Question 1

In the Solow model with labor-augmenting technological progress, what is the formula for the break-even investment per effective worker?

Accepted Answer

$$(\delta + n + g)k$$

Question 2

Suppose a country increases its rate of technological progress $$g in $$the Solow model. What is the long-run effect on the growth rate of output per worker ($$Y/L$$)?

Accepted Answer

It increases by $$g$$

Question 3

Which of the following best describes 'conditional convergence' as predicted by the Solow-Swan model?

Accepted Answer

Countries converge to their own steady states determined by saving, population growth, and education

Question 4

In the Solow model with technological progress, what is the steady-state growth rate of total output ($$Y$$)?

Accepted Answer

$$n + g$$

Question 5

If the marginal product of capital net of depreciation ($$MPK - \delta) is $$greater than the sum of population growth and technological progress ($$n + g$$), what does the Golden Rule suggest for the saving rate?

Accepted Answer

Increase the saving rate

Question 6

Which policy is most likely to increase the saving rate in an economy according to the lecture?

Accepted Answer

Expanding tax incentives for retirement savings accounts

Question 7

In the AK model of endogenous growth, what is the key difference from the Solow model regarding returns to capital?

Accepted Answer

Returns to capital are constant

Question 8

Suppose a country is landlocked and trades less due to geography. According to Frankel and Romer (1999), what is the likely impact on its income per capita?

Accepted Answer

Income per capita will be lower due to reduced trade

Question 9

In the Solow model with technological progress, what happens to the capital-output ratio ($$K/Y) in $$the steady state?

Accepted Answer

It remains constant

Question 10

Which of the following is NOT a plausible explanation for the correlation between capital per worker and production efficiency across countries?

Accepted Answer

High population growth directly causes higher production efficiency

Question 11

In the two-sector endogenous growth model, what is the effect of increasing the fraction of labor devoted to research ($$u$$)?

Accepted Answer

It increases the level and growth rate of income

Question 12

Which of the following is a reason why the private sector may not do enough R&D, according to endogenous growth theory?

Accepted Answer

There are positive externalities from knowledge creation

Question 13

According to Schumpeter's concept of 'creative destruction,' what is a consequence of technological progress?

Accepted Answer

It leads to the displacement of existing firms and products

Question 14

If a country wants to maximize long-run consumption per capita, what should it do according to the Golden Rule of capital accumulation?

Accepted Answer

Set $$MPK = n + g$$

Question 15

Which of the following is NOT a recommended policy to encourage technological progress?

Accepted Answer

Increasing tariffs on imported technology

Question 16

In the Solow model with technological progress, what is the effect of an increase in the saving rate $$s on $$the steady-state growth rate of output per worker?

Accepted Answer

It has no effect on the growth rate

Question 17

Which institutional factor is most likely to promote efficient allocation of resources and higher economic growth?

Accepted Answer

Well-developed capital markets

Question 18

Suppose the U.S. capital stock is 2.5 times annual GDP ($$k = 2.5y$$), depreciation is 10% of GDP ($$\delta k = 0.1y$$), and capital income is 30% of GDP ($$MPK 	imes k = 0.3y). $$What is the net marginal product of capital ($$MPK - \delta$$)?

Accepted Answer

$$0.08$$

Question 19

In the AK model, what condition must be satisfied for income to grow forever?

Accepted Answer

$$A \u003e \delta$$

Question 20

Which of the following is a real-world example supporting the importance of institutions for economic growth?

Accepted Answer

South Korea's much higher GDP per capita compared to North Korea due to different institutions

Economic Growth II: Technology & Policy – Macroeconomic Theory I Study Notes

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