1. Lewis's model of coexistence of modern and traditional methods of production is an example of

a. False-paradigm model

b. Dualism

c. Free-market analysis

d. Linear-stages theory

2. The Harrod-Domar growth model suggests that growth is

a. directly related to saving and the capital/output ratio

b. directly related to saving and inversely related to the capital/output ratio

c. directly related to the capital/out ratio and inversely related to savings

d. indirectly related to savings and the capital/output ratio.

3. Consider a closed economy. Suppose the capital-output ratio is 5 and the saving rate is 30%. If the target is to increase its annual growth rate by 1%, use the Harrod-Domar growth equation to determine how such a target can be achieved?

a. Lower its capital-output ratio from 5 to 3.33

b. Increase its saving rate by 15%

c. Increase the labor supply to produce more goods and services

d. Encourage high consumption as it will stimulate production process