Chapter 5--MacroTB - CHAPTER 5 The Solow Growth Model...

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39 The Solow Growth Model CHAPTER 5 MULTIPLE-CHOICE 1. The Solow model of economic growth a. endogenizes labor. b. endogenizes physical capital. c. exogenizes physical capital. d. exogenizes investment. e. endogenizes investment. Answer: b. Section: 5.1 2. The key insight in the Solow model is that a. saving rates are determined in a particular manner. b. savings have no impact on economic growth c. capital depreciation enhances economic growth. d. the relationship between capital and output is static. e. capital accumulation contributes to economic growth. Answer: e. Section: 5.1 3. The Solow model describes a. how saving rates are determined. b. the static relationship between capital and output. c. how savings, population growth, and technological change affect output over time. d. how savings, population growth, and technological change affect output in a single period. e. what constitutes technological change. Answer: c. Section: 5.1 4. In the corn farm example, corn can be used as a. only investment. b. either saving or depreciation. c. only consumption. d. either consumption or investment. e. tax revenue. Answer: d. Section: 5.2 5. In the corn farm example, saving some of the corn produced a. yields future output, which grows over time. b. leads to higher consumption in the future. c. yields future output, which grows over time. d. leads to higher consumption today. e. both a and b. Answer: e. Section: 5.2 6. The production function used in the Solow model is a. Y t = K t 1/3 L t 2/3 . b. Y t = A ± K t 2/3 L t 2/3 . c. Y t = A ± K t 1/3 L t 2/3 . d. Y t = A ± (1/3) K t • (2/3) L t . e. Y t = A ± (1/3) K t + (2/3) L t . Answer: c. Section: 5.2 7. If C t denotes consumption, I t denotes investment, and Y t is output, the resource constraint in the Solow model is a. Y t = C t I t . Y t = C t + I t . c. Y t = A ± K t 1/3 L t 2/3 . d. D K t = I t – d ± K t . e. None of the above. Answer: b. Section: 5.2
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40 | Chapter 5 8. In the Solow model, in every period, a fraction of total output __________, which __________. a. is saved; reduces next period’s capital stock b. depreciates; adds to next period’s capital stock c. is saved; adds to next period’s capital stock d. is consumed; adds to next period’s capital stock e. is consumed; reduces next period’s capital stock Answer: c. Section: 5.2 9. In the Solow model, the equation of capital accumulation is a. D K t = I t – d ± K t . b. K t + 1 = K t + I t – d ± K t . c. K t + 1 = K t + I t + d ± K t . d. K t + 1 = K t + dK t I t . e. Both a and b are correct. Answer: e. Section: 5.2 10. In the Solow model, if I t > d ± K t , the capital stock a. declines. b. stays the same. c. grows. d. Not enough information is given. e. None of the above. Answer: c. Section: 5.2 11. In the Solow model, if investment is __________ depreciation, the capital stock __________. a. less than; declines b. greater than; grows c. greater than; declines d. equal to; declines e. a and b are correct Answer: e.
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This note was uploaded on 01/20/2011 for the course ACCT ACCT 3371 taught by Professor Smart during the Spring '10 term at Rensselaer Polytechnic Institute.

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Chapter 5--MacroTB - CHAPTER 5 The Solow Growth Model...

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