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Exam 8: Economic Growth I: Capital Accumulation and Population Growth

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Question 41

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What does the Malthusian model predict about population growth and its impact? How does the Kremerian model contradict the Malthusian model?

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Malthus argued that a continuous increas...

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Question 42

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In the Solow growth model, with a given production function, depreciation rate, saving rate, and no technological change, higher rates of population growth produce:

A) higher steady-state ratios of capital per worker.
B) higher steady-state growth rates of output per worker.
C) higher steady-state growth rates of total output.
D) higher steady-state levels of output per worker.

E) All of the above
F) C) and D)

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Question 43

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When an economy's capital is below the Golden Rule level, reaching the Golden Rule level:

Suppose an economy is initially in a steady state with capital per worker exceeding the Golden Rule level. If the saving rate falls to a rate consistent with the Golden Rule, then in the transition to the new steady state, consumption per worker will:

The Solow growth model describes:

Assume that a country's per-worker production is y = k^1/2, where y is output per worker and k is capital per worker. Assume also that 10 percent of capital depreciates per year (= 0.10) ² and there is no population growth or technological change. a.If the saving rate (s) is 0.4, what are capital per worker, production per worker, and consumption per worker in the steady state? b.Solve for steady-state capital per worker, production per worker, and consumption per worker with s = 0.6. c.Solve for steady-state capital per worker, production per worker, and consumption per worker with s = 0.8. d.Is it possible to save too much? Why?

Explain the two uses of saving in the steady state in the Solow model with population growth but no technological progress.

Define Golden Rule level of capital.

Analysis of population growth around the world concludes that countries with high population growth tend to:

According to Michael Kremer, large populations:

Suppose that two countries are exactly alike in every respect except that population grows at a faster rate in country A than in country B. a.Which country will have the higher level of output per worker in the steady state? Illustrate graphically. b.Which country will have the faster rate of growth of output per worker in the steady state?

If an economy moves from a steady state with positive population growth to a zero population growth rate, then in the new steady state, total output growth will be _____, and growth of output per person will be _____.

In the Solow growth model, the assumption of constant returns to scale means that:

Assume that a country's production function is Y = K^1/2L^1/2 and there is no population growth or technological change. a.What is the per-worker production function y = f(k)? b.Assume that the country possesses 40,000 units of capital and 10,000 units of labour. What is Y? What is labour productivity computed from the per-worker production function? Is this value the same as labour productivity computed from the original production function? c.Assume that 10 percent of capital depreciates each year. What gross saving rate is necessary to make the given capital-labour ratio the steady-state capital-labour ratio?

When an economy reaches a steady state other than the Golden Rule, what actions should policymakers take to achieve the Golden Rule steady state when: a. the economy begins with more capital than in the Golden Rule steady state? b. the economy begins with less capital than in the Golden Rule steady state?

The Solow model shows that a key determinant of the steady-state ratio of capital to labour is the:

If an economy with no population growth or technological change has a steady-state MPK of 0.125, a depreciation rate of 0.1, and a saving rate of 0.225, then the steady-state capital stock:

Suppose an economy is initially in a steady state with capital per worker below the Golden Rule level. If the saving rate increases to a rate consistent with the Golden Rule, then in the transition to the new steady state consumption per worker will:

The formula for steady-state consumption per worker (c*) as a function of output per worker and investment per worker is:

Suppose that an economy is in its steady state and the capital stock is above the Golden Rule level. Assuming that there are no population growth or technological change, if the saving rate falls: