The it revolution of the late 1990s led to an

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4. The “IT Revolution” of the late 1990’s led to an increase in productivity but also to an increase in the rate of depreciation because computers have to be replaced more often. According to the Solow Growth Model: a. Output-per-worker will fall. b. Output-per-worker will rise. c. The effect on output-per-worker is indeterminate. d. Economic growth will be lower in the new steady state. e. Economic growth will be higher in the new steady state.
5. When the central bank increases the money supply, interest rates generally decline. It is widely believed that lower interest rates cause an increase in real economic output. This observation:
6. Suppose that the central bank is committed to maintaining a fixed price level. If the economy starts below its steady state, then according to the Solow growth model and the Quantity Theory of Money:
7. Suppose an economy described by the Solow growth model is initially at a steady state with an economic growth rate of 3%. An earthquake then destroys 25% of the capital stock and kills 25% of the labor force. If these are the only effects then after the earthquake output-per-worker:
8. Although the U.S. economy has been in a steady state for the past 100 years, the average economic growth has been 2% higher than the labor force growth rate. This was most likely due to: a. A rising saving rate. b. Faster capital accumulation. c. An increase in net capital inflow. d. Increasing total factor productivity.
9. Suppose an economy is at its steady state with constant total factor productivity. If the labor force is growing at 3% and the money supply is growing at 9%, then according to the quantity theory of money, the inflation rate is:
Exam #1 (Fall 2016) Econ 100B 3/9

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