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Exam 8: Economic Growth II

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Question 41

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Suggest three explanations for the productivity slowdown experienced between 1972 and 1995.

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Possible explanations include:...

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Question 42

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In a steady state with population growth and technological progress:

A) the capital share of income increases.
B) the labour share of income increases.
C) in some cases the capital share of income increases and sometimes the labour share increases.
D) the capital and labour shares of income are constant.

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

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Question 43

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Prescott interpreted fluctuations in the Solow residual as evidence that:

What is the difference between convergence and conditional convergence with respect to predictions of the Solow growth model? Explain.

Explain how the Solow growth model differs from models of endogenous growth with respect to: a.the sources of technological progress.b.returns to capital.

In a steady-state economy with a saving rate s,population growth n,and labour-augmenting technological progress g,the formula for the steady-state ratio of capital per effective worker (k*) ,in terms of output per effective worker (f(k*) ) ,is (denoting the depreciation rate by $\delta$ ) :

An alternative to Prescott's explanation of the cyclical behaviour of the Solow residual is that it is the result of:

Exhibit: Factors of Production Data Use the data in the exhibit to complete a and b. a.Compute and report the value of growth in total factor productivity ((A_t - A_t-1)/A_t-1)in each period from periods 2 through 5.If the value of A is 1.000 in period 1,also report the value of A in each period. b.Does the value of A rise in each period? If it declines,do you think this decline is because technological progress works backwards? If so,explain your answer.If not,provide another explanation.

Suppose a government is able to impose controls that limit the number of children people can have.Use the Solow growth model of Chapter 8 to graphically illustrate the impact of the slower rate of population growth on the steady-state capital-labour ratio and the steady-state level of output per worker.Be sure to label the: i.axes ii.curves iii.initial steady-state levels iv.terminal steady-state levels v.the direction curves shift.

If productivity growth in Canada had remained at its level before the recent productivity slowdown,real income today would be more than ______ percent higher.

Suppose a government is able to permanently reduce its budget deficit.Use the Solow growth model of Chapter 8 to graphically illustrate the impact of a permanent government deficit reduction on the steady-state capital-labour ratio and the steady-state level of output per worker.Be sure to label the: i.axes ii.curves iii.initial steady-state levels iv.terminal steady-state levels v.the direction curves shift.

The Solow residual will fall even if technology has not changed if there is:

In the Solow model with technological progress,by increasing the efficiency of labour at rate g:

The Solow residual equals the percentage change in output:

Schumpeter's thesis of "creative destruction" is an explanation of economic progress resulting from:

In the two-sector endogenous growth model,the fraction of labour in universities (u) affects the steady-state:

In the Solow growth model with population growth and technological change,the steady-state growth rate of income per person depends on:

Economic research shows that ______ in explaining international differences in living standards.

a.What is the Solow residual? b.Compare Prescott's interpretation of the fluctuations of the Solow residual over the business cycle with more standard explanations of these fluctuations.

If two economies are identical (including having the same saving rates,population growth rates,and efficiency of labour) ,but one economy has a smaller capital stock,then the steady-state level of income per worker in the economy with the smaller capital stock will be: