Economic Growth I

Economic Growth I

Capital Accumulation and Population

Multiple Choice

The following production function $zY=F(2zK,2zL)$   is characterised by:

• increasing returns to scale

• decreasing returns to scale

• constant returns to scale

• none of the answers is correct

Multiple Choice

In the Solow model the steady-state refers to situation when:

• investment is equal to depereciation

• the capital stock is constant

• k=k*

• all the answers are correct

Multiple Choice

The steady-state represents the short-run equilibrium of the economy.

• true

• false

Multiple Choice

An increase in the saving rate raises investment causing the capital stock to grow toward a new steady state.

• true

• false

Multiple Choice

The Golden Rule maximizes:

• consumption

• depreciation

• output

• investment

Multiple Choice

In the Golden Rule steady-state the marginal product of capital is equal to depreciation rate.

• true

• false

Multiple Choice

In transition to the Golden Rule steady-state when the economy begins with too much capital in the Solow growth model, we observe instant decrease in:

• investment

• consumption

• output

• none of the answers is correct

Multiple Choice

When the economy begins below the Golden Rule, reaching the Golden Rule requires initially reducing consumption to increase consumption in the future.

• true

• false

Multiple Choice

Break-even investment level depends on:

• all the mentioned factors

• depreciation

• population growth

• capital stock

Multiple Choice

Solow model predicts that countries with higher population growth will have a higher levels of GDP per person.

• true

• false

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