In the steady state of Solow's exogenous growth model, an increase in the savings rate ... A. increases output per worker, reduces consumption per worker and decreases capital per worker. B. increases output per worker and increases capital per worker. C. decreases output per worker and decreases capital per worker. D. increases output per worker and decreases capital per worker. E. decreases output per worker and increases capital per worker.

In the steady state of Solow's exogenous growth model, an increase in the savings rate ... A. increases output per worker, reduces consumption per worker and decreases capital per worker. B. increases output per worker and increases capital per worker. C. decreases output per worker and decreases capital per worker. D. increases output per worker and decreases capital per worker. E. decreases output per worker and increases capital per worker.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter20: Economic Growth In The Global Economy

Section: Chapter Questions

Problem 5P

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In the Solow growth model, countries with identical total factor productivities, identical labour force growth rates, and identical savings rates O A. there is no convergence to the same level of capital per worker or output per worker. B. always have identical levels of capital per worker and output per worker. O C. in equilibrium, have identical levels of capital per worker but not necessarily identical levels of output per worker. D. in equilibrium, have identical levels of capital per worker and output per worker. E. in equilibrium, have identical levels of output per worker but not necessarily identical levels of capital per worker.
Suppose that population growth increases. The Solow growth model with population growth and depreciation (but without technological progress) predicts that this will tend to deteriorate people's welfare because of: (i) lower total output (ii) lower output per worker (iii) lower consumption per worker O a. (i), (ii), and (iii) O b. Only (i) and (iii) O c. Only (ii) and (iii) O d. Only (i) and (ii)
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In the Solow growth model, if the economy's actual capital stock per worker is greater than the steady-state capital stock per worker, growth from convergence O A. detracts from the overall growth of the economy until the steady state is attained. O B. complicates the growth process and creates uncertainty regarding the overall growth of the economy. O C. adds to the overall growth of the economy until the steady state is attained. O D. neither adds to nor detracts from the overall growth of the economy.
Suppose the government decides to reduce the Department of Science and Technology's budget for research. Assume this cancelled investment in research could have paid off in terms of useful innovations that increase labor efficiency. Which of the following statements is true under the Solow growth model with population growth and technological progress? In the steady state, the growth rate of the country's output per capita is expected to decrease. O b. In the steady state, the growth rate of the country's output per capita is expected to increase. O c. All the other statements are false. d. In the steady state, the growth rate of the country's total output is expected to increase.
According to the Solow model, an increase to the savings rate will increase income per worker in the steady-state, but will have no effect on long-run growth rate of income per worker. O increase consumption per worker if and only if the new steady-state capital per worker is greater than the golden rule level of capital per worker. O increase the long-run growth rate of income per worker if and only if the new steady-state capital per worker is greater than the golden rule level of capital per worker. O increase income per worker in the steady-state and long-run growth rate of income per worker.
In the Solow growth model without population growth and technological progress, which of the following statements is/are always true in the steady state when the saving rate increases? (i) Output per worker increases. (ii) Consumption per worker increases. (iii) Capital per worker increases. O a. (i), (ii), and (iii) are always true. O b. O c. O d. None of the statements is always true. Only (i) and (ii) are always true. Only (i) and (iii) are always true.
In the Solow growth model without population growth and technological progress, consumption per worker will be maximized in the steady state when: (1) Output per worker is maximized. (ii) Investment per worker is maximized. (iii) The marginal product of capital equals the depreciation rate. O a. (i), (ii), and (ii) O b. Only (iii) O c. Only (ii) Od. Only (1)
which statement \s are true. use graphs to exlain a. In the Solow growth model, the saving rate is a crucial determinant of the economy's long-run growth rate of output per worker. b. In the endogenous growth model , the representative firm sets the wage so that the demand and supply of efficiency units of labour are equal. c. In the endogenous growth model , there is no steady state of the economy as human capital will always continue to grow forever. d. The assumption of Constant Returns to Scale technology implies that the marginal product of factor imput is always decreasing.
Assume that an economy described by the Solow model is in a steady state with output and capital growing at 3 percent and labor growing at 2 percent. The capital share is 0.4. The growth-accounting equation indicates that the contributions to growth of capital, labor, and total factor productivity are: O a. 1.2 percent, 1.2 percent, and 0.6 percent, respectively. O b. 3 percent, 2 percent, and 1 percent, respectively. O c. 0.4 percent, 0.6 percent, and 1 percent, respectively. O d. 0.4 percent, 0.6 percent, and 0.2 percent, respectively.
Consider the Solow Model with no population or technological growth. Suppose that two countriesare identical except that in Country A the depreciation rate is greater than the depreciation rate inCountry B.a. How do you compare the steady state level of capital per worker in these countries? Illustrategraphically. Explain the economic intuition for the di erences in capital per worker in steadystate.b. Which country a higher output per worker in steady state? What about investment per workerin steady state? Explain carefully.
Use the Solow model with exogenous growth to answer the following. Following a reduction in the population growth rate, output per worker growth temporarily increases. O True O False The golden rule rate of saving is the rate of saving that maximizes steady state output per effective worker. O True O False The only way to increase the long-run growth rate of output per worker is to increase the growth rate of labor efficiency. O True O False Following an increase in TFP, output per worker growth temporarily declines. O True O False