The convergence to a steady-state capital-labor ratio k* is ensured by the fact that if k is at a level
A. lower than k*, saving will exceed the investment required to maintain a constant k, causing k to rise
B. lower than k*, investment will exceed saving, leading to an increase in the capital stock
C. lower than k*, saving will exceed the investment required to maintain a constant k, causing output per capita to decline
D. higher than k*, the rate of depreciation will be higher than the savings rate, causing k to decrease
E. higher than k*, output per capita will continue to increase until a new steady-state equilibrium is reached
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In the neoclassical growth model, if the capital-labor ratio is below the (optimal) steady-state level, we should expect that
A. economic growth will continue to decline unless technological advances are made
B. income per capita will decrease since gross investment is not sufficient to supply new workers with adequate capital
C. the savings rate will decline due to the lack of economic growth
D. all of the above
E. none of the above
In a neoclassical growth model, a nation with a declining population growth rate will experience
A. a decrease in living standards
B. an increase in living standards
C. a lower savings rate
D. an increase in long-term growth
E. a decrease in the steady-state capital-labor ratio
A neoclassical growth model would predict that if the rates of both population growth and saving increase, then the steady-state capital-labor ratio will
A. increase
B. decrease
C. stay the same
D. temporarily increase, but then go back to its original level
E. most likely change but we cannot say for sure how
Assume a neoclassical growth model with constant returns to scale. Which of the following statements is TRUE?
A. a declining population growth rate will increase per-capita income
B. an increase in the savings rate will permanently increase the growth rate of output
C. an increase in the depreciation rate will increase the capital-labor ratio
D. technological advances will have no effect on the long-run growth rate of output
E. none of the above
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