Site MapHelpFeedbackSelf-test Questions
Self-test Questions
(See related pages)





1Since the industrial revolution, growth in Europe has averaged about 2% per annum except during the ‘golden age’ of growth in the 1950s and 1960s.
A)TRUE
B)FALSE


2In the 1950s and 1960s, members of the European Economic Community grew faster, on average, than non-members.
A)TRUE
B)FALSE


3The Solow model assumes increasing returns to scale.
A)TRUE
B)FALSE


4The Solow model explains how the EU's long-run growth rate could be affected by European integration.
A)TRUE
B)FALSE


5The Solow model assumes that a constant fraction of the economy's GDP is invested.
A)TRUE
B)FALSE


6In the Solow model:
A)all long run growth is driven by physical capital accumulation.
B)medium run growth is affected by physical capital accumulation, but long-run growth is determined by technological progress.
C)investment is assumed to be financed by borrowing abroad.
D)the main equilibrating variable is the investment rate.


7In the Solow model, the GDP/L curve is concave since:
A)the rate of depreciation is assumed to be constant.
B)the rate of depreciation and the investment rate are assumed to be constant.
C)the marginal return to additional capital falls as the capital-labour ratio rises.
D)the population is constant.
Consider a situation in which European integration leads to an increase in efficiency, so that more output can be produced from the same amount of capital and labour. Use the diagram to answer the questions; in particular refer to the labels in the diagram. <a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0077111192/117919/ch07q08eq01.GIF','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (31.0K)</a>



8The improved efficiency shows up as a shift of to , and as a shift of to .


9In the Solow model, an increase in efficiency affects investment because the investment rate is assumed to be .


10Before the liberalisation, the long-run equilibrium capital-labour ratio was . Afterwards it is .


11At the points D and A, the of new capital balances the of existing capital.


12The impact of the efficiency gain on GDP per capita is shown by the number and the impact of the induced capital formation is shown by the number .


13Firms can still break even despite the drop in price since average costs and sales per firm .





To learn more about the book this website supports, please visit its Information Center.
(c)2006 McGraw-Hill Education Europe
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Education Europe is one of the many fine businesses of The McGraw-Hill Companies.


Baldwin & Wyplosz 2eOnline Learning Center

Home > Chapter 7 > Self-test Questions