Human Capital 1. In the presence of public education and human capital, if the initial private physical capital intensity is set so that human and physical capital explain half of US historical growth then a. both the time path of growth rates and interest rates are consistent with the data b. the time of growth rates is consistent with the data but not the time path of interest rates c. the time of interest rates is consistent with the data but not the time path of growth rates d. neither the time path of growth rates nor interest rates are consistent with the data 2. Estimates of the human capital production function suggest a. 6'1 : 62 : 0.10 b. 61 = 010,92 = 0.40 c. 61 =0.40,62 =0.10 d. 61 = 612 = 0.40 3. For the US, the ratio of real public school spending per student during 1960 compared 1840 was a. 1.14 b. 1.67 c. 3.63 d. 9.50 4. For the US, a rise in real public school spending per student caused worker productivity to rise fold from 1870 to 1990 a. 1.14 b. 1.67 c. 3.63 d. 9.50 Introducing the Government 5. Which of the following represents the government consumption of goods? a. r, b. Cf c. G, 6. In our model, the government taxes a. wages b. capital income c. all income d. income and consumption 7. When government is added to the overlapping-generations model, physical capital intensity is measured by a. K, b. [fr/E, c. Kt/Nt d. KtlEtNt 8. When government is added to the overlapping-generations model, output per worker in the economy is a. AE,g{'(1'\")kf'/(1+s) b. AnyaWk? c. (13.914113,gg"(1"")k;I d. aAgf'l'\")ka Government Consumption 9. Assuming no public capital investment, an increase in the relative size of the public sector employment raises a. the wage tax rate the capital-labor ratio in the private sector worker productivity in the private sector none of the above 95"?" 10. Assuming no public capital investment, an increase in both government purchases of private goods and government employment increases a. government consumption b. government investment 0. public debt (1. transfer payments 11. Assuming no public capital investment, an increase in government employment causes the transition equation for private capital intensity to a. shift up b. shift down 0. remain the same d. shift up or down depending on the rate of taxation l2. Imagine an economy without a government with the following characteristics: A = 10, n = l, d = 0, N = 100, 1? = l / 2 , and a = 1 / 3 . The steady state value ofk for this economy is a. 2.020 b. 2.222 c. 3.012 d. 3.313 Government Investment 13. The presence of government capital the marginal product of private capital and the decline of the path of worker productivity growth in transition to the steady state. a. raises, steepens b. raises, attens c, lowers, steepens d. lowers, attens 14. If the Only government purchase is public employment, the transition equation for private capital intensity is a. kr+1=$(1G)Akfr (1. km =$(1a)Ak, 15. If government purchases take the form of public employment and public capital investment, the transition equation for private capital intensity is worker productivity _ 0! b. k,+1=xk,\"+\" c- kr+1=xkf+#(l_a) d. kr+1 =ka 16. In a numerical analysis of the transition equation for private capital, we made the following parameterassumptions: n=1, d=0, 5:1/2, a=1/3,A =10, g=ctg =0, ,u=1/3andan initial capital intensity of k0 = 0.0500. In this model, increasing the tax rate r from 0 to 0.10, causes the transition equation to shift a. up, increase b. up, decrease 0. down, increase (1. down, decrease and worker productivity growth to 17. In a numerical analysis of the transition equation for private capital, we made the following parameterassumptions: n=1, d=0, =1/2, a=l/3,A =10, g=ctg =0, ,u=1/3andan initial capital intensity of k0 = 0.0500. In this model, increasing the tax rate r from 0.10 to 0.20, causes the transition equation to shift and worker productivity growth to _ a. up, increase b. up, decrease 0. down, increase (1. down, decrease Open Economy 18. The international equilibrium rental rate paid to capital owners is denoted by a. r" b. r" 5 c. 0214ng (Fan? _1 d. aAgf'U'alkfl a 19. In an open economy, private capital intensity in period t is given by a. Kka+;(la) 20. In an economy open to international capital ows, the capitallabor ratio is a function of which of the following variables? a. the time discount factor b. wages taxes and transfers 0. the international return to capital (1. all of the above 21. In an open economy with taxation of capital income (and not just labor income), international capital market equilibrium requires that the aer-mx return to capital be equal across countries. So, we now interpret r* as the equilibrium after-tax rental rate in world markets. For an economy that taxes capital income at a tax rate I which expression must now equal 1\"\" ? a. aAgf'a'alkf'l b. (1z)aAg;"(1'\")k,\"1 c. raA gf' (1_a)kf' d. TU a)Agf'(1'\")kf Convergence 22. Suppose country A and country B have the same values of ,6 , A, and n. If country A currently has a lower capital-labor ratio than country B then, compared to Country B, Country A has a . a. higher level and a higher growth rate in worker productivity b. higher level but lower growth rate in worker productivity c. lower level but higher growth rate in worker productivity (1. lower level and a lower growth rate in worker productivity 23. Suppose country A and country B have the same values of [2' and n, but country A has a higher value of A. If country A and B currently have the same capital-labor ratio, Country A _ the worker productivity of country B. will growth faster and converge to . will grow faster and will surpass will grow slower and fail to converge to . will grow slower but will converge to mpg-'9: 24. Economic theory predicts a. poor countries will grow faster than rich countries b. rich countries will grow faster than poor countries 0. poor and rich countries will grow at similar rates (1. a country's growth depends on the distance from its steady state 25. From 1920 to 1970, the annual growth rate in US. worker productivity was about a. 4% b. 3% c. 2% d. 1% Bonus Questions 1. Introduce a government workforce, equal to 10, into the economy of #12 above. The steady state value of k for the economy with 10 government workers is a. 2.020 b. 2.222 c. 3.012 d. 3 .3 1 3 . Increasing wage taxes to fund government investment in public capital raises private capital . raises private capital up to a unique positive tax rate, after which it lowers private capital . lowers private capital . lowers private capital up to a unique positive tax rate, after which it raises private capital 0.0pr