per worker, k*.  c.  have the same growth rate of output per
worker.  d.  all of the above. 


54.

Convergence will not happen if economies around the world have:
a.  different savings rates.  b.  different population growth
rates.  c.  different optimum levels of capital per worker, k*.  d.  all of the
above. 


55.

Convergence will not happen if economies around the world have:
a.  different capital per worker growth rates in the transition.  b.  different initial
levels of labor input, L(0).  c.  different initial starting
points.  d.  none of the above. 

Short Answer


56.

What are the short and long run effects of an increase in the saving rate in the
Solow growth model?


57.

What are the long and short run effects of an increase in technology, A, in the
Solow growth model?


58.

What are the long run and short run effects to an increase in the labor input in
the Solow growth model?


59.

What are the long and short run effects of an increase in the population growth
rate the Solow growth model?


60.

Why does the Solow growth model show the economies of poor countries tend to
converge over time toward richer ones in terms of per capita and real GDP per worker?
