In the Solow model, the faster growth of output that results from an increase in the saving rate is ...

In the Solow model, the faster growth of output that results from an increase in the saving rate is temporary, because ________.
 
  A) of diminishing marginal product of capital
  B) with a larger stock of capital, consumption is encouraged more than investment
  C) the rising capital stock depreciates at a faster rate
  D) the economy settles into a steady state in which saving no longer rises

Question 2

Compared to adaptive expectations, rational expectations would imply that the transition between the short-run and the long-run will take:
 
  a. the same amount of time.
  b. a longer period of time.
  c. a variable period of time.
  d. less time.

Question 3

What was the typical policy of the British colonies toward the practice of squatting or freely settling and cultivating the land without any formal transfer of ownership?
 
  (a) Squatting was encouraged by colonial officials as a way to encourage settlement of the land.
  (b) Squatting was discouraged by colonial officials because of the legal ownership of land by the Indians.
  (c) Squatting was generally discouraged by colonial officials; formal transfer of ownership to
  settlers was required because the British Crown and their designated officials claimed
  ownership to the land.
  (d) There was no general policy toward the practice of squatting; it was left to the individual settlers.

Question 4

An increase in the saving rate results in a higher steady state ________.
 
  A) growth rate of capital
  B) growth rate of output per worker
  C) level of consumption per worker
  D) level of capital per worker

Question 5

The period between a business cycle peak and the subsequent trough is called
 
  a. a recession.
  b. a complete cycle.
  c. an expansion.
  d. a change in economic trend.

Question 6

During the antebellum period, U.S. consumers increased their demand for mass-produced, standardized and simple goods.
 
  Indicate whether the statement is true or false

Question 7

In a perfectly competitive market, firms take:
 
  a. the money wage as exogenous, the price level as endogenous.
  b. the money wage and price level as exogenous, the quantity of labor as endogenous.
  c. the money wage and price level as endogenous.
  d. the quantity of labor as exogenous.

Question 8

Assume the marginal propensity to consume is .8 . To offset a fall in income of 1,000, the government should
 
  a. increase taxes by 200.
  b. raise taxes by 250.
  c. increase government spending and taxes by 1,000.
  d. cut taxes by 200.
  e. both c and d.

Question 9

A government debt larger than the economy's GDP ________.
 
  A) is an example of debt repudiation
  B) is a predictor of future large budget deficits
  C) is a consequence of debt intolerance
  D) is a possible consequence of tax smoothing

Question 10

According to Lucas' misperception theory, countries with higher rates of inflation should have a _____new classical AS curve.
 
  a. flatter.
  b. steeper.
  c. downward sloping
  d. vertical.
  e. none of the above.

Question 11

With regard to indentured servitude,
 
  (a) indentured servants were typically slaves.
  (b) this institutional arrangement benefited all parties entering the contract.
  (c) this institutional arrangement restricted the supply of labor for the colonies.
  (d) all of the above answers are correct.

Question 12

Inflation targeting alleviates the problem of
 
  a. money multiplier instability that makes money targeting difficult.
  b. time inconsistency.
  c. a lack of credibility in monetary policy.
  d. both b and c.
  e. all of the above.