Question 1
The key to keeping the economy growing in the long run is:
A. foreign investment.
B. advances in technological knowledge.
C. investment in physical capital.
D. education and training to build human capital.
Cutting-edge growth is growth due to:
A. new ideas.
B. improving the organization of existing resources.
C. capital accumulation.
D. new human capital.
Question 3
Which is NOT a key institution for economic growth?
A. honest government
B. political stability
C. income equality
D. property rights
Question 4
What is meant by the “steady-state” level of capital?
A. All of a nation’s capital is being reinvested back into the economy.
B. Investment exceeds depreciation.
C. Positive net capital investment continues to drive growth at a steady rate.
D. There is no new net investment or any growth.
Question 5
An economy with production function Y = F(K) =
that has 400 units of capital will produce _____ units
of output.
A. 1,600
B. 20
C. 400
D. 40
Question 6
Which statement best explains why growth in China has been so rapid recently?
A. China began with very high capital, so its marginal product of capital was very high.
B. China began with very high capital, so its marginal product of capital was very low.
C. China began with very little capital, so its marginal product of capital was very low.
D. China began with very little capital, so its marginal product of capital was very high.
Question 7
Imagine an economy with production function Y = F(K) =
and 400 units of capital. If the fraction of
output invested in new capital is ? = 0.2 and the depreciation rate is ? = .05, how much total capital will
be available in the next period?
A. 380 units
B. 400 units
C. 384 units
D. 404 units
Question 8
In the Solow model, if a country’s saving rate (?) increased from 10% to 12% and it was operating at its
steady state before the change, we would expect to see:
A. an increase in both the capital stock and output.
B. an increase in output only.
C. an increase in the capital stock only.
D. a decrease in both the capital stock and output.
Question 9
If we hold ideas, education, and labor constant in the Solow model, then output (GDP) is a function of:
A. technological knowledge only.
B. physical capital only.
C. human capital only.
D. labor only.
Question 10
The Solow growth model features _____ returns to physical capital.
A. decreasing
B. constant
C. increasing
D. no
