Name: 
 

Chapter 5 - Conditional Convergence and Long-run Economic Growth


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.
mc008-1.jpgk/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.
mc009-1.jpgk/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.
mc010-1.jpgy/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.
mc011-1.jpgy/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:
a.
mc012-1.jpg
b.
Y = A•F(K,L)
c.
mc012-2.jpg
d.
mc012-3.jpg
 

 13. 
The key equation for conditional convergence for output per worker is:
a.
mc013-1.jpg
b.
Y = A•F(K,L)
c.
mc013-2.jpg
d.
mc013-3.jpg
 

 14. 
In the key equation for convergence mc014-1.jpg, 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 mc015-1.jpg, 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 mc016-1.jpg, 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 mc017-1.jpg, 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 mc023-1.jpg 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 mc026-1.jpg in the model with constant average product of capita, the long run growth rate is:
a.
mc026-2.jpg
b.
Ak
c.
mc026-3.jpg
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 non-rival 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 non-rival 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 non-rival 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 non-rival 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.
anti-trust 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.
anti-trust 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 non-rival.
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.
mc048-1.jpg
b.
y/k is constant.
c.
mc048-2.jpg
d.
all of the above.
 

 49. 
With steady state growth:
a.
mc049-1.jpg
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.
mc051-1.jpg
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 steady-state 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?
 



 
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