chapter06[1] - 54 Williamson Macroeconomics Second Edition...

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T Textbook Question Solutions Questions for Review 1. In exogenous growth models, growth is caused in the model by forces not explained by the model itself. Endogenous growth models examine the economic factors that cause growth. 2. Pre-1800: Constant per capita Income across Time and Space Post-1800: Sustained Growth in the Rich Countries High Investment High Standard of Living High Population Growth Low Standard of Living Divergence of per capita Incomes: 1800–1950 No conditional Convergence amongst all Countries Conditional Convergence amongst the Rich Countries No Conditional Convergence amongst the Poorest Countries 3. An increase in total factor productivity increases the size of the population, but has no effect on the equilibrium level of consumption per worker. 4. Only a downward shift in the population growth function can increase the standard of living. 5. Malthus’ model is quite successful in explaining economic growth prior to the industrial revolution. Malthus’ model has little relevance for more recent growth experience.
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Chapter 6 Economic Growth: Malthus and Solow 55 6. The Cobb-Douglas production function permits a simple decomposition of economic growth into its component sources. 7. In a competitive equilibrium, the parameter a is equal to the share of capital income in total income. 8. The Solow residual measures increases in real GDP that are not accounted for by increases in capital and labor. The Solow residual is highly procyclical as it explains the great majority of the cyclical component in GDP. 9. The productivity slowdown could be explained by underestimates of output in the growing services sector, increases in the relative price of energy, and the costs of adopting new technologies. 10. Growth in capital, employment and total factor productivity account for growth in GDP. 11. During this period, growth in these countries was much larger than average. Growth rates for these countries were about three-times as fast as growth in the United States. However, most of this growth can be attributed to increases in the capital stocks in these countries, and such rapid rates of growth of capital cannot be sustained for long periods of time. 12. In the steady state of the Solow model, capital, labor, and output all grow at the same rate. Therefore, per capita income and the per capita capital stock are constant.
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