Practice Problems II

Practice Problems II - ECON 502 Practice Problems II 1. If...

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Page 1 ECON 502 Practice Problems II 1. If the national saving rate increases, the: a) economy will grow at a faster rate forever. b) capital-labor ratio will increase forever. c) economy will grow at a faster rate until a new, higher, steady-state capital-labor ratio is reached. d) capital-labor ratio will eventually decline. 2. In the Solow growth model, an economy in the steady state with a population growth rate of n but no technological growth will exhibit a growth rate of output per worker at rate: a) 0 b) n c) δ d) ( n + δ ) 3. In the Solow growth model, an economy in the steady state with a population growth rate of n but no technological growth will exhibit a growth rate of total output at rate: a) 0 b) n c) δ d) ( n + δ ) 4. The Solow growth model with population growth but no technological progress can explain: a) persistent growth in output per worker. b) persistent growth in total output. c) persistent growth in consumption per worker. d) persistent growth in the saving rate. 5. The Solow model with population growth but no technological change cannot explain persistent growth in standards of living because: a) total output does not grow. b) depreciation grows faster than output. c) output, capital, and population all grow at the same rate in the steady state. d) capital and population grow, but output does not keep up. 6. Assume that two countries both have the per-worker production function y = k 1/2 , neither has population growth or technological progress, depreciation is 5 percent of capital in both countries, and country A saves 10 percent of output whereas country B saves 20 percent. If A starts out with a capital-labor ratio of 4 and B starts out with a capital-labor ratio of 2, in the long run: a) both A and B will have capital-labor ratios of 4. b) both A and B will have capital-labor ratios of 16. c) A's capital-labor ratio will be 4 whereas B's will be 16. d) A's capital-labor ratio will be 16 whereas B's will be 4.

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Page 2 7. In the Solow growth model with population growth and technological change, the break-even level of investment must cover: a) depreciating capital. b) depreciating capital and capital for new workers. c) depreciating capital and capital for new effective workers. d) depreciating capital, capital for new workers, and capital for new effective workers. 8. In the Solow model with technological progress, the steady-state growth rate of output per (actual) worker is: a) 0. b) g . c) n . d) n + g . 9. Over the business cycle, investment spending ______ consumption spending. a) is inversely correlated with b) is more volatile than c) has about the same volatility as d) is less volatile than 10. Most economists believe that prices are: a) flexible in the short run but many are sticky in the long run. b)
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This note was uploaded on 06/09/2009 for the course ECON 502.01 taught by Professor Mccafferty during the Spring '08 term at Ohio State.

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Practice Problems II - ECON 502 Practice Problems II 1. If...

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