1. Consider Solow's model of economic growth, for a closed economy, without population growth or technical progress. In this case, indicate for each of the following statements whether it is correct by checking the appropriate box: a) Because of diminishing factor returns, the slower an economy grows, the closer its capital stock is to its stationary value; b) The model implies a negative relationship between the growth rate and initial income; c) In the long run, all economies converge unconditionally, in terms of income, to the same stationary state; d) In the long run, all economies converge unconditionally, in terms of growth rate, to the same steady state; e) None of the above statements is correct.

Answers (a) (b) (c) (d) (e) **** WE COULD HAVE MULTIPLE ANSWERS *****

2. Consider a closed economy whose central bank decides to reduce the monetary base by $40 million, which leads to a reduction in the money supply of $50 million, all else being equal. Knowing that the reserve requirement coefficient () is 75%, indicate for each of the following statements whether it is correct by checking the appropriate box: a) The coefficient of holding money in fiduciary form is 20% ; b) The coefficient of holding money in fiduciary form is 25%; c) The decrease in the monetary base has been implemented through an increase in the discount rate; d) The volume of money creation could be implemented in particular through the resale of Treasury bills, held by a commercial bank, to another commercial bank; e) None of the above statements is correct.

Answers (a) (b) (c) (d) (e) Q2 **** WE COULD HAVE MULTIPLE ANSWERS *****