1.

Consider the production function Y, = AtK. L. "where A is total factor productivity (TFP), L is the labour force, and K is physical capital. Suppose TFP grows at 1% per year and a = 0.5 . If the growth rate of capital per worker is 2% per year, the growth rate of output per worker is? O 1.5% per year O 3.0% per year O 3.5% per year O 2.0% per yearConsider a basic SolowSwan model. Suppose the economy is in steady state when there is a permanent increase in the depreciation rate (5. Which of the following is TRUE? 0 There will be a short-run increase in the growth rate of capital per worker but no long-run increase in the growth rate of capital per worker Q There will be a long-run increase in the level of output per worker but no long-run increase in the growth rate of output per worker Q There will be a long-run decrease in the levels of investment per worker and consumption per worker Q There will be a long-run increase in the level of investment per worker but not the level of consumption per worker Consider a simple Keynesian model. Which of the following is FALSE? O None of the other options At zero income, individuals may have positive levels of consumption 0 All else equal, the higher the marginal propensity to consume the higher will be the multiplier O The marginal propensity to consume is the extra amount individuals will spend if you give them an extra $1 Consider a simple Keynesian model with taxation. Suppose the marginal rate of tax is 0.5 and the marginal propensity to consume is 0.5. Then a decrease in autonomous taxes of 100 units will: 0 Decrease equilibrium output by approximately 67 units 0 Increase equilibrium output by approximately 67 units Decrease equilibrium output by approximately 133 units 0 Increase equilibrium output by approximately 200 units Consider a SolowSwan model with saving rate 5 = 0.4, labour force growth .913 = 0.05_ constant productivityA = 1, and depreciation 5 = 0.05 . if output per worker is yt : 2 200 and capital per worker is let = if = 800, which of the following is TRUE? 0 Effective depreciation per worker is 60, saving per worker is 80 and kt will decrease towards the steady state 0 Effective depreciation per worker is 80, saving per worker is 60 and kt will decrease towards the steady state 0 Effective depreciation per worker is 60, saving per worker is 80 and kt will increase towards the steady state 0 Effective depreciation per worker is 80, saving per worker is 80 and kt is at the steady state Consider a Ricardian trade model where both countries have expenditure share on manufactures 0 = 1/4, Country 1 has Am = 1 and As = 2 and L = 100 , while Country 2 has A* = 3 and A* = 1 and L* = 100. Suppose there is no trade. Which of the following is FALSE? None of the other options The relative price of manufactures to services in County 1 is 2 O Consumption of services in Country 2 is 75 O Consumption of manufactures in Country 1 is 25