1.

The number of effective workers takes into account the number of workers and the:

A.

amount of capital available to each worker.

B.

rate of growth of the number of workers.

C.

efficiency of each worker.

D.

saving rate of each worker.



2.

If the labor force is growing at a 3-percent rate and the efficiency of a unit of labor is growing at a 2-percent rate, then the number of effective workers is growing at a rate of:

A.

2 percent.

B.

3 percent.

C.

5 percent.

D.

6 percent.



3.

In a steady-state economy with a saving rate s, population growth n, and labor-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 d):

A.

sf(k)/(d + n + g).

B.

s/((f(k))(d + n + g)).

C.

f(k)/((s)(d + n + g)).

D.

(s - f(k))/(d + n + g).



4.

In the Solow model with technological change, the Golden Rule level of capital is the steady state that maximizes:

A.

output per worker.

B.

output per effective worker.

C.

consumption per worker.

D.

consumption per effective worker.



5.

In the Solow model with technological progress, the steady-state growth rate of capital per effective worker is:

A.

0.

B.

g.

C.

n.

D.

n + g.



6.

In a Solow model with technological change, if population grows at a 2 percent rate and the efficiency of labor grows at a 3 percent rate, then in the steady state output per worker grows at a ______ percent rate.

A.

0

B.

2

C.

3

D.

5



7.

In the Solow model with technological progress, the steady-state growth rate of output per (actual) worker is:

A.

0.

B.

g.

C.

n.

D.

n + g.



8.

The analysis in Chapter 8 of the current capital stock in the United States versus the Golden Rule level of capital stock shows that the capital stock in the United States is:

A.

well above the Golden Rule level.

B.

about equal to the Golden Rule level.

C.

well below the Golden Rule level.

D.

slightly above the Golden Rule level.



9.

The current U.S. Social Security system is best described as:

A.

fully funded.

B.

privatized.

C.

endogenous.

D.

pay-as-you-go.



10.

A possible externality associated with the process of accumulating new capital is that:

A.

a reduction in labor productivity may occur.

B.

new production processes may be devised.

C.

old capital may be made more productive.

D.

the government may need to adopt an industrial policy.



11.

The recent worldwide slowdown in economic growth began in the early:

A.

1960s.

B.

1970s.

C.

1980s.

D.

1990s.



12.

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.



13.

Hypotheses to explain the positive correlation between factor accumulation and production efficiency include each of the following except:

A.

the quality of a nation's institutions influences both factor accumulation and production efficiency.

B.

capital accumulation causes greater production efficiency.

C.

efficient economies make capital accumulation unnecessary.

D.

an efficient economy encourages capital (including human capital) accumulation.



14.

Endogenous growth theory rejects the assumption of exogenous:

A.

production functions.

B.

rates of depreciation.

C.

population growth rates.

D.

technological change.



15.

In the basic endogenous growth model, income can grow forever--even without exogenous technological progress--because:

A.

the saving rate equals the rate of depreciation.

B.

the saving rate exceeds the rate of depreciation.

C.

capital does not exhibit diminishing returns.

D.

capital exhibits diminishing returns.



16.

In the two-sector endogenous growth model, the saving rate (s) affects the steady-state:

A.

level of income.

B.

growth rate of income.

C.

level of income and growth rate of income.

D.

growth rate of the stock of knowledge.



17.

When capital increases by DK units, output increases by:

A.

DL units.

B.

MPL x DL units.

C.

DK units.

D.

MPK x DK units.



18.

Total factor productivity may be measured by:

A.

subtracting the rate of growth of capital input and the rate of growth of labor input from the rate of growth of output.

B.

subtracting the rate of growth of capital input, multiplied by capital's share of output, plus the rate of growth of labor input, multiplied by labor's share of output, from the rate of growth of output.

C.

adding the rate of growth of capital input to the rate of growth of labor input.

D.

adding the rate of growth of capital input, multiplied by capital's share of output, to the rate of growth of labor input, multiplied by labor's share of output.



19.

In a steady state with population growth and technological progress:

A.

the capital share of income increases.

B.

the labor share of income increases.

C.

in some cases the capital share of income increases and sometimes the labor share increases.

D.

the capital and labor shares of income are constant.



20.

If the per-worker production function is y = Ak, where A is a positive constant, in the steady state, a:

A.

lower saving rate does not affect the growth rate.

B.

higher saving rate does not affect the growth rate.

C.

lower saving rate leads to a higher growth rate.

D.

higher saving rate leads to a higher growth rate.




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