1. [3 points each] Indicate whether each of the following statements is true or false. Ex- plain briefly. (a) According to the Solow growth model, a reduction in population growth can raise the growth rate of real GDP per capita. (b) In the simple Romer model, the economy may sometimes deviate from the bal- anced growth path. (c) If the number of employed people increases, the unemployment rate falls. (d) Efficiency wage can lead to involuntary unemployment.

8.Consider the empirical evidence on the Solow growth model when the population growth rate, depreciation and savings rate is the same across countries and when technological progress has the same rate in all countries. a.The Solow growth model cannot be tested for a large set of countries because it requires knowledge of each country’s steady state. b.The Solow growth model is supported by unbiased data for a small sample of countries over a long period of time. c.The Solow growth model is supported because they catch up with technological investments d.The Solow growth model is not supported by a large sample of countries over a short period of time.

which one(s) is true   (a) If an economy can raise its annual real GDP growth rate from 3.8 percent to 4.5 percent, its real GDP doubling time is reduced by 15 years.   (b) Suppose that the government passes a law requiring households to increase savings 10% above previous levels. According to Solow's growth theory, in the long run output per capita will grow less rapidly.   (c) If an economy has a real GDP doubling-time of 48 years, this will be increased to 56 years if annual GDP growth is reduced by 3.2 percentage points.   (d) If K = 3000, n = 0.02, and depreciation, δ= 0.04 and g =0.03, then investment of 320 will hold (K/AL) constant.

5..Using the graphical representation of Solow growth model explain what happens in each of the following cases, assuming that the economy is at the steady-state initially. a) A one-time, permanent improvement in technology decreases the depreciation rate. b) A war does not directly affect the capital stock, but casualties reduce the labor force