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Semester 5 Subjects

►Game Theory & Strategic Interactions

►Economic Growth & Business Cycles

►Introductory Development Economics

►DSE – Advanced Econometrics

►DSE – Law and Economics

►DSE – Environmental Economics

►DSE – Open Economics Macroeconomics

►DSE – Public Economics

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Course Introduction

Chapter 1 : Facts of Economic Growth

Chapter 2 : Solow Model

Demo Quiz

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Solow Model Test #1

1. Please Read the Questions and all the options Carefully, Before Selecting Your Choice.
2. You are not Allowed to edit your answers after submission.
3. The Paper has twenty Questions
4. Time Allowed is 20 Minutes.
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1 / 20

Investment increases proportionately with the increase in capital stock implies that, for a given rate of saving _______

those economies which have lower level of capital will have higher level of investment

those economies which have higher level of capital will have higher level of investment

those economies which have lower level of capital will have Constant level of investment

those economies which have higher level of capital will have lower level of investment

2 / 20

In the Solow Model, The production function becomes __________ as k increases indicating that it gives _____________ marginal product of capital

Flatter ; Increasing

Steeper ; Increasing

Flatter ; Diminishing

Steeper ; Diminishing

3 / 20

The aggregate production function for the Solow growth model assumes (A) ___________ returns to scale and (B) _____________marginal productivity of labour and capital.

A : Increasing, B : Diminishing

A : Constant, B : Diminishing

A : Decreasing, B : Diminishing

A : Increasing, B : Constant

4 / 20

In the Solow Model, the point where investment is equal to depreciation is known as the ______________.

Equilibrium Point

Steady State

Break Even Point

None of the above

5 / 20

According to the Solow Model, _____________________ is a function of capital.

Labour

Output

Technology

Population

6 / 20

Consider an economy described by the following production function :

F(K, L) = K^0.5L^0.5  

Assume that the rate of depreciation is 10% per year and rate of saving is 30%. Find the steady state level of Investment of Solow’s model.

i* = 0.9

i* = 0.10

i* = 3

i* = 0.16

7 / 20

 

Consider an economy described by the following production function :

F(K, L) = K^0.5L^0.5  

Assume that the rate of depreciation is 10% per year and rate of saving is 30%. Find the steady state capital stock per worker of Solow’s model.

k* = 16

k* = 10

k* = 9

k* = 3

8 / 20

In the Solow Model, the change in saving rate produces

Level Effect

Growth Effect

No Effect on steady state

None of these

9 / 20

In the Solow Model, the economy which is not at steady state

will remain where it is initially

will automatically reach at Golden rule Level of Capital

will approach towards its steady state

will never reach its steady state

10 / 20

In the Solow Model, at the steady state we have

Change in Capital = Investment

Change in Capital = Depreciation

Change in Capital = Investment plus Depreciation

Change in Capital = Investment minus Depreciation

11 / 20

In the Solow model, the steady-state level of capital per worker is determined by:

The saving rate and the population growth rate.

The level of technology and the depreciation rate.

The saving rate, the population growth rate, the level of technology, and the depreciation rate.

Government policies and external shocks.

12 / 20

What is the "golden rule" level of capital in the Solow model?

The level of capital that maximizes the output per worker.

The level of capital that maximizes the consumption per worker.

The level of capital that maximizes the saving rate.

The level of capital that minimizes the population growth rate.

13 / 20

In the Solow model, what role does the depreciation rate play in the economy?

It determines the long-term growth rate of the economy.

It influences the steady-state level of capital per worker.

It is irrelevant to the level of output.

It only affects short-term economic fluctuations.

14 / 20

The Solow model predicts that countries with lower initial levels of capital per worker will:

Grow at the same rate as richer countries.

Grow faster than richer countries, due to diminishing returns to capital.

Grow slower than richer countries, due to higher depreciation rates.

Never catch up to richer countries.

15 / 20

In the Solow model, technological progress is often considered to be:

Endogenous.

Exogenous.

Determined by the level of capital.

Irrelevant to economic growth.

16 / 20

According to the Solow model, if a country increases its saving rate, what will happen in the long run?

The country will achieve a higher level of steady-state consumption per worker.

The country will achieve a higher level of steady-state capital per worker.

The country will experience higher population growth.

The country will see a permanent increase in the growth rate of output per worker.

17 / 20

In the context of the Solow model, what is meant by "steady state"?

A situation where the economy is growing at a constant rate forever.

A situation where the capital per worker and output per worker remain constant over time.

A situation where the saving rate is equal to the depreciation rate.

A situation where technological progress ceases.

18 / 20

According to the Solow model, an increase in the population growth rate will:

Increase the steady-state level of capital per worker.

Decrease the steady-state level of capital per worker.

Have no effect on the steady-state level of capital per worker.

Increase the steady-state level of output per worker.

19 / 20

Which of the following assumptions is NOT part of the Solow model?

Constant returns to scale in production.

Diminishing returns to individual factors of production.

Endogenous technological change.

A constant saving rate.

20 / 20

In the Solow model, convergence occurs when:

All countries grow at the same rate regardless of their initial conditions.

Poorer countries grow faster than richer ones, leading to equal levels of income per worker over time.

Richer countries grow faster than poorer ones, maintaining the income gap.

Population growth rates adjust to equalize income per worker.

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Reading List

Click Here for Reading List of Economic Growth & Business Cycles

Recommended Readings

►Jones, Charles I and Vollrath, Dietrich (2013), Introduction to Economic Growth. W.W. Norton & Co.

►Carlin, Wendy and Soskice, David (2015 edition), Macroeconomics: Institutions, Instability and the Financial System

The Question Paper will be of 90 Marks

Suggested Weigtage for each Unit in the final Examination

The question paper will have roughly 50% weightage from unit II and the remaining 50% from units I and III together.

The paper will consist of three sections of 30 marks each:

Continuous Assessment (40 marks) and Internal Assessment (30 marks): As per the University guidelines.

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Economics (H) Semester V [ UGCF 2024 ]

Video Lectures, PDF Notes, Mock Tests & Live Doubt Sessions are offered for the following Subjects for BA (Hons) Economics Semester V, Delhi University