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


1.

In the Solow growth model, the growth rate of capital per worker is positively
related to the optimum capital per worker.


2.

In the Solow growth model the growth rate of capital per worker is positively
related to the initial level of capital per worker.


3.

The Solow growth model with technological progress has continuous output per
worker growth in the steady state.


4.

Ideas are rival goods.


5.

Governments grant patents and copyrights to encourage firms to engage in
research and development.

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


6.

Conditional convergence is the tendency of economies to converge:
a.  all the time.  b.  when they are similar.  c.  only when economic
conditions are good.  d.  only when currencies are
stable. 


7.

Absolute convergence is the tendency of economies to converge:
a.  all the time.  b.  when they are similar.  c.  only when economic
conditions are good.  d.  only when currencies are
stable. 


8.

In the Solow growth model transition, the growth rate of capital per worker is
negatively related to:
a.  the initial capital stock per worker, k(0).  b.  k/k.  c.  the optimum output per worker, k*  d.  all of the
above. 


9.

In the Solow growth model transition, the growth rate of capital per worker is
positively related to:
a.  the initial capital stock per worker, k(0).  b.  k/k.  c.  the optimum output per worker, k*  d.  all of the
above. 


10.

In the Solow growth model transition, the growth rate of output per worker is
negatively related to:
a.  the initial capital stock per worker, k(0).  b.  y/y.  c.  the optimum output per worker, y*  d.  all of the
above. 


11.

In the Solow growth model transition, the growth rate of output per worker is
positively related to:
a.  the initial capital stock per worker, k(0).  b.  y/y.  c.  the optimum output per worker, y*  d.  all of the
above. 


12.

The key equation for conditional convergence for capital per worker is:


13.

The key equation for conditional convergence for output per worker is:


14.

In the key equation for convergence , y(0) is:
a.  the initial level of output.  b.  the initial level of output per
worker.  c.  the optimum level of output.  d.  the optimum level of output per
worker. 


15.

In the key equation for convergence , y* is:
a.  the initial level of output.  b.  the initial level of output per
worker.  c.  the optimum level of output.  d.  the optimum level of output per
worker. 


16.

In the key equation for convergence , k* is:
a.  the initial level of capital.  b.  the initial level of capital per
worker.  c.  the optimum level of capital.  d.  the optimum level of capital per
worker. 


17.

In the key equation for convergence , k(0) is:
a.  the initial level of capital.  b.  the initial level of capital per
worker.  c.  the optimum level of capital.  d.  the optimum level of capital per
worker. 


18.

Convergence can be seen in the data of all countries together if one holds
constant:
a.  the saving rate.  b.  the fertility rate.  c.  the degree the rule
of law is maintained.  d.  all of the
above. 


19.

Convergence can be seen in the data of all countries together if one holds
constant:
a.  the degree that democracy is maintained.  b.  changes in the terms
of trade.  c.  the average rate of inflation.  d.  all of the
above. 


20.

Convergence can be seen in the data of all countries together if one holds
constant:
a.  the size of government.  b.  the extent of international
openness.  c.  investment in education and health.  d.  all of the
above. 


21.

In the Solow growth model, the long run rate of growth of output per worker
is:
a.  zero  b.  negative.  c.  cyclical.  d.  positive. 


22.

A growth model with continuing output per worker growth in the long run
is:
a.  the production function.  b.  the Ak model of constant average product of
capital.  c.  the Solow growth model.  d.  all of the
above. 


23.

If in the model with constant average product of capital, the
long run growth rate is:
a.  constant.  b.  positive  c.  negative.  d.  cyclical. 


24.

A problem with the constant average product of capital growth model is
that:
a.  output per worker grows in the long run.  b.  there is no
convergence.  c.  the Y/K ratio grows.  d.  all of the
above. 


25.

A problem with the constant average product of capital growth model is
that:
a.  a common view among economist is that the average product of capital eventually
starts to fall as capital rises.  b.  output per worker grows in the long
run.  c.  the Y/K ratio grows.  d.  all of the
above. 


26.

If in the model with constant average product of capita, the
long run growth rate is:
a.   b.  Ak  c.   d.  none of the above. 


27.

In the Solow growth model with technological progress,
a.  k* is constant.  b.  k* is growing.  c.  k* is
cyclical.  d.  k* is declining. 


28.

In the Solow growth model with technological progress in the steady
state:
a.  capital per worker is constant.  b.  capital per worker is
cyclical.  c.  capital per worker is increasing.  d.  capital per worker is
declining. 


29.

In the Solow growth model with technological progress in the optimal amount of
capital per worker is
a.  growing.  b.  shrinking.  c.  cyclical.  d.  fluctuating. 


30.

In endogenous growth models, technological progress comes from:
a.  outside the system.  b.  research and development.  c.  increases in the
capital stock.  d.  all of the above. 


31.

An example of a rival capital good is:
a.  infrastructure like roads.  b.  a machine like a printing
press.  c.  an idea like a new chemical formula for a drug.  d.  all of the
above. 


32.

An example of a nonrival good is:
a.  a output like a pizza.  b.  a machine like a printing
press.  c.  an idea like a new chemical formula for a drug.  d.  all of the
above. 


33.

An example of a nonrival good is:
a.  mathematical formulas in calculus.  b.  codes for computer
software.  c.  an idea like a new chemical formula for a drug.  d.  all of the
above. 


34.

An example of a rival capital good is:
a.  an employee like an R&D engineer.  b.  a machine like a printing
press.  c.  a structure like a factory.  d.  all of the
above. 


35.

An example of a nonrival good is:
a.  an output like a shirt.  b.  code for computer software.  c.  a structure like a
factory.  d.  all of the above. 


36.

An example of nonrival good is:
a.  mathematical formulas in calculus.  b.  a machine like a laser
printer.  c.  an output like a dress.  d.  all of the
above. 


37.

To encourage firms to engage in research and development (R&D), governments
grant temporary monopolies in the production of the goods that result from R&D called:
a.  patents.  b.  land grants.  c.  antitrust
exemptions.  d.  all of the above. 


38.

To encourage firms to engage in research and development (R&D), governments
grant temporary monopolies in the production of the word or symbol based goods like books and
computer code that result from R&D called:
a.  cartels.  b.  copyrights.  c.  antitrust
exemptions.  d.  all of the above. 


39.

The private return from research and development might be less than the social
return because:
a.  others than just the inventor can use inventions that come out of research and
development.  b.  it is encouraged by patents and copyrights.  c.  it is funded by the
government.  d.  all of the above. 


40.

The rewards to private R&D depend on:
a.  the costs of R&D.  b.  the rewards from the results of
R&D.  c.  the security of intellectual property rights.  d.  all of the
above. 


41.

The rewards to private R&D are negatively related to:
a.  the costs of R&D.  b.  the rewards from the results of
R&D.  c.  the security of intellectual property rights.  d.  all of the
above. 


42.

The rewards to private R&D are positively related to:
a.  the costs of R&D.  b.  growth rate of capital per
worker.  c.  the security of intellectual property rights.  d.  all of the
above. 


43.

If intellectual property rights become better secured, then:
a.  the costs of R&D are greater.  b.  the costs of R&D are
smaller.  c.  the private returns to R&D are greater.  d.  the private returns
to R&D are smaller. 


44.

The ability to control the inventions from R&D spending is known as
a.  greed.  b.  a rival good.  c.  intellectual
property rights.  d.  all of the above. 


45.

A business may not seek a patent on an idea or invention because:
a.  patents are not valuable.  b.  approval is costly.  c.  ideas and inventions
are nonrival.  d.  all of the above. 


46.

Diffusion of technology means:
a.  how many industries a technology can be used in.  b.  describes the
imitation and adaptation of technology from country to country.  c.  how expensive a
technology is.  d.  how many scientist had to work on a technology. 


47.

Steady state growth is when:
a.  when the average product of capital, y/k, is unchanging as k increases at a constant
rate.  b.  when the rate of growth of capital per worker is constant at
zero.  c.  when the rate growth of output per worker is constant at zero.  d.  all of the
above. 


48.

With steady state growth:
a.   b.  y/k is constant.  c.   d.  all of the above. 


49.

With steady state growth:
a.   b.  k* = 0.  c.  y* =
0.  d.  all of the above. 


50.

With steady state growth:
a.  there is absolute convergence.  b.  y/k is constant.  c.  k* growth
fluctuates.  d.  all of the above. 


51.

With steady state growth:
a.  k* growth fluctuates.  b.  there is absolute
convergence.  c.   d.  all of the
above. 


52.

With steady state growth:
a.  the optimal output per worker and capital per worker grow at the same
rate.  b.  the steady state growth rate of real GDP per worker is greater than the rate of
technological progress.  c.  the average product of capital is
constant.  d.  all of the above. 


53.

With steady state growth:
a.  the optimal output per worker and capital per worker grow at the same
rate.  b.  the steady state growth rate of real GDP per worker is equal to the rate of
technological progress.  c.  the average product of capital
falls.  d.  all of the above. 


54.

With steady state growth:
a.  the optimal output per worker grows faster than optimal capital per
worker.  b.  the steady state growth rate of real GDP per worker is less than the rate of
technological progress.  c.  the average product of capital is
constant.  d.  all of the above. 


55.

With steady state growth:
a.  the optimal output per worker grows faster than the optimal capital per
worker.  b.  the steady state growth rate of real GDP per worker is greater than the rate of
technological progress.  c.  the average product of capital is
falling.  d.  all of the above. 

Short Answer


56.

What is conditional convergence?


57.

What variables must be held constant to find convergence in the data on all
countries.


58.

What is the key equation for conditional convergence and what are the direction
of influences?


59.

What are the steadystate growth results of a constant average product of
capital model of growth and what are the problems of such a model?


60.

What happens when exogenous technological change is modeled in the Solow growth
model?
