Question

16. In the Solow growth model where s is saving rate, y is output per worker, and i is investment per worker, consumption per worker, c, equals

A. sy

B. (1-s)y

C. (1+s)y

D. (1-s)y-i

17. If the capital stock equals 200 units in year 1 and depreciation rate is 5% per year, then in year 2, assuming no new or replacement investment, the capital stock would equal _____ units.

A. 210

B. 200

C. 195

D. 190

18. In the Solow model, it is assumed that a(n) ______ fraction of capital wears out as the capital-labor ratio increases

A. smaller

B. larger

C. constant

D. increasing

20. The formula for the steady-state ratio of capital to labor (k*), with no population growth or technological change is, s

A. dividend by the depreciation rate

B. multiplied by the depreciation rate

C. divided by the product of f(k*), and the depreciation rate

D. multiplied by f(k*) divided by the depreciation rate

21. In the Solow growth model, if investment exceeds depreciation, the capital stock will ______ and output will ______ until the steady state is attained.

A. increase; increase

B. increase; decrease

C. decrease; decrease

D. decrease; increase

Answer 1

ANSWER:

Consumption per worker in solow model is defined as:

C=(1-s)Y.

s=savings rate

Y=output per worker

The answer is B.

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