Ch.12 Productivity and Growth
Figure 25-1. On the horizontal axis, K/L represents capital (K) per worker (L). On the vertical axis, Y/L
represents output (Y) per worker (L).
Y/L
K/L
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1. Refer to Figure 25-1. The shape of the curve is consistent with which of the following statements about
the economy to which the curve applies?
a. In the long run, a higher saving rate leads to a higher growth rate of productivity.
b. In the long run, a higher saving rate leads to a higher growth rate of income.
c. Returns to capital become increasingly smaller as the amount of capital per worker
increases.
d. All of the above are correct.
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2. Other things equal, relatively poor countries tend to grow
a. slower than relatively rich countries; this is called the poverty trap.
b. slower than relatively rich countries; this is called the fall-behind effect.
c. faster than relatively rich countries; this is called the catch-up effect.
d. faster than relatively rich countries; this is called the constant-returns-to-scale effect.
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3. Other things the same, if a country raises its saving rate, then in the long run
a. both the level and growth rate of real GDP are unchanged.
b. the level of real GDP is higher but the growth rate of real GDP is unchanged.
c. both the level and growth rate of real GDP are higher.
d. None of the above are correct.
10.When a society decides to increase its quantity of physical capital, the society
a. can avoid the usual need to face trade-offs.
b. is apparently not very concerned about its rate of economic growth in the future.
c. is in effect deciding to consume fewer goods and services in the present.
d. is in effect deciding to save less of its current income in the present.