Question 1

What is the name for the tendency-among countries with similar steady-state levels of output-for poorer countries to grow faster than richer countries until they reach the same income levels?

Accepted Answer

A)   the diminishing rate of return
B)   the marginal law of supply
C)   conditional convergence
D)   growth capitalizationE) B) and C)
F) A) and D)

Question 2

The most important incentive for research and development of new ideas is government funding.

Accepted Answer

A) True 
 B)False

Question 3

In the context of the Solow model,new ideas shift the production function upward.

Accepted Answer

A) True 
 B)False

Question 4

In the Solow model,output increases when investment is greater than depreciation.

Accepted Answer

A) True 
 B)False

Question 5

1 to Y2 in the accompanying diagram of the Solow model? A)  increases in productivity B)  better ideas C)  physical capital accumulation D)  advances in technological knowledge" class="answers-bank-image d-inline" rel="preload" >
-(Figure: The Solow Model) Which of the following events would NOT shift the production function from Y1 to Y2 in the accompanying diagram of the Solow model?

Accepted Answer

A)   increases in productivity
B)   better ideas
C)   physical capital accumulation
D)   advances in technological knowledgeE) C) and D)
F) A) and B)

Question 6

Consider an economy that is operating at its steady state.An increase in the investment rate in this economy will lead to:

Accepted Answer

A)   an increase in the growth rate of output in both the short run and long run.
B)   no change in the growth rates of either capital or output in either the short run or the long run,since the economy is already in the steady state.
C)   an increase in the growth rate of output in the short run but lower overall growth in the long run as a result of increased depreciation.
D)   an increase in the growth rate of output in the short run but zero growth in output in the long run.E) A) and B)
F) C) and D)

Question 7

The simplest form of the Solow model with no advances in technology predicts that economic growth will continue indefinitely in the long run.

Accepted Answer

A) True 
 B)False

Question 8

The formula that represents the generation of ideas (A) is:

Accepted Answer

A)   population - incentives - ideas per hour.
B)   population × incentives × ideas per hour.
C)   capital × (population ÷ ideas per hour) .
D)   capital ÷ population - ideas per hour.E) All of the above
F) B) and D)

Question 9

The Solow model predicts that a country will grow more rapidly the:

Accepted Answer

A)   further its capital stock is above its steady-state value.
B)   further its capital stock is below its steady-state value.
C)   closer its capital stock is to its steady-state value from above.
D)   closer its capital stock is to its steady-state value from below.E) A) and C)
F) B) and D)

Question 10

Imagine an economy with production function Y = F(K) = and 400 units of capital.If the fraction of output invested in new capital is  = 0.2,the depreciation rate is  = .05,and the economy starts with output of 20,what does the Solow model predict will happen to output in the long run?

Accepted Answer

A)   It will remain at 20.
B)   It will decline.
C)   It will increase.
D)   It will increase for a time and then return to 20.E) A) and B)
F) A) and C)

Question 11

Conditional convergence refers to the tendency for:

Accepted Answer

A)   poorer countries to grow faster than richer countries,but only if they receive sufficient foreign investment.
B)   richer countries to grow faster than poorer countries given similar steady-state capital stocks,so the poor countries never catch up with the rich countries.
C)   poorer countries to grow faster than richer countries given similar steady-state capital stocks,but the poor countries will never catch up with the rich countries.
D)   countries with similar steady-state levels of output to grow faster when they're poor than when they're rich until their per capita GDP levels converge.E) A) and C)
F) C) and D)

Question 12

Patents encourage new idea creation by temporarily granting monopoly status to inventors.

Accepted Answer

A) True 
 B)False

Question 13

Solow estimated that better ideas are responsible for about _____ of the U.S.standard of living.

Accepted Answer

A)   one-fourth
B)   one-half
C)   three-fourths
D)   allE) A) and C)
F) C) and D)

Question 14

Governments can play a role in supporting the production of new ideas by:

Accepted Answer

A)   taxing industries that become too competitive.
B)   enforcing antimonopoly laws.
C)   directing the immediate exchange of all scientific ideas.
D)   protecting intellectual property.E) A) and C)
F) All of the above

Question 15

In the past several hundred years,economic growth has been:

Accepted Answer

A)   decreasing.
B)   staying the same.
C)   increasing.
D)   nonexistent.E) A) and C)
F) A) and B)

Question 16

Depreciation is defined as the wear and tear on capital goods.

Accepted Answer

A) True 
 B)False

Question 17

The difference between investment and depreciation determines capital growth.

Accepted Answer

A) True 
 B)False

Question 18

Among countries with similar Solow steady states,poorer countries tend to grow _____ rich countries.

Accepted Answer

A)   more slowly than
B)   at the same rate as
C)   faster than
D)   sometimes faster and sometimes more slowly thanE) B) and C)
F) All of the above

Question 19

A patient with a rare disease has the same chance of survival as one with a common disease,thanks to the spillover effect.

Accepted Answer

A) True 
 B)False

Question 20

The social benefits of research and development are equal to the private benefits.

Accepted Answer

A) True 
 B)False

Exam 8: Growth,capital Accumulation

The simplest form of the Solow model with no advances in technology predicts that economic growth will continue indefinitely in the long run.

Correct AnswerverifiedShow Answer

The difference between investment and depreciation determines capital growth.

Correct AnswerverifiedShow Answer

In the context of the Solow model,new ideas shift the production function upward.

Correct AnswerverifiedShow Answer

Consider an economy that is operating at its steady state.An increase in the investment rate in this economy will lead to:

Correct AnswerverifiedShow Answer

Patents encourage new idea creation by temporarily granting monopoly status to inventors.

Correct AnswerverifiedShow Answer

-(Figure: The Solow Model) Which of the following events would NOT shift the production function from Y1 to Y2 in the accompanying diagram of the Solow model?

Correct AnswerverifiedShow Answer

The formula that represents the generation of ideas (A) is:

Correct AnswerverifiedShow Answer

A patient with a rare disease has the same chance of survival as one with a common disease,thanks to the spillover effect.

Correct AnswerverifiedShow Answer

The most important incentive for research and development of new ideas is government funding.

Correct AnswerverifiedShow Answer

Imagine an economy with production function Y = F(K) = and 400 units of capital.If the fraction of output invested in new capital is  = 0.2,the depreciation rate is  = .05,and the economy starts with output of 20,what does the Solow model predict will happen to output in the long run?

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Among countries with similar Solow steady states,poorer countries tend to grow _____ rich countries.

Correct AnswerverifiedShow Answer

In the past several hundred years,economic growth has been:

Correct AnswerverifiedShow Answer

The Solow model predicts that a country will grow more rapidly the:

Correct AnswerverifiedShow Answer

What is the name for the tendency-among countries with similar steady-state levels of output-for poorer countries to grow faster than richer countries until they reach the same income levels?

Correct AnswerverifiedShow Answer

Solow estimated that better ideas are responsible for about _____ of the U.S.standard of living.

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Depreciation is defined as the wear and tear on capital goods.

Correct AnswerverifiedShow Answer

Governments can play a role in supporting the production of new ideas by:

Correct AnswerverifiedShow Answer

Conditional convergence refers to the tendency for:

Correct AnswerverifiedShow Answer

The social benefits of research and development are equal to the private benefits.

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In the Solow model,output increases when investment is greater than depreciation.

Correct AnswerverifiedShow Answer

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-(Figure: The Solow Model) Which of the following events would NOT shift the production function from Y₁ to Y₂ in the accompanying diagram of the Solow model?

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