33
Barro
Chapter 4
TRUE/FALSE
1. An increase in the depreciation rate affects the steady-state capital per worker the same way as an
increase in the population growth rate.
2. If the saving rate increases, then the optimum level of capital per worker falls.
3. An increase in technology causes the optimum level of capital per worker to rise in the long run or
steady state.
4. An increase in technology causes the real GDP per worker to increase during the transition to the
steady-state.
5. An increase in technology cause the growth in real output per worker to be higher in the long run or
steady-state.
6. An increase in the saving rate causes the growth in real output per worker to be lower in the long run
or steady-state.
7. The Solow model of growth says that poorer economies should over time converge towards richer
ones in terms of real output put worker.
8. In the long run or steady state of the Solow model, the growth rate of capital per worker is higher with
a higher saving rate.
9. An increase in the population growth rate in the Solow model causes the growth in output per worker
to be higher in the long run or steady-state.
10. An increase in the population growth rate in the Solow model causes output per worker to be lower in
the long run or steady-state.
34
MULTIPLE CHOICE
1. In the revised version of the Solow growth model the optimal level of capital stock per worker depends
on:
a.
the saving rating.
c.
population growth rate.
b.
the depreciation rate.
d.
all of the above.
2. In the revised version of the Solow growth model the optimal level of the capital stock per worker
depends on:
a.
monetary growth.
c.
the saving rate.
b.
government spending.
d.
all of the above.
3. In the revised version of the Solow growth model the optimal level of the capital stock per worker
depends on:
a.
monetary growth.
c.
appreciation in the stock market.
b.
the depreciation rate.
d.
all of the above.
4. In the revised version of the Solow growth model the optimal level of the capital stock per worker
depends on:
a.
the population growth rate.
c.
inflation.
b.
government spending.
d.
all of the above.
5. In the Solow growth model as a growing economy transitions to the steady state:
a.
the average product of capital falls.
c.
the average product of labor falls.
b.
output per worker is constant.
d.
the growth rate of capital is equal to zero.
6. In the Solow growth model in the steady state the growth rate of capital per worker, k*, is:
a.
rising.
c.
fluctuating.
b.
falling.
d.
zero.
7. In the Solow growth model, if technology, A, improves, then in the steady state:
a.
output per worker grows faster.
c.
capital per worker grows faster.
b.
output per worker grows at the same rate,
zero.
d.
all of the above.
8. In the Solow growth model, if the population growth rate, n, increases, then in the steady state:
a.
output per worker grows slower.
c.
capital per worker grows at the same rate,
zero.
b.
capital per worker grows slower.
d.
all of the above.
35
9. In the Solow growth model, if the depreciation rate, , increases, then in the steady state:
a.
output per worker grows at the same rate,
zero.
c.
capital per worker grows faster.
b.
output per worker grows faster.
d.
all of the above.
10. In the Solow growth model, if labor input, L(0), increases, then in the steady state:
a.
output per worker grows faster.
c.
capital per worker grows faster.
b.
capital per worker grows at the same rate,
zero.
d.
all of the above.
11. In the Solow growth model in the steady state the growth rate of output per worker, y*, is:
a.
rising.
c.
constant at zero.
b.
falling.
d.
fluctuating.
12. If the saving rate increases in the Solow growth model, then during the transition to the steady state:
a.
the growth rate of capital per worker will
increase.
c.
the growth rate of capital per worker is
constant.
b.
the growth rate of capital per worker will
decrease.
d.
the growth rate of capital per worker is
zero.
13. If the saving rate increases in the Solow growth model, then in the steady state the growth rate of
capital per worker is:
a.
constant.
c.
zero.
b.
unchanged.
d.
all of the above.
14. If the saving rate increases in the Solow growth model, then in the steady state the growth rate of
capital per worker is:
a.
higher.
c.
lower.
b.
unchanged.
d.
rising.
15. If the level of technology increases in the Solow growth model, then in the steady state, the growth
rate of capital per worker is:
a.
higher.
c.
lower.
b.
unchanged.
d.
rising.
16. If the saving rate increases in the Solow growth model, then in the steady state:
a.
capital per worker and the growth of
capital will be higher.
c.
capital per worker will be higher but the
growth rate of capital will be lower.
b.
capital per worker will be higher but the
growth rate of capital will remain the
d.
capital per worker will be lower but the
growth rate of capital will be higher.
36
same at zero.
17. If the level of technology increases in the Solow growth model, then in the steady state
a.
capital per worker and the growth of
capital will be higher.
c.
capital per worker will be higher but the
growth rate of capital will be lower.
b.
capital per worker will be higher but the
growth rate of capital will remain the
same at zero.
d.
capital per worker will be lower but the
growth rate of capital will be higher.
18. If the level of technology increases in the Solow growth model, then in the steady state
a.
capital per worker will be higher.
c.
the growth rate of capital will be lower.
b.
saving per worker will be higher.
d.
capital per worker will be the same.
19. If the level of technology increases in the Solow growth model, then in the steady state
a.
capital per worker will be higher.
c.
the growth rate of capital will be lower.
b.
output per worker will be higher.
d.
both (a) and (b).
20. If the saving rate increases in the Solow growth model, then in the steady state
a.
capital per worker will be higher.
c.
the growth rate of capital will be zero.
b.
output per worker will be higher.
d.
all of the above.
21. If the level of technology increases in the Solow growth model, then in the steady state
a.
output per worker will be higher.
c.
the growth rate of capital will be zero.
b.
capital per worker will be higher.
d.
all of the above.
22. In the Solow growth model during the transition an increase in technology:
a.
lowers the growth rate of capital per
worker.
c.
raises the growth rate of capital per
worker.
b.
does not change the growth rate of capital
per worker.
d.
causes the growth rate of capital to fall to
zero per worker.
23. In the Solow growth model during the transition an increase in technology:
a.
lowers the growth rate of output per
worker.
c.
raises the growth rate of output per
worker.
b.
does not change the growth rate of output
per worker.
d.
causes the growth rate of output per
worker to fall to zero.
24. In the Solow growth model during the transition an increase in technology:
a.
lowers the growth rate of capital and
output per worker.
c.
raises the growth rate of capital and output
per worker.
37
b.
raises the growth rate of capital per
worker and lowers the growth rate of
output per worker.
d.
lowers the growth rate of capital per
worker and raises the growth rate of
output per worker.
25. In the Solow growth model in the short run, an increase in the labor input L(0):
a.
increases the growth rate of real output per
worker.
c.
reduces the growth rate of capital per
worker.
b.
increases s•(y/k).
d.
decreases s + n.
26. In the Solow growth model in the short run, an increase in the labor input L(0),
a.
decrease the growth rate of real output per
worker.
c.
increase the growth rate of capital per
worker.
b.
increases s•(y/k).
d.
decrease s + n.
27. In the Solow growth model in the long run or steady state, an increase in the labor input L(0) will,
a.
increase the capital stock.
c.
not affect real output per worker.
b.
lead to a growth of the capital stock per
worker of zero.
d.
all of the above.
28. In the Solow growth model in the long run or steady state, an increase in the labor input L(0) will,
a.
decrease the capital stock.
c.
not change real output per worker.
b.
lead to a positive growth of the capital
stock per worker.
d.
all of the above.
Figure 4.1
Determinants
of k/k
29. In Figure 4.1 the distance between s•(y/k) and s + n is the growth of capital per worker:
a.
in the transition.
c.
in the steady state.
b.
in the long-run.
d.
none of the above.
ANS: A PTS: 1 DIF: 3 NAT: Analytic
38
30. In Figure 4.1 if the saving rate increases, then
a.
the curve s + n increases.
c.
the curve s + n decreases.
b.
the curve s + n becomes steeper.
d.
the curve s + n becomes flatter.
31. In Figure 4.1, if the saving rate increase, then:
a.
s•(y/k) increases.
c.
s•(y/k) decreases.
b.
s•(y/k) gets steeper.
d.
s•(y/k) becomes vertical.
32. In Figure 4.1, if the saving rate increase, then:
a.
s•(y/k) and s + n increase.
c.
s•(y/k) and s + n decrease.
b.
s•(y/k) increases while s + n decreases.
d.
s•(y/k) decreases while s + n increase.
33. In Figure 4.1, if the technology improves, then:
a.
s•(y/k) increases.
c.
s•(y/k) decreases.
b.
s + n increases.
d.
s + n decreases.
34. In Figure 4.1, if the initial amount of labor increases, then:
a.
s•(y/k) increases.
c.
s + n increases.
b.
K/L moves away from the optimum.
d.
the growth rate of population increases.
35. In Figure 4.1, if the initial amount of labor increases, then in the steady state:
a.
the growth rate of capital per worker
increases.
c.
the growth rate of output per worker is the
same.
b.
the growth rate of output per worker rises.
d.
the population growth rate rises.
36. In Figure 4.1, if the initial amount of labor increases, then during the transition to they steady state:
a.
the growth rate of capital per worker and
output per worker increase.
c.
the growth rate of capital per worker
increases and output per worker decrease.
b.
the growth rate of capital per worker and
output per worker.decrease.
d.
the growth rate of capital per worker
decreases and output per worker increases.
37. In Figure 4.1, if the population growth rate increases, then:
a.
s•(y/k) increases.
c.
s + n increases.
b.
K/L moves away from the optimum.
d.
the initial amount of labor increases.
38. In Figure 4.1, an increase in productivity:
a.
raises the steady state growth rate of
capital per worker.
c.
lowers the steady state growth rate of
output per worker
b.
does not change steady-state growth rates
d.
lowers the steady-state level of capital.
of output or capital per worker.
39. In Figure 4.1, an increase in the depreciation rate has the same effects as:
a.
an increase in the savings rate.
c.
an increase in the population growth rate.
b.
an increase in the initial amount of labor.
d.
all of the above.
40. In Figure 4.1, an increase in technology:
a.
increases s•(y/k)
c.
increases s + n.
b.
decreases s•(y/k)
d.
decreases s + n.
41. In Figure 4.1, an increase in technology:
a.
increases k*.
c.
decreases k*.
b.
does not affect k*.
d.
makes k* zero.
42. In Figure 4.1, an increase in the population growth rate:
a.
increases k*.
c.
decreases k*.
b.
does not affect k*.
d.
makes k* zero.
43. In Figure 4.1, an increase in the depreciation rate:
a.
increases k*.
c.
decreases k*.
b.
does not affect k*.
d.
makes k* zero.
44. In Figure 4.1, if the technology improves, then:
a.
the steady-state capital stock increases.
c.
the steady-state growth in output per
worker increases.
b.
the steady-state growth in capital per
worker increases.
d.
the population growth rate increases.
45. Convergence of economies is the tendency according to the Solow growth model for:
a.
richer countries to buy up all the capital in
poorer countries.
c.
poorer economies to grow faster in terms
of real GDP per capita than richer
countries.
b.
richer countries to tend decline as
pollution damage increases.
d.
the tendency for richer economies to
shrink to the size of poorer economies.
46. Since 1960 the data show a tendency of output per worker to converge:
a.
in all countries in the world.
c.
in OECD countries.
b.
countries with different savings rates.
d.
none of the above.
47. The data show a tendency of output per worker to converge:
a.
among US States from 1880 to 2000.
c.
in OECD countries from 1960 to 2000.
b.
countries with similar economies.
d.
all of the above.
48. Convergence will not happen if economies around the world have:
a.
different saving rates.
c.
different population growth rates.
b.
different technologies.
d.
all of the above.
49. Convergence will not happen if economies around the world have:
a.
different saving rates.
c.
different levels out labor input.
b.
different average products of capital in the
transition.
d.
all of the above.
50. Convergence will not happen if economies around the world have:
a.
different capital labor ratios in during the
transition.
c.
different levels out labor input.
b.
different population growth rates.
d.
all of the above.
51. Convergence will not happen if economies around the world have:
a.
different average products of capital
during the transition.
c.
different levels of technology.
b.
different initial levels of labor input.
d.
all of the above.
52. Convergence will not happen if economies around the world have:
a.
different average products of capital
during the transition.
c.
different optimum levels of capital per
worker, k*.
b.
different initial levels of labor input.
d.
all of the above.
53. Economies are said to have converged if they:
a.
have the same growth rate in the
transition.
c.
have the same saving rate.
b.
have the same capital per worker, k*, in
the steady state.
d.
all of the above.
54. When converging economies:
a.
have the same growth rate of capital per
worker.
c.
have the same growth rate of output per
worker.
b.
the same steady state capital per worker,
k*.
d.
all of the above.
41
55. Convergence will not happen if economies around the world have:
a.
different savings rates.
c.
different optimum levels of capital per
worker, k*.
b.
different population growth rates.
d.
all of the above.
56. Convergence will not happen if economies around the world have:
a.
different capital per worker growth rates
in the transition.
c.
different initial starting points.
b.
different initial levels of labor input, L(0).
d.
none of the above.
57. If the savings rate increases in the Solow growth model, then during the short run transition to the
steady state,
a.
the growth rate of capital per worker
increases.
c.
the depreciation rate of capital per worker
increases.
b.
the growth rate of the population
decreases.
d.
the growth rate of capital per worker to
equal zero.
58. A major influenza pandemic which led to many deaths would have what effect on the Solow growth
model?
a.
It would decrease the level of technology.
c.
It would decrease the depreciation rate.
b.
It would decrease the labor force.
d.
It would increae the level of technology.
59. Suppose that Canada experiences a large migration of Mexicans to Canada. The effect on the Solow
growth model would be to
a.
decrease the level of technology.
c.
decrease the saving rate.
b.
increase the labor force.
d.
increae the level of technology.
60. If the initial level of labor increases, but the population growth rate does not change, then the
a.
initial capital per worker decreases,
c.
initial capital per worker remains zero.
b.
initial capital per worker increases.
d.
initial growth rate of capital per worker
decreases.
61. If the initial level of labor increases, but the population growth rate does not change, then the
a.
initial growth rate of capital per worker
decreases.
c.
initial capital per worker remains zero.
b.
initial capital per worker increases.
d.
initial growth rate of capital per worker
increases.
62. In the long run, an economy with twice as much labor has
a.
less than twice as much capital.
c.
less than twice as much real GDP.
b.
twice as much capital per worker.
d.
twice as much real GDP.
42
63. In the long run, an economy with twice as much labor has
a.
more than twice as much capital and real
GDP.
c.
less than twice as much capital and real
GDP.
b.
twice as much capital per worker and
output per worker.
d.
twice as much capital and real GDP.
64. If the population growth rate increases, then in the steady state of the Solow model,
a.
real capital per worker is higher.
c.
the gowth rate of capital per worker is
higher.
b.
real capital per worker is lower.
d.
the growth rate of capital per worker is
lower.
65. If the population growth rate increases, then in the steady state of the Solow model,
a.
real GDP per worker is higher.
c.
the gowth rate of GDP per worker is
higher.
b.
real GDP per worker is lower.
d.
the growth rate of GDP per worker is
lower.
SHORT ANSWER
1. What are the short and long run effects of an increase in the saving rate in the Solow growth model?
2. What are the long and short run effects of an increase in technology, A, in the Solow growth model?
3. What are the long run and short run effects to an increase in the labor input in the Solow growth
model?
ANS:
43
4. What are the long and short run effects of an increase in the population growth rate the Solow growth
model?
5. Why does the Solow growth model show the economies of poor countries tend to converge over time
toward richer ones in terms of per capita and real GDP per worker?