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Problem Set #2 ANSWERS (Spring 2008)
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Name: _______________________
SID: _______________________
Discussion Section: _______________________
Problem Set #2 ANSWERS
Due Tuesday, February 19, 2008
QUESTIONS
A.
Multiple Choice Questions
. Circle the letter corresponding to the best
answer. (1 points each.)
1.
Over the past year, productivity grew 2.0%, the capital stock grew 1.0%, and labor grew 1.0%. If the
elasticities of output with respect to capital and labor are 0.2 and 0.8, respectively, how much did output
grow?
a.
1.0%
b.
2.0%
c.
3.0%
d.
4.0%
2.
If capital and labor each grow by 5.0% in a year, the elasticities of output with respect to capital and labor
sum to one, and productivity grows 2.0% in the year, by how much does output grow during the year?
a.
2.0%
b.
3.0%
c.
5.0%
d.
7.0%
3.
Total factor productivity growth is that part of economic growth due to:
a.
Capital growth plus labor growth.
b.
Capital growth minus labor growth.
c.
Capital growth multiplied by labor growth.
d.
Neither capital growth nor labor growth.
4.
Over the past year, output grew 4.0%, capital grew 2.0%, and labor grew 1.0%. If the elasticities of output
with respect to capital and labor are 0.3 and 0.7, respectively, how much did productivity grow?
a.
2.0%
b.
2.7%
c.
3.0%
d.
3.3%
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5.
The perworker production function in the Solow model assumes:
a.
Constant returns to scale and increasing marginal productivity of capital.
b.
Constant returns to scale and diminishing marginal productivity of capital.
c.
Increasing returns to scale and diminishing marginal productivity of capital.
d.
Decreasing returns to scale ad diminishing marginal productivity of capital.
6.
In a steady state:
a.
Both consumptionperworker and the capitaltolabor ratio are constant.
b.
Consumptionperworker is constant but the capitaltolabor ratio can change.
c.
Capital and labor are inversely related to one another by definition.
d.
Consumptionperworker can change but the capitaltolabor ratio is constant.
7.
Steadystate investmentperworker is positively related to the capitaltolabor ratio because the higher the
capitaltolabor ratio:
a.
The lower the capital depreciation rate.
b.
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This note was uploaded on 04/01/2008 for the course ECON 100B taught by Professor Wood during the Spring '08 term at University of California, Berkeley.
 Spring '08
 Wood

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