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The Solow Growth Model
CHAPTER 5
MULTIPLECHOICE
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
3.
The Solow model describes
4.
In the corn farm example, corn can be used as
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
7. If
C
t
denotes consumption,
I
t
denotes investment, and
Y
t
is output, the resource constraint in the Solow model is
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Chapter 5
8.
In the Solow model, in every period, a fraction of total
output __________, which __________.
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
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 Spring '10
 Smart
 Accounting, Capital accumulation, Solow model, Solow

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