RecallEasyCapital Accumulation and Growth

Which of the following relationships between the capital stock, investment, and depreciation is always true by definition?

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Why

Tap an answer. The explanation will appear here, including why each wrong option is wrong.

Not quite. D is correct.

By definition, net investment (ΔK) is gross investment minus depreciation. Therefore, any change in the capital stock equals gross investment minus depreciation.

A: why it's wrongMistakes the special condition of a steady state (where net investment is zero) for an identity that holds at all times.

B: why it's wrongConfuses the flow of investment with the total stock of capital.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

By definition, net investment (ΔK) is gross investment minus depreciation. Therefore, any change in the capital stock equals gross investment minus depreciation.

A: why it's wrongMistakes the special condition of a steady state (where net investment is zero) for an identity that holds at all times.

C: why it's wrongConfuses the level of the capital stock with the change in the capital stock over a period.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

By definition, net investment (ΔK) is gross investment minus depreciation. Therefore, any change in the capital stock equals gross investment minus depreciation.

A: why it's wrongMistakes the special condition of a steady state (where net investment is zero) for an identity that holds at all times.

D: why it's wrongBy definition, net investment represents the change in the capital stock over time, which equals gross investment minus capital depreciation (ΔK = I - δK).

Tap any option to see why it's right or wrong.

Not quite. D is correct.

By definition, net investment (ΔK) is gross investment minus depreciation. Therefore, any change in the capital stock equals gross investment minus depreciation.

A: why it's wrongMistakes the special condition of a steady state (where net investment is zero) for an identity that holds at all times.

undefined: why it's wrongConfuses the rate of change of investment with the accumulation of capital.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

By definition, net investment (ΔK) is gross investment minus depreciation. Therefore, any change in the capital stock equals gross investment minus depreciation.

B: why it's wrongConfuses the flow of investment with the total stock of capital.

C: why it's wrongConfuses the level of the capital stock with the change in the capital stock over a period.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

By definition, net investment (ΔK) is gross investment minus depreciation. Therefore, any change in the capital stock equals gross investment minus depreciation.

B: why it's wrongConfuses the flow of investment with the total stock of capital.

D: why it's wrongBy definition, net investment represents the change in the capital stock over time, which equals gross investment minus capital depreciation (ΔK = I - δK).

Tap any option to see why it's right or wrong.

Not quite. D is correct.

By definition, net investment (ΔK) is gross investment minus depreciation. Therefore, any change in the capital stock equals gross investment minus depreciation.

B: why it's wrongConfuses the flow of investment with the total stock of capital.

undefined: why it's wrongConfuses the rate of change of investment with the accumulation of capital.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

By definition, net investment (ΔK) is gross investment minus depreciation. Therefore, any change in the capital stock equals gross investment minus depreciation.

C: why it's wrongConfuses the level of the capital stock with the change in the capital stock over a period.

D: why it's wrongBy definition, net investment represents the change in the capital stock over time, which equals gross investment minus capital depreciation (ΔK = I - δK).

Tap any option to see why it's right or wrong.

Not quite. D is correct.

By definition, net investment (ΔK) is gross investment minus depreciation. Therefore, any change in the capital stock equals gross investment minus depreciation.

C: why it's wrongConfuses the level of the capital stock with the change in the capital stock over a period.

undefined: why it's wrongConfuses the rate of change of investment with the accumulation of capital.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

By definition, net investment (ΔK) is gross investment minus depreciation. Therefore, any change in the capital stock equals gross investment minus depreciation.

D: why it's wrongBy definition, net investment represents the change in the capital stock over time, which equals gross investment minus capital depreciation (ΔK = I - δK).

Tap any option to see why it's right or wrong.

Not quite. D is correct.

By definition, net investment (ΔK) is gross investment minus depreciation. Therefore, any change in the capital stock equals gross investment minus depreciation.

D: why it's wrongBy definition, net investment represents the change in the capital stock over time, which equals gross investment minus capital depreciation (ΔK = I - δK).

undefined: why it's wrongConfuses the rate of change of investment with the accumulation of capital.

Tap any option to see why it's right or wrong.

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Chapter 11: not started.

RecallMediumSaving, Capital, and Output

In the Solow growth model, a permanent increase in the saving rate will NOT affect which of the following variables in the long run?

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Why

Tap an answer. The explanation will appear here, including why each wrong option is wrong.

Not quite. D is correct.

In the Solow growth model, an increase in the saving rate has a permanent level effect on capital, output, and investment per worker, but no effect on the long-run growth rate of output per worker.

A: why it's wrongStudents may overlook that a higher saving rate permanently increases the steady-state capital stock and output per worker (a level effect).

Tap any option to see why it's right or wrong.

Not quite. D is correct.

In the Solow growth model, an increase in the saving rate has a permanent level effect on capital, output, and investment per worker, but no effect on the long-run growth rate of output per worker.

A: why it's wrongStudents may overlook that a higher saving rate permanently increases the steady-state capital stock and output per worker (a level effect).

B: why it's wrongStudents may fail to recognize that higher saving directly finances additional capital accumulation, resulting in a higher steady-state capital per worker.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

In the Solow growth model, an increase in the saving rate has a permanent level effect on capital, output, and investment per worker, but no effect on the long-run growth rate of output per worker.

A: why it's wrongStudents may overlook that a higher saving rate permanently increases the steady-state capital stock and output per worker (a level effect).

C: why it's wrongStudents may forget that a higher steady-state capital stock requires and generates a higher level of investment per worker to replace depreciated capital.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

In the Solow growth model, an increase in the saving rate has a permanent level effect on capital, output, and investment per worker, but no effect on the long-run growth rate of output per worker.

A: why it's wrongStudents may overlook that a higher saving rate permanently increases the steady-state capital stock and output per worker (a level effect).

D: why it's wrongIn the long run, the saving rate determines the level of output per worker but does not affect its steady-state growth rate, which depends only on technological progress.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

In the Solow growth model, an increase in the saving rate has a permanent level effect on capital, output, and investment per worker, but no effect on the long-run growth rate of output per worker.

B: why it's wrongStudents may fail to recognize that higher saving directly finances additional capital accumulation, resulting in a higher steady-state capital per worker.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

In the Solow growth model, an increase in the saving rate has a permanent level effect on capital, output, and investment per worker, but no effect on the long-run growth rate of output per worker.

B: why it's wrongStudents may fail to recognize that higher saving directly finances additional capital accumulation, resulting in a higher steady-state capital per worker.

C: why it's wrongStudents may forget that a higher steady-state capital stock requires and generates a higher level of investment per worker to replace depreciated capital.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

In the Solow growth model, an increase in the saving rate has a permanent level effect on capital, output, and investment per worker, but no effect on the long-run growth rate of output per worker.

B: why it's wrongStudents may fail to recognize that higher saving directly finances additional capital accumulation, resulting in a higher steady-state capital per worker.

D: why it's wrongIn the long run, the saving rate determines the level of output per worker but does not affect its steady-state growth rate, which depends only on technological progress.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

In the Solow growth model, an increase in the saving rate has a permanent level effect on capital, output, and investment per worker, but no effect on the long-run growth rate of output per worker.

C: why it's wrongStudents may forget that a higher steady-state capital stock requires and generates a higher level of investment per worker to replace depreciated capital.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

In the Solow growth model, an increase in the saving rate has a permanent level effect on capital, output, and investment per worker, but no effect on the long-run growth rate of output per worker.

C: why it's wrongStudents may forget that a higher steady-state capital stock requires and generates a higher level of investment per worker to replace depreciated capital.

D: why it's wrongIn the long run, the saving rate determines the level of output per worker but does not affect its steady-state growth rate, which depends only on technological progress.

Tap any option to see why it's right or wrong.

Not quite. D is correct.

In the Solow growth model, an increase in the saving rate has a permanent level effect on capital, output, and investment per worker, but no effect on the long-run growth rate of output per worker.

D: why it's wrongIn the long run, the saving rate determines the level of output per worker but does not affect its steady-state growth rate, which depends only on technological progress.

Tap any option to see why it's right or wrong.

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Chapter 11: not started.

AnalysisHardSolow Growth Model

Suppose an economy is in a steady state where consumption per worker, (C/N)*, is below the golden-rule level. Without knowing whether the capital-labor ratio is above or below the golden-rule level, what can be stated with certainty?

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Why

Tap an answer. The explanation will appear here, including why each wrong option is wrong.

Not quite. is correct.

Because steady-state consumption per worker lies below the maximum (golden-rule) level on both sides of the golden-rule peak, the capital stock could be either too low or too high. Therefore, a reduction in the saving rate could either raise or lower steady-state consumption.

A: why it's wrongThis is only true if the steady-state capital stock is below the golden-rule level; if it is above, raising saving further reduces (C/N)*.

Tap any option to see why it's right or wrong.

Not quite. is correct.

A: why it's wrongThis is only true if the steady-state capital stock is below the golden-rule level; if it is above, raising saving further reduces (C/N)*.

B: why it's wrongIf the economy is oversaving (capital above golden-rule), reducing capital actually increases consumption per worker.

Tap any option to see why it's right or wrong.

Not quite. is correct.

A: why it's wrongThis is only true if the steady-state capital stock is below the golden-rule level; if it is above, raising saving further reduces (C/N)*.

C: why it's wrongThe economy is already in a steady state, so the capital-labor ratio remains constant unless an exogenous shock occurs.

Tap any option to see why it's right or wrong.

Not quite. is correct.

A: why it's wrongThis is only true if the steady-state capital stock is below the golden-rule level; if it is above, raising saving further reduces (C/N)*.

D: why it's wrongIn a steady state, capital per worker is stable and does not change without parameter shifts.

Tap any option to see why it's right or wrong.

Not quite. is correct.

A: why it's wrongThis is only true if the steady-state capital stock is below the golden-rule level; if it is above, raising saving further reduces (C/N)*.

undefined: why it's wrongSteady-state consumption is below golden-rule consumption either because saving is too low or because saving is too high; reducing saving increases consumption in the latter case and decreases it in the former.

Tap any option to see why it's right or wrong.

Not quite. is correct.

B: why it's wrongIf the economy is oversaving (capital above golden-rule), reducing capital actually increases consumption per worker.

Tap any option to see why it's right or wrong.

Not quite. is correct.

B: why it's wrongIf the economy is oversaving (capital above golden-rule), reducing capital actually increases consumption per worker.

C: why it's wrongThe economy is already in a steady state, so the capital-labor ratio remains constant unless an exogenous shock occurs.

Tap any option to see why it's right or wrong.

Not quite. is correct.

B: why it's wrongIf the economy is oversaving (capital above golden-rule), reducing capital actually increases consumption per worker.

D: why it's wrongIn a steady state, capital per worker is stable and does not change without parameter shifts.

Tap any option to see why it's right or wrong.

Not quite. is correct.

B: why it's wrongIf the economy is oversaving (capital above golden-rule), reducing capital actually increases consumption per worker.

Tap any option to see why it's right or wrong.

Not quite. is correct.

C: why it's wrongThe economy is already in a steady state, so the capital-labor ratio remains constant unless an exogenous shock occurs.

Tap any option to see why it's right or wrong.

Not quite. is correct.

C: why it's wrongThe economy is already in a steady state, so the capital-labor ratio remains constant unless an exogenous shock occurs.

D: why it's wrongIn a steady state, capital per worker is stable and does not change without parameter shifts.

Tap any option to see why it's right or wrong.

Not quite. is correct.

C: why it's wrongThe economy is already in a steady state, so the capital-labor ratio remains constant unless an exogenous shock occurs.

Tap any option to see why it's right or wrong.

Not quite. is correct.

D: why it's wrongIn a steady state, capital per worker is stable and does not change without parameter shifts.

Tap any option to see why it's right or wrong.

Not quite. is correct.

D: why it's wrongIn a steady state, capital per worker is stable and does not change without parameter shifts.

Tap any option to see why it's right or wrong.

Not quite. is correct.

Tap any option to see why it's right or wrong.

Your progress

Chapter 11: not started.