a) 1 b) 4 c) 8 d) 9 e) 16 2. In equilibrium, the rate of growth of the capital s
ID: 1093688 • Letter: A
Question
a) 1
b) 4
c) 8
d) 9
e) 16
2. In equilibrium, the rate of growth of the capital stock in a closed economy is primarily determined by:
a) The saving rate.
b) The growth rate of savings.
c) The growth rate of actual investment.
d) The growth rate of balanced investment.
e) The level of saving relative to balanced investment.
3. Suppose the government passes a law requiring households to increase their saving rate by 10%. According to the Solow Growth Model, in the short run:
a) Output per worker remains constant
b) Output per worker grows more slowly
c) Output per worker grows more rapidly
d) Output per worker grows at the same rate as the labor force
e) None of the above.
4. According to the Solow Growth Model, less-developed countries that have access to the latest productivities must be suffering from a relative shortage of _____, implying a very _____ rate of return available on additions to capital in those countries.
a) labor; low
b) labor; high
c) capital; low
d) capital; high
5. Suppose that both Country A and Country B have the same production function: Y/L = 6*(K/L)0.5. However, Country A has a capital-to-labor ratio that is initially twice as big as Country B. In addition, Country A has a 10% saving rate, a 10% labor force growth rate and a. 5% depreciation rate while Country B has a 20% saving rate, a 10% labor force growth rate and a 20% depreciation rate
a) The steady state capital-to-labor ratio in Country A is _____.
b) The steady state capital-to-labor ratio in Country B is _____.
c)Steady state output-per-worker in Country A is _____.
d) Steady state output-per-worker in Country B is _____.
Explanation / Answer
1.b) 4
2.e) The level of saving relative to balanced investment.
3.a) Output per worker remains constant
4.c) capital; low
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