1. In New Zealand, the rate of saving is greater than in Australia Given this information, we know, other things equal, that in the long run New Zealand's:

a. growth rate will be greater than the Australian growth rate.

b. output per worker will be greater than Australian output per worker.

c. capital per worker will be no different than the Australian capital per worker.

d. all of the above

e. none of the above

2.Suppose there is a permanent increase in a country's saving rate. This increase in the saving rate will cause:

a)a permanently higher level of capital per worker.

b)a permanently higher level of output per capita.

c)a permanently faster growth rate of output.

d)both of the first two answers above

e)none of the above.

3.A tax cut will cause which of the following when a liquidity trap situation exists?

a)The interest rate will increase.

b)The interest rate will decrease.

c)Output will increase.

d)Output will not change.

e)Output will decrease.

4.If the saving rate is 1 (i.e.,s= 1), we know that:

a)Capital per worker,K/N= 0.

b)Output per worker,Y/N= depreciation per worker.

c)Consumption per worker,C/N, will be at its highest level.

d)Output per worker,Y/N= 0.

5. A permanent reduction in the saving rate will:

a)increase the growth of output per worker only temporarily.

b)increase the steady state growth of output per worker.

c)decrease the growth of output per worker only temporarily.

d)decrease the steady state growth of output per worker.

e)increase or decrease the steady state growth of output per worker, depending on the level of saving to begin with.

6.Suppose there are two countries that are identical in every way with the following exception: Country A has a lower depreciation rate than country B. Given this information, we know with certainty that:

a)the steady state growth rate will be the same in the two countries.

b)the steady state growth rate will be higher in A than in B.

c)Capital per worker,K/N, will be higher in B.

d)Output per worker, Y/N, will be higher in B

7.Suppose thelabor force in Australia is growingby 5% every year. The labor productivity is increasing by 2% every year. What has to be the growth rateof output to keep the unemployment rate constant?

a)7%

b)5%

c)3%

d)2%

8.When a liquidity trap situation exists, we know that:

a)an open market operation will have no effect on the supply of money.

b)an open market operation will have no effect on the interest rate.

c)expansionary monetary policy will be deflationary.

d)fiscal policy will have no effect on the demand for goods.

e)an open market operation will have no effect on the monetary base.