1) In the steady state of the Solow model with technological progress, which of the following variables is not constant?
(a) capital per effective worker
(b) the real rental price of capital
(c) the real wage
(d) the capital-output ratio
2) The U.S. economy has more/less capital than at the Golden Rule steady state, suggesting that it may be desirable to
increase/decrease the rate of saving.
3) The purpose of exogenous/endogenous growth theory is to explain technological progress. Some of these models do so by questioning the Solow model’s assumption of increasing/diminishing/constant returns to capital.
4) Models of Schumpeterian creative destruction aim to explain:
(a) how old capital is best retired and replaced with new capital.
(b) why seeming technological progress can reduce average incomes.
(c) how entrepreneurs with new products displace incumbent producers.
(d) why economies grow quickly after suffering the ravages of war.