Assume a closed economy, perfectly elastic labor supply, and linear technology. Suppose the incremental capital-output ratio (ICOR) is 3, the depreciation rate is 3%, and the gross savings rate is 10%
Use the Harrod-Domar growth equation to determine the rate of growth. What would the gross savings rate have to be to achieve 5% growth? Assuming a perfectly elastic labor supply, state one criticism of this model from an exogenous growth theory viewpoint and another criticism of this model from an endogenous growth theory viewpoint.
This question may be asked later in the course or may be broken up into several questions. Whether to use it at this stage will depend on how much coverage you gave this topic in lecture, especially for the last part of the question and also whether the Harrod-Domar model was covered assuming a zero depreciation rate (as in the text) or a positive depreciation rate.
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In a subgame-perfect equilibrium
A) each player's strategy constitutes a Nash equilibrium at every subgame of the original game. B) the last mover has an advantage over other players. C) the first mover has an advantage over other players. D) each player has the same response as the others at every subgame of the tree.
How many people still live on less than the equivalent of $1.25 per day (new definition of "extreme poverty")?
a. 100 million. b. 500 million. c. 1.4 billion. d. 2.2 billion.
In answer to the question "How did Britain affect American economic growth?" Hughes and Cain (2011) reach what conclusion?
(a) The colonies were launched with English institutions, and they were allowed to modify them to meet local needs. In exchange for their investment in the colonies, the British expected the American colonies to produce and grow rapidly. (b) British policies were adverse to the colonies because they interfered with efforts to recruit a labor force and maintain employment at something close to full employment. (c) British policies prevented the colonies from going through an Industrial Revolution, as was occurring in England. (d) British policies significantly held down income growth in the colonies because they aimed at increasing the proportion of "primary" output at the expense of commercial and manufacturing output.
The Japanese yen will appreciate against the dollar if
A) U.S. residents demand more Japanese goods. B) U.S. residents demand fewer Japanese goods. C) Japanese residents demand more U.S. goods. D) none of the above.