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Midterm_1_AnswerKey_FinalVersion

Midterm_1_AnswerKey_FinalVersion - Economics 111B Meissner...

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Economics 111B - Meissner Midterm 1 Answer Key 1 Multiple Choice . Version A 1. b 2. a 3. d 4. c 5. b Version B 1. b 2. b 3. d 4. d 5. b Explanations use the questions from Version A, which are the same as Ver- sion B except the question and possible answers (a)-(e) are in a di/erent order. 1. In the Solow or neoclassical growth model, the level of per capita income at any point in time is not determined by which of the fol- lowing: a. the growth rate of technological change b. the size of the °nancial sector c. the depreciation rate of the capital stock d. the savings rate Explanation: According to the Solow Model, the level of the per capita income at any point is determined by the capital / output ratio (or the capital per e/ective worker), which is directly related to the saving rate(s) and indi- rectly related to the depreciation rate, the rate of population growth and the technology growth rate. There are no "scale e/ects" in Solow, which means that changes in the units used to measure our various inputs will not have a real e/ect. For example, if we were to change a measure of Labor to something measured in cents, and previously we had had dollars, then any numbers we compute will simply be 100 times greater than when we used dollars (or 1/100, depending on whether Labor occurs in the numerator or denominator of the number in question). So, the size of the °nancial sector is unimportant in Solow, whether it involves trillions of dollars or thousands of dollars. 1
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2. Which of the following was least important in shaping changes in the level of total output since 1870 in the US? a. settlement of new land and acquisition of new lands for the United States b. the growth rate of the population c. the accumulation of capital d. total factor productivity growth Explanation: Growth in land contributed 4% to total output growth in the period of 1870-1930 and practically 0% afterward. 3. Which list of factors has been cited as important in driving the number of children born to women in the US in the nineteenth cen- tury? a. increased incidence of disease and rising risk of infant mortality due to a major increase in the prevalence of infectious diseases associated with industrialization b. the size of the railroad network, compulsory schooling laws and the con- traceptive pill c. monopolistic merchant lenders, racism, and barriers to land ownership for poor emancipated African-Americans d. job opportunities in manufacturing, the level of immigration to the US, and the contribution to the value of the output of the family farm Explanation: Declining birth rate is associated with: o The entry of women into the manufacturing labor force (the opportunity cost of having more children and staying at home increased) o Some cite growing immigration as a cause for decline in the number of children per family o With rising land prices, individual farmers had smaller pieces of land re- quiring less help of children in the production process on the farm as well as growing mechanization reduced the need for children for farm production
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