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1, Solow model assumes increasing returns to scale (IRS). True or False 2, Solow model is based on a closed economy. Thus, savings will be equal to investment. T or F 3, Since people with higher incomes save more, Solow model will assume that the average saving rate will be increasing in per capita income. True or False

1, Solow model assumes increasing returns to scale (IRS). True or False 2, Solow model is based on a closed economy. Thus, savings will be equal to investment. T or F 3, Since people with higher incomes save more, Solow model will assume that the average saving rate will be increasing in per capita income. True or False

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1, Solow model assumes increasing returns to scale (IRS). True or False 2, Solow model is based on a closed economy. Thus, savings will be equal to investment. T or F 3, Since people with higher incomes save more, Solow model will assume that the average saving rate will be increasing in per capita income. True or False 4, According to the Solow model, income per capita, y, is purely a function of the total factor productivity (TFP) term, A, and capital per capita, k. True or False 5, Solow model assumes a closed ecor Hence, A, Net foreign investment is always positive. B, Citizens can buy foreign stock. C, Net foreign capital flows are zero. D, Foreigners can buy domestic real estate. 6, In this Solow model (M.1), capital per сapita: A, decreases proportionally with savings per capita and increases proportionally with depreciation of capital per capita. B, increases proportionally with savings per capita and decreases proportionally with epreciation of capital per capita. C, increases exponentially with savings per сapita. D, decreases exponentially with depreciation of capital per capita. 7, In the Solow model, consumption per capita: A, always equals income net of savings. B, equals income net of savings only in the stable steady state. C, exceeds savings out of the steady state. D, always equals savings. 8, In this version of the Solow model (M.1), there are two stable steady states. True or False my. 9, This basic Solow model predicts that countries with lower saving rates would end up with higher levels of income per capita in the steady state (all else equal). True or False 10,All else equal, Solow mode! predicts convergence: that poor countries should catch up to rich economies because they would growth faster than them. True or False
Transcribed Image Text:1, Solow model assumes increasing returns to scale (IRS). True or False 2, Solow model is based on a closed economy. Thus, savings will be equal to investment. T or F 3, Since people with higher incomes save more, Solow model will assume that the average saving rate will be increasing in per capita income. True or False 4, According to the Solow model, income per capita, y, is purely a function of the total factor productivity (TFP) term, A, and capital per capita, k. True or False 5, Solow model assumes a closed ecor Hence, A, Net foreign investment is always positive. B, Citizens can buy foreign stock. C, Net foreign capital flows are zero. D, Foreigners can buy domestic real estate. 6, In this Solow model (M.1), capital per сapita: A, decreases proportionally with savings per capita and increases proportionally with depreciation of capital per capita. B, increases proportionally with savings per capita and decreases proportionally with epreciation of capital per capita. C, increases exponentially with savings per сapita. D, decreases exponentially with depreciation of capital per capita. 7, In the Solow model, consumption per capita: A, always equals income net of savings. B, equals income net of savings only in the stable steady state. C, exceeds savings out of the steady state. D, always equals savings. 8, In this version of the Solow model (M.1), there are two stable steady states. True or False my. 9, This basic Solow model predicts that countries with lower saving rates would end up with higher levels of income per capita in the steady state (all else equal). True or False 10,All else equal, Solow mode! predicts convergence: that poor countries should catch up to rich economies because they would growth faster than them. True or False
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