The Solow model emphasizes the role of which of the following factors of production?
land
labour
capital
natural resources
In an exogenous growth model, growth is caused by
capital accumulation
government policies
human capital accumulation
forces that are not explained by the model itself
Suppose that two countries share identical levels of total factor productivity, identical labor force growth rates and identical savings rates. According to the Solow model
the country with the greater initial level of output per worker will grow more rapidly than the country with the smaller initial level of output per worker.
the country with the smaller initial level of output per worker will grow more rapidly than the country with the greater initial level of output per worker.
both countries will have the same growth rates of output per worker, even if they start out with different levels of output per worker
if both countries start out with different levels of income per worker, both countries may have different growth rates of output per worker, but we cannot be certain which country will have the higher growth rate of output per worker.
In the endogenous growth model, an increase in a worker’s level of human capital
increases the amount of additional human capital she can produce, but does not increase the amount of output she can produce.
increases the amount of additional output she can produce, but does not increase the amount of human capital she can produce.
increases both the amount of additional human capital she can produce and the amount of output she can produce.
increases neither the amount of additional human capital she can produce nor the amount of output she can produce.
According to Alesina and Dollar (2000) donor countries tend to allocate more aid to:
recipient countries with a low level of Human Development Index
recipient countries that used to be former colonies of the donor and that are not necessarily poor
recipient countries with a high level of population
none of the previous answers
Burnside and Dollar (2000) state that foreign aid can be effective if allocated where good policies are in place. How do they empirically measure the good policies?
controlling for the level of democracy inside the recipient country
using a variable that accounts for the type of fiscal policy implemented by the recipient government
using a composite index that accounts for the fiscal, monetary and foreign policy
controlling for the level of corruption inside the recipient country
According to the Harrod-Domar model, an increase in growth rates depends on:
Increase in capital-output ratio
Decrease in capital-output ratio
Increase in marginal propensity to consume
None of the above
Without adjusting for "purchasing power parity", Real GDP tends to understate income in developing economies by
Ignoring government deficit spending
Omitting non-market transactions
Underestimating saving
All of the above
The Solow Growth Model predicts that
The rich will get richer and the poor will get poorer
Rich nations will grow faster than poor nations
Poor nations will grow faster than rich nations
The rich will get poorer and the poor will get richer
If the central prediction of the Solow Growth Model is valid,
Economic freedom as measured by the Heritage Foundation Index will decrease
Population growth rates in rich countries will increase
Per capita Real GDP differences among nations will increase
Per capita Real GDP differences among nations will diminish
The new growth theory attempts to explain
the rate of capital accumulation within a country
the rate of population growth within a country
why there are diminishing returns to capital
the factors that determine the size of the Solow residual
Lack of investment in strong education and health care systems:
Causes a deterioration in human capital and an increase in physical capital
Causes a deterioration in human capital and a decline in labor productivity
Increases human capital and a cause a decline in labor productivity
Causes a decline in physical capital and a decline in labour productivity
According to Burnside and Dollar (2000):
Foreign aid has a positive impact on growth if associated with sound policies but with diminishing returns
Foreign aid does not have a positive impact on growth but with increasing returns
Foreign aid has always a positive impact on growth but with diminishing returns
Foreign aid has a positive impact on growth if associated with sound policies but with increasing returns
Per Capita GDP is a good proxy for the growth of a country because:
is negatively correlated with Life expectancy
is positively correlated with Infant Mortality
is negatively correlated with Adult Literacy
none of the above
According to Galor and Zeira (1993):
Individuals who inherit less than f work as unskilled but their descendants in future generations will work as skilled workers
Individuals who inherit more than f invest in human capital and all their descendants will remain in the skilled labour sector in future generations
Individuals who inherit less than g may invest in human capital but after some generations their descendants become skilled workers
Individuals who inherit less than f work as unskilled and so are their descendants in future generations
If a war destroys a large portion of a country's capital stock but the saving rate is unchanged, the Solow model predicts output will grow and that the new steady state will approach:
the same output level as before
a higher output level than before
the Golden Rule output level
a lower output level than before
What conclusion can be reached from the following data on income shares?
Percentage of Income Received by Lowest 40% Highest 20%
Bangladesh 17.3 45.3 Indonesia 14.4 49.4
Bangladesh has adopted a strategy of redistribution with growth
absolute poverty is more widespread in Bangladesh
the size distribution of income is more unequal in Indonesia
growth in Bangladesh is calculated using poverty weights rather than income weights
In the Harrod-Domar equation g = s/v, v is defined as
the change in the country’s capital stock
the ratio of the country’s capital stock to its output
the value of the country’s capital stock
According to the Harrod-Domar model, an increase in growth rates depends on
In the Solow growth model, if investment exceeds depreciation, the capital stock will ______ and output will ______ until the steady state is attained.
increase; decrease
decrease; increase
decrease; decrease
increase; increase
With perfect income equality the Gini coefficient in a country would be :
1
infinity
0
0.5
The concept of Purchasing Power Parity:
is based upon the cost of hamburgers around the world
is based upon the nominal exchange rate
is based upon the market exchange rate
is based upon the cost of the same market basket of goods in different countries
Compared to the developed countries, the LDCs have
higher birth rates and lower death rates
lower birth rates and lower death rates
higher birth rates and higher death rates
lower birth rates and higher death rates
One study found that the Gini coefficient for Egypt .403 . was virtually the same as that for Australia .404. From this information one can conclude that Egypt and Australia:
had virtually the same number of households in absolute poverty
had virtually the same percentage of households in absolute poverty
had virtually the same Human Development Index level
