Practice Test #3

Practice Test #3 - ECO 3202.U07 Applied Macroeconomics -...

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Page 1 ECO 3202.U07 Applied Macroeconomics - Practice Test #3 1. If capital lasts an average of 25 years, the depreciation rate is ______ percent per year. A) 25 B) 5 C) 4 D) 2.5 2. The Golden Rule level of the steady-state capital stock: A) will be reached automatically if the saving rate remains constant over a long period of time. B) will be reached automatically if each person saves enough to provide for his or her retirement. C) implies a choice of a particular saving rate. D) should be avoided by an enlightened government. 3. If the per-worker production function is given by y = k 1/2 , the saving ratio is 0.3, and the depreciation rate is 0.1, then the steady-state ratio of output per worker ( y ) is: A) 1. B) 2. C) 3. D) 4. 4. In an economy with no population growth and no technological change, steady-state consumption is at its greatest possible level when the marginal product of: A) labor equals the marginal product of capital. B) labor equals the depreciation rate. C) capital equals the depreciation rate. D) capital equals zero. 5. In the Solow model, it is assumed that a(n) ______ fraction of capital wears out as the capital-labor ratio increases. A) smaller B) larger C) constant D) increasing
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Page 2 6. The formula for steady-state consumption per worker ( c *) as a function of output per worker and investment per worker is: A) c * = f ( k *) – k *. B) c * = f ( k *) + k *. C) c * = f ( k *) ÷ d k *. D) c * = k * – f ( k )*. 7. With population growth at rate n and labor-augmenting technological progress at rate g , the Golden Rule steady state requires that the marginal product of capital ( MPK ): A) net of depreciation be equal to n + g . B) net of depreciation be equal to the depreciation rate plus n + g . C) plus n be equal to the depreciation rate plus g . D) plus g be equal to the depreciation rate plus n . 8. In the Solow growth model, increases in capital ______ output and ______ the amount of output used to replace depreciating capital. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease 9. Over the past 50 years in the United States: A) output per worker hour, capital stock per worker hour, the real wage, and the real rental price of capital have all increased about 2 percent per year. B) output per worker hour, the real wage, and the real rental price of capital have all increased about 2 percent per year, whereas capital stock per worker hour has increased faster. C) output per worker hour and the real wage have both increased about 2 percent per year, whereas capital stock per worker hour has increased faster and the real rental price of capital has remained about the same. D) output per worker hour, the real wage, and capital stock per worker hour have all increased about 2 percent per year, whereas the real rental price of capital has remained about the same. 10. Public policies in the United States designed to stimulate technological progress do not include: A) tax breaks for gains on investment in the stock market.
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This note was uploaded on 12/31/2011 for the course ECO 3032.U07 taught by Professor Danielomurgo during the Fall '10 term at FIU.

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Practice Test #3 - ECO 3202.U07 Applied Macroeconomics -...

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