Question

30. What does the term "Iron Logic of Diminishing Returns" refer to? 31. Is the function Y= VK a good approximation for the production function of an entire country? Why or why not? 32. In the Solow model, what is the most important variable to accumulate? How does this work? 33. Consider the following two countries. Thrifty and Inventive. In Thrifty, people devote 50% of GDP (Y) to making new investment goods, so S=5, and their production function is Y=vK. In Inventive, people devote 25% of GDP to making new investment goods, so s = 25, and their production function is Y=2VK. Both countries begin with K=100. What is the GDP in both countries, consumption, and investment? Bonus, if you know that the depreciation rate is d=0.1, and there is no population growth, what is the steady state in Thrifty? 34. What is the difference between an ITT and a TOT estimate? What do they estimate, and what are the advantages and disadvantages of each? 35. What/who is an ALWAYS, a NEVER, and how can we find the numbers of each in the treatment and control.groups 36. What is PROGRESA, and how was an experiment used to test its effectiveness? 37. Discuss why it is important to choose the right randomization level when running an RCT. What are the advantages of choosing a more localized level, and what are the advantages of choosing a higher (more aggregated) level. Why is it important to find a balance between these two?

Answer 1

30) The Iron logic of diminishing returns states that for each new input of capital, there is less and less output produced.