1.2: Economic Growth Theory(A+ Guaranteed Answers)
Accumulation of physical and human capital correct answers_________________ is central in
explaining rising living standards and economic growth
Investment is greater than the amount necessary to replace depreciated capital correct
answersEconomic growth occurs when:
Solow Model/Neoclassical Growth Model correct answersHighlights the determinants of a
country's standard of living in the long run.
Law of diminishing returns correct answersUltimate constraint on growth for the Solow Model
technological progress correct answersAccording to the Solow model, sustained increases in per-
capita income are only possible through
Endogenous correct answersexplained in the model
Exogenous correct answersnot explained in the model
Exogenous correct answersThe Solow model is _________ because technology progress is not
explained here
No population growth
Technology is constant and exogenous (no cost of adopting frontier tech)
No barriers to investment, borrowing, or employment
Perfectly competitive markets (free entry and exit) correct answersAssumptions of solow model
(CHECK!!!!!)
the return from investment is exactly offset by the cost of depreciation correct answersCapital
accumulation and growth takes places until
steady-state capital sotck correct answersThere is no further capital accumulation or economic
growth at the
-output
-consumption
-per-capita income correct answersAt the steady-state equilibrium, all of these are constant:
Diminishing returns correct answers_________________ eventually put a brake on economic
growth
Convergence correct answersinitial distribution of capital does not matter for the steady state:
1) all countries end up equally wealthy in the long-run
2) no inequality within or across countries in the long-run
Accumulation of physical and human capital correct answers_________________ is central in
explaining rising living standards and economic growth
Investment is greater than the amount necessary to replace depreciated capital correct
answersEconomic growth occurs when:
Solow Model/Neoclassical Growth Model correct answersHighlights the determinants of a
country's standard of living in the long run.
Law of diminishing returns correct answersUltimate constraint on growth for the Solow Model
technological progress correct answersAccording to the Solow model, sustained increases in per-
capita income are only possible through
Endogenous correct answersexplained in the model
Exogenous correct answersnot explained in the model
Exogenous correct answersThe Solow model is _________ because technology progress is not
explained here
No population growth
Technology is constant and exogenous (no cost of adopting frontier tech)
No barriers to investment, borrowing, or employment
Perfectly competitive markets (free entry and exit) correct answersAssumptions of solow model
(CHECK!!!!!)
the return from investment is exactly offset by the cost of depreciation correct answersCapital
accumulation and growth takes places until
steady-state capital sotck correct answersThere is no further capital accumulation or economic
growth at the
-output
-consumption
-per-capita income correct answersAt the steady-state equilibrium, all of these are constant:
Diminishing returns correct answers_________________ eventually put a brake on economic
growth
Convergence correct answersinitial distribution of capital does not matter for the steady state:
1) all countries end up equally wealthy in the long-run
2) no inequality within or across countries in the long-run
