Essay About Marginal Product Of Capital And Exogenous Growth Models

Macroeconomics – Governance and Leadership
Final Test: Macroeconomics (2016)1. One difference between exogenous growth models and endogenous growth models isthere is no steady state in an exogenous growth modelendogenous growth models have no role for total factor productivityexogenous growth models seek to explain only short run business cyclesendogenous growth models seek to explain technological progressexogenous growth models do not rely on production functions2. If the marginal product of capital is constant,output does not increase when more capital is used in productiontechnological progress cannot shift the production functioninvestment is always equal to depreciationthe economy does not reach a steady statethe stock of capital never changes3. Endogenous growth theory explains poverty traps as the result ofdiscriminationwide variations in basic human attitudes, motivation, and risk-takingmore rapid depreciation of human capital among some groups than othersinterdependencies which make investments more valuable in wealthy regionsmismanaged government policy4. One reason to believe that the marginal product of capital may be constant is thatcapital and labor are substitutes in productionphysical capital and human capital may be complementary inputsfirms treat unsold output as inventory investmentsbeyond the optimal level, the extra output produced by another machine is always zerotechnology rarely changes5. The observation that poorer nations grow more rapidly than richer ones if they share the same steady state, and more slowly if they don’t, is known asconditional convergencespilloverlearning by doingthe poverty trapthe iron law of convergence6. The marginal product of labour is defined asthe amount of output produced by a given labour forcethe minimum amount of workers required to produce a given level of output the increase in productivity of the marginal worker if capital is increasedthe amount of output one more worker could produce given other factors of production are fixedthe cost of employing another worker7. If the stock of physical capital remains constant while employment rises, outputinitially declines, then eventually risesincreases at an increasing rateremains constant in real termsincreases at a decreasing ratefluctuates with the price level8. If a firm’s marginal product of labor is currently 75 units of output, the wage is $15 per unit of labor, and output sells for $0.80 per unit, the firm should shut down productionhire fewer workersmaintain its current workforce, but at fewer hours per workerkeep the current number of employees and hours workedhire more labor9. The labor supply curveslopes upward if the income and substitution effects of a wage increase exactly offset each otheris vertical if the income effect of a wage increase is dominantis downward-sloping if the income effect of a wage increase is dominantis vertical if the substitution effect of a wage increase is dominantis horizontal in the long run10. Increases in labor productivity from improved technology increase the long run supply of laborreduce the demand for laborreduce real wagesinduce firms to substitute capital for laborhave no long run effect on total hours worked11. Which of the following is the least likely to influence the natural rate of unemployment?monopolies in the goods marketlabor unionspayroll taxesunemployment insurance benefitsmonetary policy12. The replacement ratio is defined asThe cost of replacing a worker The cost of employing a new worker relative to the value of output they could produceThe cost of replacing capital relative to the book value of existing capitalUnemployment benefit as a share of previous earningsNone of the above13. The Beveridge Curve is the relationship between