Module 2 Exam ECON302

Using the 2-sided search model from Chapter 6, a decrease in Unemployment Insurance benefits (b) would be expected to cause

real wages to [increase/decrease/stay the same/change ambiguously]

the labor force to [increase/decrease/stay the same/change ambiguously]

employment to [increase/decrease/stay the same/change ambiguously]

the number of job openings to [increase/decrease/stay the same/change ambiguously]

the unemployment rate to [increase/decrease/stay the same/change ambiguously]

and GDP to [increase/decrease/stay the same/change ambiguously]

decrease, change ambiguously, change ambiguously, change ambiguously, decrease, change ambiguously

Using the 2-sided search model from Chapter 6, an increase in Unemployment Insurance benefits (b) would be expected to cause

real wages to [increase/decrease/stay the same/change ambiguously]

the labor force to [increase/decrease/stay the same/change ambiguously]

employment to [increase/decrease/stay the same/change ambiguously]

the number of job openings to [increase/decrease/stay the same/change ambiguously]

the unemployment rate to [increase/decrease/stay the same/change ambiguously]

and GDP to [increase/decrease/stay the same/change ambiguously]

increase, change ambiguously, change ambiguously, change ambiguously, increase, change ambiguously

Using the 2-sided search model from Chapter 6, a decrease in the Solow Residual would be expected to cause

real wages to [increase/decrease/stay the same/change ambiguously]

the labor force to [increase/decrease/stay the same/change ambiguously]

employment to [increase/decrease/stay the same/change ambiguously]

the number of job openings to [increase/decrease/stay the same/change ambiguously]

the unemployment rate to [increase/decrease/stay the same/change ambiguously]

and GDP to [increase/decrease/stay the same/change ambiguously]

decrease, decrease, decrease, decrease, increase, decrease

Using the 2-sided search model from Chapter 6, an increase in the Solow Residual would be expected to cause

real wages to [increase/decrease/stay the same/change ambiguously]

the labor force to [increase/decrease/stay the same/change ambiguously]

employment to [increase/decrease/stay the same/change ambiguously]

the number of job openings to [increase/decrease/stay the same/change ambiguously]

the unemployment rate to [increase/decrease/stay the same/change ambiguously]

and GDP to [increase/decrease/stay the same/change ambiguously]

increase, increase, increase, increase, decrease, increase

Using the 2-sided search model from Chapter 6, a decrease in the cost of capital (k) would be expected to cause

real wages to [increase/decrease/stay the same/change ambiguously]

the labor force to [increase/decrease/stay the same/change ambiguously]

employment to [increase/decrease/stay the same/change ambiguously]

the number of job openings to [increase/decrease/stay the same/change ambiguously]

the unemployment rate to [increase/decrease/stay the same/change ambiguously]

and GDP to [increase/decrease/stay the same/change ambiguously]

stay the same, increase, increase, increase, decrease, increase

Using the 2-sided search model from Chapter 6, an increase in the cost of capital (k) would be expected to cause

real wages to [increase/decrease/stay the same/change ambiguously]

the labor force to [increase/decrease/stay the same/change ambiguously]

employment to [increase/decrease/stay the same/change ambiguously]

the number of job openings to [increase/decrease/stay the same/change ambiguously]

the unemployment rate to [increase/decrease/stay the same/change ambiguously]

and GDP to [increase/decrease/stay the same/change ambiguously]

stay the same, decrease, decrease, decrease, increase, decrease

Using the 2-sided search model from Chapter 6, a decrease in search efficiency would be expected to cause

real wages to [increase/decrease/stay the same/change ambiguously]

the labor force to [increase/decrease/stay the same/change ambiguously]

employment to [increase/decrease/stay the same/change ambiguously]

the number of job openings to [increase/decrease/stay the same/change ambiguously]

the unemployment rate to [increase/decrease/stay the same/change ambiguously]

and GDP to [increase/decrease/stay the same/change ambiguously]

stay the same, decrease, decrease, decrease, increase, decrease

Using the 2-sided search model from Chapter 6, an increase in search efficiency would be expected to cause

real wages to [increase/decrease/stay the same/change ambiguously]

the labor force to [increase/decrease/stay the same/change ambiguously]

employment to [increase/decrease/stay the same/change ambiguously]

the number of job openings to [increase/decrease/stay the same/change ambiguously]

the unemployment rate to [increase/decrease/stay the same/change ambiguously]

and GDP to [increase/decrease/stay the same/change ambiguously]

stay the same, increase, increase, increase, decrease, increase

Using the 2-sided search model from Chapter 6, an decrease in worker bargaining power would be expected to cause

real wages to [increase/decrease/stay the same/change ambiguously]

the labor force to [increase/decrease/stay the same/change ambiguously]

employment to [increase/decrease/stay the same/change ambiguously]

the number of job openings to [increase/decrease/stay the same/change ambiguously]

the unemployment rate to [increase/decrease/stay the same/change ambiguously]

and GDP to [increase/decrease/stay the same/change ambiguously]

decrease, change ambiguously, change ambiguously, change ambiguously, decrease, change ambiguously

Using the 2-sided search model from Chapter 6, an increase in worker bargaining power would be expected to cause

real wages to [increase/decrease/stay the same/change ambiguously]

the labor force to [increase/decrease/stay the same/change ambiguously]

employment to [increase/decrease/stay the same/change ambiguously]

the number of job openings to [increase/decrease/stay the same/change ambiguously]

the unemployment rate to [increase/decrease/stay the same/change ambiguously]

and GDP to [increase/decrease/stay the same/change ambiguously]

increase, change ambiguously, change ambiguously, change ambiguously, increase, change ambiguously

In the two-sided search model from class, productivity shocks are ________ at explaining counter-cyclical fluctuations in unemployment because ___________________

A. good; as z decreases we move down and to the right along the Beveridge curve

B. good; as z increases we move down and to the right along the Beveridge curve

C. bad; as z increases we move down and to the right along the Beveridge curve

D. bad; as z decreases we move down and to the right along the Beveridge curve

A

All other things being equal, "Work from Home" opportunities would more likely cause it to be easier for workers and firms to match, resulting in a ______ shift in the Beveridge Curve and _____ in GDP.

A. leftward; a decrease

B. rightward; an increase

C. leftward; an increase

D. rightward; a decrease

C

Based on the two-sided search model from Chapter 6, all of the following can lead to an increase in the worker's probability of finding a match, EXCEPT:

A. a decrease in worker's bargaining power (a).

B. a decrease in unemployment insurance benefits (b).

C. an increase in match efficiency (e).

D. a decrease in TFP (z).

D

In the two-sided search equilibrium from Chapter 6, firms make _______ profits after matching with workers.

A. positive

B. zero

C. negative

D. ambiguous

A

In the two-sided search model from Chapter 6, if b>z,

A. the minimum wage is too high.

B. employment will be zero.

C. workers will have more bargaining power than firms.

D. firms will earn positive profits.

B

US labor force participation-rate data are

A. pro-cyclical.

B. counter-cyclical.

C. neither pro- nor counter-cyclical.

D. impossible to measure.

A

Consider the two-sided matching model and notation from Chapter 6. If firms expect to make positive profits, then

A. wages will increase until expected profits are zero.

B. cost k will increase until expected profits are zero.

C. the labor force Q will increase until expected profits are zero.

D. market tightness j will increase until expected profits are zero.

D

In the two-sided search model, apprenticeship programs provided by firms to train their workers will most likely

A. cause employment to increase.

B. cause wages to increase.

C. cause GDP to increase.

D. all of these things

D

Consider the two-sided search model from class. Why do workers have to search for jobs?

A. It takes time for government to process the unemployment benefit application.

B. It takes time to find a good job “match”.

C. It takes time to get a college degree.

D. There are inter-generational human capital externalities.

B

Economists have hypothesized that the decline of unions between 1970-2023 has decreased worker bargaining power. If this had been the only change between now and 1970, today we would expect to now see

A. higher vacancy rate, lower unemployment rate, lower real wages

B. lower vacancy rate, higher unemployment rate, lower real wages

C. higher vacancy rate, lower unemployment rate, higher real wages

D. lower vacancy rate, higher unemployment rate, higher real wages

A

Consider the two-sided search model from class. Which of the following is NOT true?

A. There is equilibrium unemployment.

B. Wage is set to be equal to MPN.

C. Firm profits are zero on expectation.

D. Increases in unemployment benefits always increase the unemployment rate.

B

Consider the two-sided search model. Which of the following is true about the firm in the model?

A. The firm is indifferent between creating a job opening and exiting the market.

B. The firm is indifferent between matching and continuing to search.

C. The firm is indifferent between matching and exiting the market.

D. All of these things.

A

Consider the two-sided search model from class. If there is a decrease in the unemployment insurance benefit, which of the following is true?

A. There is a movement up and to the left along the Beveridge Curve.

B. There is a movement down and to the right along the Beveridge Curve.

C. The Beveridge Curve shifts out and to the right.

D. The Beveridge Curve shifts in and to the left.

A

In the two-sided search model from Chapter 6, skill-biased growth that increases match surplus more for STEM- skilled workers than for others, will lead to _______ wages for STEM-skilled workers than for other types of workers as well as to _______ unemployment rates for STEM-skilled workers than for other types of workers.

A. higher; higher

B. lower; lower

C. lower; higher

D. higher; lower

D

The Beveridge Curve is a graphical representation of the relationship between

A. market tightness and vacancy rate.

B. unemployment rate and market tightness.

C. vacancy rate and unemployment rate.

D. unemployment rate and GDP.

C

In the two-sided search model, a decrease in matching efficiency

A. has no effect on firms because k/(1-a)(z-b) is unchanged.

B. reduces worker bargaining power over the wage.

C. reduces GDP.

D. all of these things

C

Assume the two-sided search model from class. If there is an increase in productivity, what happens to the firm’s probability of finding a worker?

A. There is a movement up and to the left along the Beveridge Curve.

B. There is a movement down and to the right along the Beveridge Curve.

C. The Beveridge Curve shifts out and to the right.

D. The Beveridge Curve shifts in and to the left.

A

In the Nash Bargaining solution from Chapter 6:

A. Firms get half of the worker’s surplus.

B. Firms pay the marginal productivity of labor.

C. Firms pay no more than the value of continued search, which is the unemployment benefit.

D. None of these things.

D

Consider the two-sided search model from class. Assume that M is the aggregate number of matches, e is the matching efficiency, m(Q,A) is the matching function, Q is the number of labor force participants searching for jobs and A is the number of vacancies. What is the probability of finding a job for a labor market participant?

A. em(Q,A)/Q

B. em(Q,A)/A

C. em(Q,A)/M

D. e/m(Q,A)

A

Assume the two-sided search model from class. If there is an increase in productivity, what happens to the firm’s probability of finding a worker?

A. It increases.

B. It decreases.

C. It remains the same.

D. The effect is ambiguous.

B

Which of the following statements is true about the 2-sided search model from class?

A. Unemployment is the efficient outcome of market forces, but employment is not.

B. Employment is the efficient outcome of market forces, but unemployment is not.

C. Both employment and unemployment are the efficient outcomes of market forces.

D. The model equilibrium does not satisfy the First Welfare Theorem.

D

In the two-sided search model from class, if there is a decrease in match efficiency then

A. There is a movement up and to the left along the Beveridge Curve.

B. There is a movement down and to the right along the Beveridge Curve.

C. The Beveridge Curve shifts out and to the right.

D. The Beveridge Curve shifts in and to the left.

C

What are the effects on GDP of introducing a minimum wage that is above the Nash bargaining wage?

A. GDP increases.

B. GDP decreases.

C. GDP remains the same.

D. The effect on GDP is ambiguous.

D

Suppose a poor economy inches towards the steady state in Solow's exogenous growth model. What happens?

A. The growth rate of output decreases.

B. The depreciation rate increases.

C. Saving per capita decreases.

D. Consumption per capita decreases.

A

Use the endogenous human capital accumulation model from Chapter 8 to consider the following real-world situation: Imagine that internet access improves for people living in remote and under-developed regions of the world; Less-Developed Economy Consumption would likely ___________ in the current period and be on __________ growth path as a result.

A. be unchanged; steeper

B. fall; steeper

C. be unchanged; the same

D. fall; the same

A

According to the assumptions of the Chapter 8 endogenous growth model, would an educated worker prefer to live in a country with other highly-educated people or in a country where most other people are not highly educated?

A. Prefer to live in the country with high education levels in the short run but not the long run.

B. Prefer to live in the country with low education levels in both the short run and long run.

C. Prefer to live in the country with high education levels in both the short run and long run.

D. Prefer to live in the country with low education levels in the short run but not in the long run.

C

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 savings rate.

C. population growth rate plus the depreciation rate.

D. savings rate plus the depreciation rate.

C

In the endogenous growth model, if more time is devoted to accumulating human capital,

A. the growth rate in output rises, but output falls in the short run.

B. the growth rate in output falls, but output rises in the short run.

C. real income is lower now and forever.

D. real income is higher now and forever.

A

Which, if any, of the following statements is not correct?

A. Per-capita standards of living were fairly constant everywhere in the world until the early 1600s.

B. Per-capita standards of living started to rise most dramatically starting with the Industrial Revolution.

C. Per-capita standards of living have increased most everywhere in the world since the 1960s.

D. All of these statements are supported by the data.

D

In the Malthusian model, an improvement in the technology of growing food is most 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.

C

The endogenous growth model from Chapter 8 makes the assumption that education is non rival. That implies that

A. knowledge is not in limited supply.

B. there is more than one way to produce the same good.

C. the market for education is not competitive.

D. there are externalities associated with an individual's education decision.

A

In the Malthusian growth model, an increase in technology does not affect long run per capita GDP because

A. Land increases with technology.

B. Capital increases with technology.

C. Population increases with technology.

D. The production function does not have constant returns to scale.

C

One of the predictions of the Malthusian growth model is:

A. Per-capita GDP could never rise even with technological progress because the capital stock grew at the same rate as productivity.

B. The only way a country could grow would be with technological progress, and there wasn’t any until the Industrial Revolution.

C. Population growth would exploit all the planet’s resources, leading to famine and devastation.

D. Per-capita GDP could never rise even with technological progress because land was in fixed supply.

D

Predictions of the Malthusian growth model were wrong because:

A. The industrial revolution added capital to the production function which is not in fixed supply.

B. The model didn’t consider technological progress in the production function.

C. The model didn’t consider population growth in the production function.

D. Having children is never an economic decision.

A

Which of the following statements is true about the Solow model in the long run?

A. The standards of living of a country depend on the savings rate but not on the population growth.

B. The standards of living of a country depend on population growth but not on the savings rate.

C. The standards of living of a country depend on the savings rate and population growth.

D. The standards of living of a country depend on neither population growth nor the savings rate.

C

The Solow growth model tells us that the standard of living in country A can be higher than in country B for all the following reasons, except

A. country A has lower population growth than country B.

B. country A has a higher savings rate than country B.

C. country A has a higher depreciation rate than country B.

D. country A has higher total factor productivity than country B.

C

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 forecasts.

D. a nation's level of education.

B

Suppose that government spending makes human capital technology more efficient. Use the graphical model from Chapter 8 to show how a lump-sum tax on Consumption to improve education would affect new consumption path. Discuss the conditions under which this policy might be optimal from a social planner’s perspective and why it might not be chosen by the market even if it is more efficient. In this case we expect

A. The graph of ln(Ct) to shift up and get steeper.

B. The graph of ln(Ct) to get steeper but not shift.

C. The graph of ln(Ct) to get flatter but not shift.

D. The graph of ln(Ct) to shift down and get steeper.

D

Which of the following is NOT positively correlated with per capita GDP growth?

A. Widening of the income distribution.

B. All of these are positively correlated with per capita GDP growth.

C. Literacy rates, adult.

D. Average number of years in education, female.

A

Consider the graph from the Chapter 8 endogenous growth model that shows (log) Consumption as a function of time. An increase in the efficiency of the human capital-augmented labor input (z) would

A. temporarily shift the Consumption path but not change its slope.

B. permanently shift the Consumption path and increase its slope.

C. permanently shift the Consumption path but not change its slope.

D. temporarily shift the Consumption path and temporarily increase its slope.

C

Using the Solow model, could differences in population growth, all other things being equal, explain persistent differences in standards of living across countries?

A. Yes, the high-population growth country will have lower standards of living.

B. Yes, the high-population growth country's standards of living will grow faster.

C. Yes, the high-population growth country will have higher standards of living.

D. Yes, the high-population-growth country's standards of living will grow more slowly.

A

If the savings rate falls in the Solow growth model,

A. steady state capital per worker rises.

B. output growth is unchanged in the steady state.

C. per worker output is unchanged in the steady state.

D. per capita consumption is unchanged in the steady state.

B

Assume the Solow growth model. Using the usual notation: n is the population growth rate, d is the depreciation rate, k is the per capita capital stock, s is the savings rate and y is per capita output. Assume that the per capita capital stock of the economy is lower than the steady-state per capita capital stock. Then the model implies that:

A. sy > (n+d)k.

B. sy < (n+d)k.

C. sy = (n+d)k.

D. y = d*k.

A

Statistically, countries that have ________ barriers to international trade and international finance have ________ gains in per capita GDP and ___________ average life expectancies.

A. greater, greater, longer

B. greater, lower, shorter

C. lower, greater, shorter

D. lower, lower, longer

B

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. Paul Romer.

B

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.

B

A country with low literacy rates institutes a law that says people need to go to school and pass a literacy test before being able to work. Using the endogenous growth model this will:

A. Shift the consumption path down.

B. Shift the consumption path up.

C. Shift the consumption path down, but pivot it upwards.

D. Shift the consumption path up, but pivot it downwards.

C

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.

B

A steady state is

A. a temporary equilibrium.

B. a Pareto Optimum.

C. a long-run equilibrium.

D. an economy with ongoing fluctuations.

C

All other things being equal, and according to the Romer endogenous growth model from class, if people spend less time in education, then the immediate effect is for the country to have

A. higher per-capita GDP and higher per-capita GDP growth.

B. lower per-capita GDP and higher per-capita GDP growth.

C. higher per-capita GDP and lower per-capita GDP growth.

D. lower per-capita GDP and lower per-capita GDP growth

C

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.

A

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.

B

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.

B

All other things being equal in the two countries, and according to the Solow growth model from class, if a country A has a higher marginal productivity of per-capita capital than country B, then country A has _________ than country B.

A. higher per-capita GDP and higher per-capita GDP growth

B. lower per-capita GDP and higher per-capita GDP growth

C. higher per-capita GDP and lower per-capita GDP growth

D. lower per-capita GDP and lower per-capita GDP growth

B

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.

B

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

C. nf(k*) = sk*/(s+d).

D. f(k*) = sk*/(n+d).

A

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.

D

In the Solow growth model, long run growth in the standard of living is propelled by

A. government spending.

B. technological change.

C. growth in the capital stock.

D. growth in the labor force.

B

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.

A

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.

A

In the steady state of the Solow model and using the notation from class, per capita GDP (y) is

A. increasing.

B. constant.

C. decreasing.

D. we do not know without knowing exogenous variables such as z, n, and depreciation rate (d).

B

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.

D

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.

A

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.

C

Starting from the Golden Rule steady state, an increase in the savings rate (s) will cause equilibrium per-capita consumption in the Solow growth model to ______

A. rise.

B. fall.

C. stay the same.

D. change ambiguously.

B

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.

A

The Solow growth model can account for

A. the patterns of international trade.

B. business cycles.

C. why richer countries have higher investment rates.

D. the role of government in spurring growth

C

Income per worker has been

A. converging in both the rich countries and the poor countries.

B. converging in the rich countries, but not converging in the poor countries.

C. converging in the poor countries, but not converging in the rich countries.

D. converging in neither the poor nor the rich countries.

B

Convergence means that

A. if poor countries grow quickly, then fast-growing countries are poor.

B. all countries grow at the same rate.

C. all countries tend towards the same per capita income.

D. the savings rate is positively related to per capita income.

C

All other things being equal, if the population growth rate is lower, then the golden rule level of the per capita capital stock will be

A. higher.

B. lower.

C. unchanged.

D. indeterminant (either higher, lower, or unchanged).

A

In the Solow growth model, if all countries have the same technology, population growth, savings behavior, and depreciation rates, then

A. rich countries remain rich, poor countries remain poor.

B. in the long run, all countries will have the same standard of living.

C. consumption will fall in rich countries in the long run.

D. technology will be transferred from rich countries to poor ones.

B

After countries converge,

A. they all grow at the same rate but the levels of per-capita GDP may differ.

B. they all have the same per capita GDP and the same per-capita GDP growth rates.

C. countries that used to be relatively poor eventually become relative rich, as their growth rates are higher.

D. growth rates in richer countries fall and growth rates in poor countries rise until they are equalized.

B

In the Solow growth model, if all countries have the same technology, population growth, savings behavior, and depreciation rates, but that one is much richer than the others. What happens in the long run?

A. The other countries catch up to the rich one.

B. The rich country grows the fastest.

C. The rich country becomes poorer than the others.

D. Nothing.

A

Which of the following is not a reason for differences in total factor productivity across countries?

A. Differences in the size of population.

B. Learning by doing.

C. Barriers to the adoption of technology.

D. Inefficient allocation of factors of production across firms in some countries.

A

In the Solow growth model, countries with identical total factor productivities, identical labor force growth rates, and identical savings and depreciation rates

A. always have identical levels of capital per worker and output per worker.

B. in equilibrium, have identical levels of capital per worker and output per worker.

C. in equilibrium, have identical levels of capital per worker but not necessarily identical levels of output per worker.

D. in equilibrium, have identical levels of output per worker but not necessarily identical levels of capital per worker.

B

Suppose that two countries share identical levels of total factor productivity, identical labor force growth rates and identical savings rates. According to the Solow model

A. the country with the greater initial level of output per worker will grow more rapidly than the country with the smaller initial level of output per worker.

B. the country with the smaller initial level of output per worker will grow more rapidly than the country with the greater initial level of output per worker.

C. both countries will have the same growth rates of output per worker, even if they start out with different levels of output per worker.

D. if both countries start out with different levels of income per worker, both countries may have different growth rates of output per worker, but we cannot be certain which country will have the higher growth rate of output per worker.

B

Suppose a poor economy inches towards the steady state in Solow's exogenous growth model. What happens along the way?

A. Consumption per capita decreases.

B. Saving per capita decreases.

C. The depreciation rate increases.

D. The growth rate of output decreases.

D

Suppose a poor economy inches towards the steady state in Solow's exogenous growth model. What happens along the way?

A. Capital grows faster than population.

B. Capital grows slower than population.

C. Capital grows as fast as population.

D. It depends.

A

According to Solow's exogenous growth theory, what happens to a country at steady state that suffered extensive capital destruction due to a war or climate event?

A. It will stay poor forever.

B. It will grow back to be richer than before.

C. It will get back to its original status.

D. Anything can happen.

C

According to the Solow growth model from class, an increase in Total Factor Productivity leads in the long run to _______ in the level of GDP and ______ in population growth.

A. an increase; no change

B. an increase; a decrease.

C. no change; no change.

D. no change; a decrease.

A

In the endogenous growth model, an increase in a worker's level of human capital

A. increases the amount of additional human capital she can produce, but does not increase the amount of output she can produce.

B. increases the amount of additional output she can produce, but does not increase the amount of human capital she can produce.

C. increases both the amount of additional human capital she can produce and the amount of output she can produce.

D. increases neither the amount of additional human capital she can produce nor the amount of output she can produce.

C

In the endogenous growth model, a decline in total factor productivity (z) is represented by

A. a downward shift in the Consumption growth path.

B. a movement to the left along the Consumption growth path.

C. a flatter Consumption growth path.

D. all of these things.

A

In the endogenous growth model, workers divide their time between market work and

A. accumulating physical capital.

B. accumulating human capital.

C. trying to invent production processes.

D. work at home.

B

Endogenous growth theory is about

A. the welfare of indigenous people.

B. explaining the importance of history on economic growth.

C. studying how fertility choices impact standards of living.

D. giving more importance to capital accumulation.

B

In the endogenous growth model, education is best described as a type of

A. all of these things.

B. investment.

C. government spending.

D. production

B

What characteristic do both human and physical capital share?

A. Both are controlled by the government.

B. Current costs are incurred for future benefits.

C. The use of both exhibits rivalry.

D. They can easily be transferred to ownership.

B

Human capital is knowledge in

A. books.

B. people.

C. firms.

D. government.

B

In the development of the endogenous growth model from class, Paul Romer argued that a key feature of knowledge is

A. divisibility.

B. private ownership.

C. nonrivalry.

D. durability.

C

Which of the following is best characterized as being nonrivalrous?

A. Consumption goods.

B. Services.

C. Physical capital.

D. Knowledge.

D

A key characteristic of the production function in the endogenous growth model presented in the text is that

A. there are increasing returns to scale.

B. there are decreasing returns to scale.

C. there are constant returns to scale.

D. at low levels of human capital, there are increasing returns to scale in human capital, while at high levels of human capital, there are decreasing returns to scale in human capital.

C