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15 Cards in this Set
- Front
- Back
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An increase in TFP:
a) steepens the aggregate supply curve b) shifts the aggregate supply curve upward c) shifts the production function upward d) increases the rate of depreciation e) cannot occur once a steady state has been achieved |
C. SHIFTS THE PRODUCTION FUNCTION UPWARD
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An increase in the savings rate
a) steepens the economy’s steady-state growth path b) moves the economy to a higher steady-state growth path c) moves the economy to a higher and steeper steady-state growth path d) shifts the production function upward e) increases the rate of depreciation |
B. MOVES THE ECONOMY TO A HIGHER STEADY-STATE GROWTH PATH
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Increases in human capital:
a) reduce the marginal product of labour b) increase the marginal product of physical capital c) are the by-product of technological innovations d) shift the economy’s production function downward e) are calculated as the difference between birth rates and death rates |
B. INCREASE THE MARGINAL PRODUCT OF PHYSICAL CAPITAL
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If human capital were the same in all countries:
a) rates of return on investment would be the same in developed and less-developed countries b) industrial nations would invest in less-developed countries c) less developed countries would invest in the industrial nations d) industrial nations would continue to grow more rapidly than less-developed countries e) there would be no incentive for international trade |
B. INDUSTRIAL NATIONS WOULD INVEST IN LESS-DEVELOPED COUNTRIES
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In which respect is human capital unlike physical capital?
a) human capital does not depreciate b) the stock of human capital cannot be increased c) human capital cannot be measured d) human capital does not affect output e) none of the above |
E. NONE OF THE ABOVE
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Why do developed economies need to engage in research and development more than developing economies?
a) have greater capital depreciation rates b) have largely exhausted the gains from capital accumulation c) are inherently less innovative than developing economies d) need to exploit rent-seeking opportunities in order to continue growing e) have smaller workforces |
B. HAVE LARGELY EXHAUSTED THE GAINS FROM CAPITAL ACCUMULATION
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Multinational enterprises help promote convergence by
a) hiring foreign nationals b) exporting raw materials from less-developed countries to developed economies c) shifting production to low-wage countries d) exporting technology to emerging markets e) consolidating separate firms into large monopolies |
D. EXPORTING TECHNOLOGY TO EMERGING MARKETS
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Which of the following does not promote convergence between nations?
a) equal access to technology b) the existence of multinational enterprises c) foreign direct investment d) openness to foreign trade e) international patent protection |
E. INTERNATIONAL PATENT PROTECTION
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Consider an economy in which output in period t is produced by the Cobb-Douglas production function: Yt = AtKt^(α)Lt^(1-α)
where, Yt is output at time t, Kt is capital at time t, L is labour employed at time t, and A is total factor productivity at time t. The savings rate (s) is 25% and the depreciation rate of capital (δ) is 5% a period. Initially, A is constant at 1 and L is constant at 100. The share of income paid to labour is 70%. a) Calculate the initial steady-state level of output. |
[SEE WORKSHEET]
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Consider an economy in which output in period t is produced by the Cobb-Douglas production function: Yt = AtKt^(α)Lt^(1-α)
where, Yt is output at time t, Kt is capital at time t, L is labour employed at time t, and A is total factor productivity at time t. The savings rate (s) is 25% and the depreciation rate of capital (δ) is 5% a period. Initially, A is constant at 1 and L is constant at 100. The share of income paid to labour is 70%. b) What happens in the short-run if TFP suddenly rises from 1 to 1.2? |
[SEE WORKSHEET]
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Consider an economy in which output in period t is produced by the Cobb-Douglas production function: Yt = AtKt^(α)Lt^(1-α)
where, Yt is output at time t, Kt is capital at time t, L is labour employed at time t, and A is total factor productivity at time t. The savings rate (s) is 25% and the depreciation rate of capital (δ) is 5% a period. Initially, A is constant at 1 and L is constant at 100. The share of income paid to labour is 70%. c) What is the new long-run steady-state level of output, assuming TFP stays at 1.2? |
[SEE WORKSHEET]
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Consider an economy in which output in period t is produced by the Cobb-Douglas production function: Yt = AtKt^(α)Lt^(1-α)
where, Yt is output at time t, Kt is capital at time t, L is labour employed at time t, and A is total factor productivity at time t. The savings rate (s) is 25% and the depreciation rate of capital (δ) is 5% a period. Initially, A is constant at 1 and L is constant at 100. The share of income paid to labour is 70%. d) What is the growth in the capital stock between the old steady-state and the new one? |
[SEE WORKSHEET]
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Consider an economy in which output in period t is produced by the Cobb-Douglas production function: Yt = AtKt^(α)Lt^(1-α)
where, Yt is output at time t, Kt is capital at time t, L is labour employed at time t, and A is total factor productivity at time t. The savings rate (s) is 25% and the depreciation rate of capital (δ) is 5% a period. Initially, A is constant at 1 and L is constant at 100. The share of income paid to labour is 70%. e) Draw a diagram to show the impact of the increase in TFP on the steady-state level of output and capital. |
[SEE WORKSHEET]
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Consider an economy in which output in period t is produced by the Cobb-Douglas
production function: Yt = AtHt^(b)Kt^(α)Lt^(1-α) where, Yt is output at time t, Ht is capital at time t, Kt is capital at time t, L is labour employed at time t, and A is total factor productivity at time t; α and b are both greater than 0. a) What happens to GDP if human capital is increased? b) Assuming 0 < b < 1, what shape is the marginal product of human capital curve? c) As K increases, what happens to the marginal product of human capital? |
[SEE WORKSHEET]
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There are two Countries A and B. At time t0, Countries A and B had the same levels of GDP per capita ($1,000). Between time t0 and time t1:
Country A did not increase investment levels and experienced little technological progress or human capital improvement. Country B increased investment from 15% of GDP to 30% of GDP, and experienced continuous technological progress and human capital improvement. Draw a growth path diagram to represent the growth of GDP per capita for Countries A and B. Between time t0 and t1, did these two countries experienced convergence or divergence? |
[SEE WORKSHEET]
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