1. Which of the following increase(s) the steady statelevelof capital per capita in the Solow model with population growth?

a. An increase in depreciation rate

b. An increase in population growth rate

c. Both a. and b.

d. None of the above.

2. Which of the following is (are)truein the basic Solow model (without population growth)?

a. The supply of capital is fixed.

b. Investment causes capital per worker to grow.

c. The government imposes taxes on households.

d. Both b. and c. are true

3. Which of the following is (are)truefor a Solow model with technological progress?

a. Increase in the growth rate of labor efficiency (technological progress) has only level effect on income per capita.

b. Increase in the saving rate has only level effect on income per effective worker.

c. Both a. and b. are true.

d. None of the above.

4. Suppose that in the steady state of the Solow growth model with population growth, current saving ratesissmallerthan the saving rate that supports golden rule level of capital,s_gold. Then

a. Current steady state capital per workerk*>k*_gold

b. Current steady state consumption per workerc*_gold

c. Current steady state (MPK)* > (MPK)*_gold.

d. Both b and c

5. Consider a Solow model with population growth. Let the per capita production function bey=f(k)=k^1/3. If savings rate,s=0.4, depreciation rate,=0.1 and population growth rate,n=0.3, the steady state level of per capita capital is

a. 1

b. 4/9

c. 1/4

d. 3/2

6. Which of the following statements is (are)true?

a. The Solow model predicts that the only source of sustained improvements in living standards (i.e., growth in per capita income) over long periods of time is higher saving rate.

b. The Solow model predicts that the only source of sustained improvements in living standards (i.e., growth in per capita income) over long periods of time is technological progress.

c. Both a. and b.

d. None of the above.

7. Consider a basic Solow model (without population growth and with no technological progress). Let the per capita production function bey=f(k)=k^0.5. Let the savings rate,s=0.2, and the depreciation rate,=0.1. Then the golden rule level of capital per capita in this economy is

a. 25

b. 1.56

c. 0.40

d. 0.64