1. Which of the following is not true about the Environmental Kuznet’s Curve? (a

Question

1. Which of the following is not true about the Environmental Kuznet’s Curve? (a) Pollution increases initially as a country develops its industry and then begins to decline after reaching a certain level of economic progress. (b) That in the early stages of economic growth, degradation and pollution increase, but beyond some level of income per capita, the trend reverses. High-income levels per capita leads to environmental improvements. (c) That economic inequality decreases over time while a country is developing, then after a certain average income is attained, inequality begins to increase. (d) That the relationship between per capita income and the use of natural resources and/or the emission of wastes has an upside down U-shape.

2. In the Solow growth model, if investment exceeds depreciation, the capital stock will ...... and output will ...... until the long run equilibrium is attained. (a) increase; increase (b) increase; decrease (c) decrease; decrease (d) decrease; increase

3. Suppose the demand for oil in Alaska is given by 8 0.4q while the supply is 2. Alaska only consumes its oil and the stock of oil is equal to 20 barrels for two years. If the interest rate is 10%, the government of Alaska will extract: (a) X1 =5andX2 =15. (b) X1 =15andX2 =5. (c) X1 = 12.039 and X2 = 7.961. (d) X1 = 11.278 and X2 = 8.722. (e) None of the above.

4. Consider a Solow Growth Model with no population growth and no technological progress. Final goods and services (Y ) are produced using technology (A), machines (K), and workers (L) using the following production technology: Y = AKL1. If a country, say the US, decides to invest half of the total output, the growth rate in the US is: (a) falling. (b) falling only if we account for the value of land. (c) rising. (d) rising only if we account for the value of land. (e) None of the above.

Explanation / Answer

1. b) That in the early stages of economic growth, degradation and pollution increase, but beyond some level of income per capita, the trend reverses.

2.increase,increase

Higher investment than depreciation means higher level of capital to work with h and thus higher level of output .

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