Answer key AS4

Answer key AS4 - Econ 199 Macroeconomic Theory I Assignment...

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1 Econ 199 Macroeconomic Theory I Assignment 4 (Chapter 10, 11,12) Due: in TA’s office hour, May 27th, 2009, Wednesday 1. Label each of the following statement true, false, or uncertain. Explain briefly. a) In the long-run, capital accumulation affects the level of output, but not the growth rate of output per capita. True/Uncertain. If the production function satisfies the property of decreasing return to capital, as the one we discussed in Chapter 10 and 11, then in the long run capital accumulation will only affect the level of output per capita, but not the growth rate of output per capita. b) Output per capita in most countries in the world is converging to the level of output per capita in the United States. Uncertain/ False. Output per capita in OECD countries converges to the level of output per capita in the United States. But for some African countries, their output per capita remains in low level or even have negative growth rate since 1960. c) For much of the human history, any increase in output leads to a proportional increase in population, and therefore, there was stagnation of output per capita. True. See Pg 235 of textbook. d) A higher investment rate cannot sustain higher growth rate forever. True. Higher investment rate (higher saving rate) will only increase the capital accumulation. As illustrated in (a), if the production function satisfies the property of decreasing return to capital, then this will lead to positive growth rate for some time, but it cannot lead to higher growth rate forever. e) The golden rule capital stock is the capital stock that gives the highest steady state output per worker. False. The golden rule capital stock is the capital stock that gives the highest
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This note was uploaded on 04/03/2010 for the course ECON ECON199 taught by Professor Jennyxu during the Spring '09 term at HKUST.

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Answer key AS4 - Econ 199 Macroeconomic Theory I Assignment...

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