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Macroeconomics, 3e (Williamson)
Chapter 7 Income Disparity Among Countries and Endogenous Growth
1) Income per worker has been
A) converging in both the rich countries and the poor countries.
B) converging in the rich countries, but not converging in the poor countries.
C) converging in the poor countries, but not converging in the rich countries.
D) converging in neither the poor nor the rich countries.
Answer: B
Question Status: Previous Edition
2) For the Solow model to accurately explain the observed divergence of growth experience
around the world would require
A) differences in savings rates across countries.
B) differences in population growth rates across countries.
C) barriers to the introduction of new technologies.
D) inadequate educational opportunities in poor countries.
Answer: C
Question Status: Previous Edition
3) In the Solow growth model, countries with identical total factor productivities, identical
labor force growth rates, and identical savings rates
A) always have identical levels of capital per worker and output per worker.
B) in equilibrium, have identical levels of capital per worker and output per worker.
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 output per worker but not necessarily identical
levels of capital per worker.
Answer: B
Question Status: Previous Edition
4) 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
A) 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.
B) 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.
C) both countries will have the same growth rates of output per worker, even if they start
out with different levels of output per worker.
D) 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.
Answer: B
Question Status: Previous Edition
5) In the context of the Solow growth model, so-called growth miracles, such as Japan, South
Korea, Singapore, and Hong Kong, are most easily explained by
A) reductions in the population growth rate.
B) increases in the savings rate.
C) removal of barriers to technology.
D) improvements in public health.
Answer: C
Question Status: Previous Edition
6) Suppose a poor economy inches towards the steady state in Solow's exogenous growth
model. What happens?
A) Consumption per capita decreases.
B) Saving per capita decreases.
C) The depreciation rate increases.
D) The growth rate of output decreases.
Answer: D
Question Status: New
7) Suppose a poor economy inches towards the steady state in Solow's exogenous growth
model. What happens?
A) Capital grows faster than population.
B) Capital grows slower than population.
C) Capital grows as fast as population.
D) It depends.
Answer: A
Question Status: New
8) What happens to a poor economy in Solow's exogenous growth model?
A) It becomes poorer.
B) It does not change.
C) Its consumption per capita decreases.
D) Its saving per capita increases.
Answer: D
Question Status: New
9) What happens to a very rich economy in Solow's exogenous growth model?
A) It becomes poorer.
B) It does not change.
C) Its consumption per capita increases.
D) Its saving per capita increases.
Answer: A
Question Status: New
10) According to Solow's exogenous growth theory, what happens to a country at steady state
that suffered extensive capital destruction due to a war or climate event?
A) It will stay poor forever.
B) It will grow back to be richer than before.
C) It will get back to its original status.
D) Anything can happen.
Answer: C
Question Status: New
11) Barriers to Riches, by S. Parente and E. Prescott, emphasizes the importance of
A) barriers to technological adoption.
B) barriers to the development of natural resources.
C) public education.
D) endogenous growth.
Answer: A
Question Status: Previous Edition
12) The importance of barriers to the adoption of technologies is supported by research by
A) P. Romer.
B) R. Lucas.
C) S. Parente and E. Prescott.
D) G. Glomm and B. Ravikumar.
Answer: C
Question Status: Previous Edition
13) In the endogenous growth models of Lucas and Romer, an increase in a worker's level of
human capital
A) increases the amount of additional human capital she can produce, but does not
increase the amount of output she can produce.
B) increases the amount of additional output she can produce, but does not increase the
amount of human capital she can produce.
C) increases both the amount of additional human capital she can produce and the
amount of output she can produce.
D) increases neither the amount of additional human capital she can produce nor the
amount of output she can produce.
Answer: C
Question Status: Previous Edition
14) In the endogenous growth models of Lucas and Romer, workers divide their time between
market work and
A) accumulating physical capital.
B) accumulating human capital.
C) trying to invent new production processes.
D) work at home.
Answer: B
Question Status: Previous Edition
15) Endogenous growth theory is about
A) the welfare of indigenous people.
B) explaining growth.
C) studying fertility choices.
D) giving more importance to capital accumulation.
Answer: B
Question Status: New
16) In the endogenous growth models of Lucas and Romer, human capital accumulation is best
described as a form of
A) consumption.
B) investment.
C) government spending.
D) none of the above
Answer: B
Question Status: Previous Edition
17) Human capital is
A) knowledge found in books.
B) knowledge found in people.
C) wealth.
D) machines owned by people.
Answer: B
Question Status: New
18) Which of the following statements best describes the characteristics of accumulating
physical capital and human capital?
A) Both physical capital accumulation and human capital accumulation are characterized
by decreasing marginal returns.
B) Physical capital accumulation is subject to decreasing marginal returns, but human
capital accumulation is not.
C) Human capital accumulation is subject to decreasing marginal returns, but physical
capital accumulation is not.
D) Neither physical capital accumulation nor human capital accumulation is
characterized by decreasing marginal returns.
Answer: B
Question Status: Previous Edition
19) Paul Romer argues that a key feature of knowledge is
A) divisibility.
B) private ownership.
C) nonrivalry.
D) durability.
Answer: C
Question Status: Previous Edition
20) What is a characteristic of human capital?
A) rivalry
B) rapid accumulation
C) private ownership
D) concavity
Answer: C
Question Status: New
21) What characteristic of human capital is crucial in giving the possibility of sustained growth?
A) It is embodied in people.
B) It has constant returns to scale in production.
C) It takes time to accumulate it.
D) It grows at the same rate as consumption.
Answer: B
Question Status: New
22) What characteristic do human and physical capital share?
A) Both are controlled by the government.
B) Current costs are incurred for future benefits.
C) Their growth depends crucially on the growth of total factor productivity.
D) The use of both exhibits rivalry.
Answer: B
Question Status: New
23) Which of the following is best characterized as being nonrivalrous?
A) consumption goods
B) services
C) physical capital
D) knowledge
Answer: D
Question Status: Previous Edition
24) A key characteristic of the production function in the endogenous growth model presented
in the text is that
A) there are increasing returns to scale in human capital.
B) there are decreasing returns to scale in human capital.
C) there are constant returns to scale in human capital.
D) at low levels of human capital, there are increasing returns to scale in human capital,
while at high levels of human capital, there are decreasing returns to scale in human
capital.
Answer: C
Question Status: Previous Edition
25) In the endogenous growth model presented in the text, suppose that u represents the
fraction of time spent working (as opposed to accumulating human capital), b represents the
efficiency of human capital accumulation, H represents the amount of human capital, and z
represents the marginal product of efficiency units of labor. Consumption equals
A) buH.
B) zuH.
C) buz.
D) buzH.
Answer: B
Question Status: Revised
26) In the endogenous growth model presented in the text, suppose that u represents the
fraction of time spent working (as opposed to accumulating human capital) and b represents
the efficiency of human capital accumulation. The growth rate of human capital equals
A) u(1 - b) - 1.
B) 1 + b(1 - u).
C) (1 + b)(1 - u).
D) b(1 - u) - 1.
Answer: D
Question Status: Previous Edition
27) In the endogenous growth model presented in the text, suppose that u represents the
fraction of time spent working (as opposed to accumulating human capital) and b represents
the efficiency of human capital accumulation. The growth rate of consumption equals
A) u(1 - b) - 1.
B) 1 + b(1 - u).
C) (1 - b)(1 - u).
D) b(1 - u) - 1.
Answer: D
Question Status: Previous Edition
28) In the endogenous growth model presented in the text,
A) consumption grows faster than human capital.
B) human capital grows faster than consumption.
C) both consumption and human capital grow at the same rate.
D) neither consumption nor human capital grows in the steady state.
Answer: C
Question Status: Previous Edition
29) In the endogenous growth model presented in the text, an increase in the efficiency of
human capital accumulation
A) increases the growth rate of human capital and increases the growth rate of output.
B) increases the growth rate of human capital and decreases the growth rate of output.
C) decreases the growth rate of human capital and increases the growth rate of output.
D) decreases the growth rate of human capital and decreases the growth rate of output.
Answer: A
Question Status: Previous Edition
30) In the endogenous growth model presented in the text, an increase in the fraction of time
accumulating human capital
A) increases the growth rate of human capital and increases the growth rate of output.
B) increases the growth rate of human capital and decreases the growth rate of output.
C) decreases the growth rate of human capital and increases the growth rate of output.
D) decreases the growth rate of human capital and decreases the growth rate of output.
Answer: A
Question Status: Previous Edition
31) An example of an increase in b, the efficiency of human capital accumulation, is
A) more mandatory school years.
B) better teachers.
C) better school material.
D) better total factor productivity.
Answer: C
Question Status: New
32) Which of the following policies would increase the growth rate of an economy in the
endogenous growth model with human capital?
A) Mandatory schooling.
B) Minimum wages.
C) Redistributive taxation.
D) Lump-sum taxation.
Answer: A
Question Status: New
33) According to the endogenous growth model with human capital, what can we say about
countries with more efficient schools?
A) They are richer.
B) They are richer and grow faster.
C) They are richer and grow more slowly.
D) They grow faster.
Answer: D
Question Status: New
34) The idea that contact with others with high levels of human capital increases ones own
human capital is called human capital
A) contagion.
B) externality.
C) transference.
D) convergence.
Answer: B
Question Status: Previous Edition
35) Schooling is subsidized in the United States in part
A) so that the golden rule capital level can be reached.
B) because otherwise people would not get educated.
C) because there is a constitutional right to education.
D) because there is a positive externality from schooling.
Answer: D
Question Status: New
36) An improvement in school quality translates into an increase in which model parameter?
A) H
B) z
C) b
D) 1-u
Answer: C
Question Status: New
37) Evidence suggests that income per worker and education are
A) negatively correlated.
B) positively correlated.
C) uncorrelated.
D) positively correlated in the richer countries and negatively correlated in the poorer
countries.
Answer: B
Question Status: Previous Edition
38) What immediate consequence does an increase in education time have in the endogenous
growth model with human capital?
A) lower output
B) lower output in the future
C) lower wages
D) lower human capital
Answer: A
Question Status: New
39) A study by Gerhard Glomm and B. Ravikumar suggests that relying more on private
education relative to public education results in
A) more income inequality and higher per-capita income in the long run.
B) more income inequality and lower per-capita income in the long run.
C) less income inequality and higher output per worker in the long run.
D) less income inequality and lower output per worker in the long run.
Answer: A
Question Status: Previous Edition