Question 1

The natural rate of unemployment is:
A) the average rate of unemployment around which economy fluctuates
B) about 10 percent of the labor force
C) a rate that never changes
D) the transitiion of individuals between employment and unemployment

Accepted Answer

A

Question 2

In a steady state:
A) no hiring or firing are occurring
B) # of people finding jobs = the # of people losing jobs
C) # of people findings jobs exceeds the # of people losing jobs
D)# of people losing jobs exceeds the # of people finding jobs

Accepted Answer

B

Question 3

Unemployment insurance increased amount of frictional by":
A) making workers more 
B) inducing workers to accept the first job offer they recieve
C) making employers more reluctant to lay off workers
D) softening the economic hardship of unemployment

Accepted Answer

D

Question 4

Wage rigidity:
A) forces labor demand to equal labor supply
B) is caused by sectoral shifts
C) prevents labor demand and labor supply from reaching the equilibrium level
D) increases the rate of job finding

Accepted Answer

C

Question 5

When real wage is above level that equilibrates supply and demand
A) quantity of labor supplied exceeds quantity demanded
B) quantity of labor demanded exceeds the quantity supplied
C) there is no unemployment
D) the labor market clears

Accepted Answer

A

Question 6

Efficiency wages do not lead to:
A) structural unemployment
B) wages above their equilibrium level
C) lower firm points
D) increased worker productivity

Accepted Answer

C

Question 7

In solow growth model with population growth (n) and technological progress (g), the steady state growth rate of output per effective worker is:
A)0
B)n
C)g
D)n+g

Accepted Answer

A

Question 8

In solow growth model with population growth (n) and technological progress (g), the steady state growth rate of output per worker is:
A)0
B)n
C)g
Dn+g

Accepted Answer

C

Question 9

A permanent change in the growth rate of total output can arise from a change in the:
A. rate of technological progress.
B. saving rate.
C. ratio of capital per worker.
D. number of workers.

Accepted Answer

A

Question 10

Solow model with technological progress, an increase in the rate of technological change
A. shift the investment curve upward.
B. shift the investment curve downward.
C. leave the investment curve unchanged.

Accepted Answer

C

Question 11

Solow growth model, the steady state level of income per person in a country is a function
EXCEPT:
A. the rate of saving.
B. the current level of income in the country.
C. the efficiency with which the economy employs the factors of production.

Accepted Answer

B

Question 12

In the basic endogenous growth model, usually called the Y=AK model, as long as the saving
rate times the constant A is greater the rate of depreciation
A. at an increasing rate.
B. at a decreasing rate.
D. forever.

Accepted Answer

D

Question 13

In the Solow model, increased saving leads to _______ growth, but in the Y=AK model,
increased saving can lead to _______ growth.
A. negative; eternal
B. temporary; persistent
C. exogenous; endogenous
D. consumption; technological

Accepted Answer

B

Question 14

Advocates of the Y=AK model interpret capital as:
A. consisting solely of the stock of plants and equipment.
B. being inversely related to technological progress.
C. including knowledge.
D. being determined by exogenous forces.

Accepted Answer

C

Question 15

In the two-sector model, the proportion of labor devoted to research universities determines
the:
A. steady-state stock of physical capital.
B. marginal product of capital.
C. steady-state saving rate.
D. steady-state growth rate of income.

Accepted Answer

D

Question 16

The efficiency of labor:
A. is the marginal product of labor.
B. is the rate of growth of the labor force.
C. includes the knowledge, health, and skills of labor.
D. equals output per worker.

Accepted Answer

C

Question 17

In the Solow model with technological progress, the steady-state growth rate of output per
effective worker is:
A. 0.
B. g.
C. n.
D. n + g.

Accepted Answer

A

Question 18

The Solow model predicts that two economies will converge if the economies start with the
same:
A. capital stocks.
B. populations.
C. steady states.
D. production functions.

Accepted Answer

C

Question 19

In the Solow growth model, technological change is ______, whereas in endogenous growth
theories, technological change is ______.
A. assumed; explained
B. explained; assumed
C. persistent; constant
D. constant; persistent

Accepted Answer

C

Question 20

If the production function is y = k
1/2, the steady-state value of y is:
A. y = ((s + g)/(δ + n))
1/2.
B. y = (s + g)/(δ + n).
C. y = (2/(δ + n + g))
1/2.
D. y = s/(δ + n + g).

Accepted Answer

D

Question 21

The Solow growth model assumes that the production function exhibits:
A. decreasing returns to scale. 
B. constant returns to scale.
C. increasing returns to scale. 
D. increasing marginal product.

Accepted Answer

B

Question 22

The change in the capital stock is equal to:
A. investment.
B. investment – depreciation.
C. investment – inflation.
D. investment – depreciation – inflation.

Accepted Answer

B

Question 23

Suppose that the capital stock is 100, the depreciation rate is 10 percent per year, and output is
25. What must the saving rate be to keep the capital stock constant?
A. 2.5 percent B. 10 percent C. 25 percent D. 40 percent

Accepted Answer

D

Question 24

If the capital stock is above the steady-state level, then investment:
A. is smaller than depreciation.
B. is larger than depreciation.
C. is equal to depreciation.
D. could be higher than, lower than, or equal to depreciation.

Accepted Answer

A

Question 25

5. At the Golden Rule level of capital accumulation, the marginal product of capital equals the:
A. real interest rate.
B. depreciation rate.
C. savings rate.
D. marginal product of labor.

Accepted Answer

B

Question 26

Two economies are identical except for rates of pop. +, then the economy w/
the higher rate of population growth will have:
A. higher steady-state output per worker.
B. higher steady-state capital per worker.
C. lower steady-state output per worker.

Accepted Answer

C

Question 27

Unlike the long-run classical model in Chapter 3, the Solow growth model:
A. assumes that the factors of production and technology are the sources of the economy's output.
B. describes changes in the economy over time.
C. is static.

Accepted Answer

B

Question 28

Solow growth model of Chapter 8, the eco. ends up with a steady-state level of capital:
A. only if it starts from a level of capital below the steady
state level.
D. regardless of the starting level of capital.

Accepted Answer

D

Question 29

In the Solow growth model, if investment is less than depreciation, the capital stock will
______ and output will ______ until the steady state is attained.
A. increase; increase B. increase; decrease C. decrease; decrease D. decrease; increase

Accepted Answer

C

Question 30

Solow growth model with population growth, but no technological change, which of the
following will generate a higher steady-state growth rate of total output?
A. a higher saving rate
B. a lower depreciation rate
C. a higher population growth rate

Accepted Answer

C

Question	Answer
The natural rate of unemployment is: A) the average rate of unemployment around which economy fluctuates B) about 10 percent of the labor force C) a rate that never changes D) the transitiion of individuals between employment and unemployment	A
In a steady state: A) no hiring or firing are occurring B) # of people finding jobs = the # of people losing jobs C) # of people findings jobs exceeds the # of people losing jobs D)# of people losing jobs exceeds the # of people finding jobs	B
Unemployment insurance increased amount of frictional by": A) making workers more B) inducing workers to accept the first job offer they recieve C) making employers more reluctant to lay off workers D) softening the economic hardship of unemployment	D
Wage rigidity: A) forces labor demand to equal labor supply B) is caused by sectoral shifts C) prevents labor demand and labor supply from reaching the equilibrium level D) increases the rate of job finding	C
When real wage is above level that equilibrates supply and demand A) quantity of labor supplied exceeds quantity demanded B) quantity of labor demanded exceeds the quantity supplied C) there is no unemployment D) the labor market clears	A
Efficiency wages do not lead to: A) structural unemployment B) wages above their equilibrium level C) lower firm points D) increased worker productivity	C
In solow growth model with population growth (n) and technological progress (g), the steady state growth rate of output per effective worker is: A)0 B)n C)g D)n+g	A
In solow growth model with population growth (n) and technological progress (g), the steady state growth rate of output per worker is: A)0 B)n C)g Dn+g	C
A permanent change in the growth rate of total output can arise from a change in the: A. rate of technological progress. B. saving rate. C. ratio of capital per worker. D. number of workers.	A
I
Solow model with technological progress, an increase in the rate of technological change A. shift the investment curve upward. B. shift the investment curve downward. C. leave the investment curve unchanged.	C
Solow growth model, the steady state level of income per person in a country is a function EXCEPT: A. the rate of saving. B. the current level of income in the country. C. the efficiency with which the economy employs the factors of production.	B
In the basic endogenous growth model, usually called the Y=AK model, as long as the saving rate times the constant A is greater the rate of depreciation A. at an increasing rate. B. at a decreasing rate. D. forever.	D
In the Solow model, increased saving leads to _______ growth, but in the Y=AK model, increased saving can lead to _______ growth. A. negative; eternal B. temporary; persistent C. exogenous; endogenous D. consumption; technological	B
Advocates of the Y=AK model interpret capital as: A. consisting solely of the stock of plants and equipment. B. being inversely related to technological progress. C. including knowledge. D. being determined by exogenous forces.	C
In the two-sector model, the proportion of labor devoted to research universities determines the: A. steady-state stock of physical capital. B. marginal product of capital. C. steady-state saving rate. D. steady-state growth rate of income.	D
The efficiency of labor: A. is the marginal product of labor. B. is the rate of growth of the labor force. C. includes the knowledge, health, and skills of labor. D. equals output per worker.	C
In the Solow model with technological progress, the steady-state growth rate of output per effective worker is: A. 0. B. g. C. n. D. n + g.	A
The Solow model predicts that two economies will converge if the economies start with the same: A. capital stocks. B. populations. C. steady states. D. production functions.	C
In the Solow growth model, technological change is ______, whereas in endogenous growth theories, technological change is ______. A. assumed; explained B. explained; assumed C. persistent; constant D. constant; persistent	C
If the production function is y = k 1/2, the steady-state value of y is: A. y = ((s + g)/(δ + n)) 1/2. B. y = (s + g)/(δ + n). C. y = (2/(δ + n + g)) 1/2. D. y = s/(δ + n + g).	D
The Solow growth model assumes that the production function exhibits: A. decreasing returns to scale. B. constant returns to scale. C. increasing returns to scale. D. increasing marginal product.	B
The change in the capital stock is equal to: A. investment. B. investment – depreciation. C. investment – inflation. D. investment – depreciation – inflation.	B
Suppose that the capital stock is 100, the depreciation rate is 10 percent per year, and output is 25. What must the saving rate be to keep the capital stock constant? A. 2.5 percent B. 10 percent C. 25 percent D. 40 percent	D
If the capital stock is above the steady-state level, then investment: A. is smaller than depreciation. B. is larger than depreciation. C. is equal to depreciation. D. could be higher than, lower than, or equal to depreciation.	A
5. At the Golden Rule level of capital accumulation, the marginal product of capital equals the: A. real interest rate. B. depreciation rate. C. savings rate. D. marginal product of labor.	B
Two economies are identical except for rates of pop. +, then the economy w/ the higher rate of population growth will have: A. higher steady-state output per worker. B. higher steady-state capital per worker. C. lower steady-state output per worker.	C
Unlike the long-run classical model in Chapter 3, the Solow growth model: A. assumes that the factors of production and technology are the sources of the economy's output. B. describes changes in the economy over time. C. is static.	B
Solow growth model of Chapter 8, the eco. ends up with a steady-state level of capital: A. only if it starts from a level of capital below the steady state level. D. regardless of the starting level of capital.	D
In the Solow growth model, if investment is less than depreciation, the capital stock will ______ and output will ______ until the steady state is attained. A. increase; increase B. increase; decrease C. decrease; decrease D. decrease; increase	C
Solow growth model with population growth, but no technological change, which of the following will generate a higher steady-state growth rate of total output? A. a higher saving rate B. a lower depreciation rate C. a higher population growth rate	C

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