Economics and Technology: Solow Model vs Neoclassical Model Quiz
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Questions and Answers

In the Solow model, what does technology do to the ceiling of per capita income?

  • Has no effect on it
  • Keeps it constant
  • Lowers it
  • Raises it (correct)

    • What happens to the returns if you increase investment in the PH and the US according to the text?

  • They will converge
  • They will be unpredictable
  • They will diverge
  • They will remain the same (correct)

    • What does it mean to endogenize a variable, like 'k' in the text?

  • To develop it internally within the model (correct)
  • To remove it from consideration
  • To make it externally determined
  • To keep it constant

    • Which of the following best describes the impact of population growth on capital in the Solow model?

    <p>Capital growth must match population growth rate</p> Signup and view all the answers

    In the context of the text, what does a positive value of G-T signify?

    <p>The government is spending more than it collected</p> Signup and view all the answers

    How does the crowding out effect impact the economy according to the text?

    <p>Results in higher taxes, interest rates, and increased government spending</p> Signup and view all the answers

    What relationship is described by the macroeconomic identity G - T = (S - I) + (M - X)?

    <p>Government budget deficit in relation to crowding out and trade deficit</p> Signup and view all the answers

    According to the Solow Model, what does Y = AF(K,N) represent?

    <p>Correlation between capital, labor, and technology in output</p> Signup and view all the answers

    What is the primary driver of economic growth in regions in extreme poverty?

    <p>Missionary work of the government</p> Signup and view all the answers

    What is the significance of the Balanced Growth Path formula mentioned in the text?

    <p>It shows that at steady state, the capital labor ratio remains constant</p> Signup and view all the answers

    What does the text suggest regarding increasing the savings rate to stimulate economic growth?

    <p>Evidence suggests that higher incomes lead to increased saving rates</p> Signup and view all the answers

    What does the statement 'GDP Growth or ∆𝑌/𝑌 is always growing by small n - growing at the population growth rate' signify?

    <p>It signifies that GDP growth rate is always slower than population growth rate</p> Signup and view all the answers

    In the context of the text, what does a negative value of G-T imply?

    <p>The private sector saved more than the government spent.</p> Signup and view all the answers

    How does a positive budget deficit relate to the trade deficit, according to the text?

    <p>It often leads to a twin deficit scenario.</p> Signup and view all the answers

    Based on the Solow Model equation Y = AF(K,N), what does 'A' represent?

    <p>Technology</p> Signup and view all the answers

    What does the crowding out effect typically lead to in terms of government policy measures?

    <p>Higher taxes</p> Signup and view all the answers

    What does a trade surplus in foreign exchange indicate for the domestic economy?

    <p>Exporting more goods than importing</p> Signup and view all the answers

    In the Solow model, what is the main function represented by the term 'y = Af(k)'?

    <p>Output per capita</p> Signup and view all the answers

    What effect does increasing investment in the PH and the US have on their convergence according to the text?

    <p>Convergence will not occur as returns will remain consistent</p> Signup and view all the answers

    What does the term 'endogenize' mean in the context of the given text?

    <p>To allow variables to be determined within the model</p> Signup and view all the answers

    Which factor has a direct impact on the ceiling of per capita income as discussed in the text?

    <p>Technology advancement</p> Signup and view all the answers

    What relationship does the neoclassical model 'Monetarist' suggest for correcting economies when resources are fully employed?

    <p>Economies self-correct when resources are fully utilized</p> Signup and view all the answers

    Which factor plays a crucial role in changing the steady state capital-labor ratio (k/N) in the Solow model?

    <p>Population growth</p> Signup and view all the answers

    What is the potential implication of only increasing the savings rate on an economy's growth according to the text?

    <p>Limited impact due to correlations between income and savings</p> Signup and view all the answers

    How does a minor irrigation project impact the economy, based on the text?

    <p>Results in a small increase in savings, investment, and income</p> Signup and view all the answers

    Why does increasing investment in the PH and the US not affect returns significantly according to the text?

    <p>Correlation between income and saving levels</p> Signup and view all the answers

    What is a potential challenge associated with trying to stimulate economic growth through increased savings rates?

    <p>The possibility of diminishing returns on capital</p> Signup and view all the answers

    In the Solow model, what effect does an increase in the capital-labor ratio have on per capita income according to the text?

    <p>Per capita income decreases due to diminishing marginal productivity.</p> Signup and view all the answers

    What role does technology play in the convergence process of economies according to the text?

    <p>Technology accelerates the convergence process.</p> Signup and view all the answers

    How does an increase in the capital labor ratio impact the rate of change in per capita income between two economies with different ratios?

    <p>The economy with the lower initial ratio experiences a greater rate of change.</p> Signup and view all the answers

    What factor ultimately causes two economies to converge in terms of per capita income according to the text?

    <p>Growth in technology</p> Signup and view all the answers

    How does an increase in capital affect per capita income growth according to the text?

    <p>Improves per capita income with diminishing returns</p> Signup and view all the answers

    In the context of the text, what does the 'Golden Rule of Accumulation' refer to?

    <p>Equating the slope of the breakeven investment with the production function slope</p> Signup and view all the answers

    How does an increase in the savings rate impact the equilibrium capital-labor ratio in the Solow model?

    <p>It shifts the equilibrium to the right and up</p> Signup and view all the answers

    What is the effect of population growth on per capita income in the Solow model according to the text?

    <p>Leads to a permanently higher per capita income</p> Signup and view all the answers

    How does 'Malthusian The slope gets flatter' impact welfare and income in the context of the text?

    <p>Increases welfare and income permanently</p> Signup and view all the answers

    What does the graph illustrating lower rates of population growth predict about long-term standard of living?

    <p>Standard of living will be higher in the long run</p> Signup and view all the answers

    In a simple economy without government, what relationship holds true at equilibrium?

    <p>Y ≡ C + S</p> Signup and view all the answers

    What does the equation Y - T = C + S represent in the context of the text?

    <p>Disposable income equals consumption plus savings</p> Signup and view all the answers

    In a simple economy with government, what does the equation G - T = S - I indicate at equilibrium?

    <p>Government spending minus tax is equal to private savings minus investment</p> Signup and view all the answers

    What is the significance of investment spending being equal to net exports in the macroeconomic identity equation E ≡ C + G + I + (X-M)?

    <p>It shows the relationship between domestic investment and foreign trade balance</p> Signup and view all the answers

    What does the equation G-T=S-I express in a simple economy with government?

    <p>Government budget deficit is equal to private savings minus private investment</p> Signup and view all the answers

    What is the consequence of S/N being greater than (m+d)*k/N in the Solow model?

    <p>Surplus savings leading to a higher capital-labor ratio</p> Signup and view all the answers

    In the context of the Solow model, what does the scenario where S/N < (m+d)*K/N indicate?

    <p>Inability to maintain machinery resulting in a lower capital-labor ratio</p> Signup and view all the answers

    What happens to the capital-labor ratio when natural disasters or terrorism lead to the destruction of infrastructure and capital, according to the text?

    <p>Capital-labor ratio decreases</p> Signup and view all the answers

    How does unconditional foreign aid impact the Solow model's steady state?

    <p>Returns the economy to the steady state</p> Signup and view all the answers

    In the context of the Solow model, what is the implication of 'no savings' in the poorest region of a country?

    <p>No investment in capital</p> Signup and view all the answers

    What is the impact of population control on changing the steady state in the Solow model?

    <p>Necessitates other factors besides capital for change</p> Signup and view all the answers

    How does a lack of investment affect income levels in regions with no saving, according to the text?

    <p>Results in no income generation</p> Signup and view all the answers

    What is meant by 'perpetual cycle' as described in the text?

    <p>'No savings, no investment'</p> Signup and view all the answers

    How does the return to steady state occur after natural disasters or terrorism based on the text?

    <p>'Return to (k/N)' or steady state'</p> Signup and view all the answers

    What is implied by 'employing other factors like population control' to change the steady state in the Solow model?

    <p>'Population control as a factor for change'</p> Signup and view all the answers

    What is a key component of Leadership Capacity in advocacy organizations?

    <p>Vision, inspiration, and motivation</p> Signup and view all the answers

    What does Effective Adaptive Capacity refer to in advocacy organizations?

    <p>The ability to monitor, assess, and adapt to changing environments successfully</p> Signup and view all the answers

    What is a crucial quality for leaders of advocacy organizations according to the text?

    <p>Authentic personal and organizational commitment to advocacy</p> Signup and view all the answers

    Why is Leadership Capacity considered important for advocacy organizations?

    <p>As a resource to forge and sustain organizational culture</p> Signup and view all the answers

    What does organizational management capacity refer to in advocacy organizations?

    <p>Good management of people, communications, and resources</p> Signup and view all the answers

    What is a key attribute associated with technical capacity for advocacy organizations?

    <p>Legal knowledge</p> Signup and view all the answers

    In advocacy organizations, what is crucial in managing non-staff resources effectively?

    <p>Maintaining stakeholder diversity</p> Signup and view all the answers

    What is an example of a non-staff resource that advocacy organizations frequently rely on?

    <p>Volunteers</p> Signup and view all the answers

    What does technical capacity for advocacy organizations encompass?

    <p>Enhanced fundraising capability</p> Signup and view all the answers

    In advocacy organizations, what is the significance of volunteer management?

    <p>Ensuring volunteers are productive and satisfied</p> Signup and view all the answers

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