b. people run out of new ideas. c. there are diminishing returns. d. govenment p
ID: 1109041 • Letter: B
Question
b. people run out of new ideas. c. there are diminishing returns. d. govenment policies inhibit further growth. e. there is depreciation. 6. Data show that: a. all countries around the world are converging to the same level of wealth as predicted by the Solow growth theory b. no countries in the world are converging at the same level c. many countries in the world have reached a steady state as predi growth theory d. only developing countries have reached a steady state as predicted by the Solow growth theory e. there is no evidence of a steady state or convergence for the countries of the world. Use the following graph to answer the next two questions 300 250 150 50 0 100 200 300 400 500600 Capital 7. What would cause an upward shift of the production function? a. an increase in capital b. an increase in investment c. an increase in output d. an increase in depreciation e. an advance in technology 8. If net investment is negative but technology has advanced, then: a. the production function will shift upward and capital is unchanged. b. the production function will shift downward and capital is unchanged. c. there is an upward movement along the production function. d. there is a downward movement along the production function. e. there is an upward shift of the production function and a downward movement along the production function. 9. Modern growth theory views technological innovation as , whereas Solow theory views technological change as a. exogenous; random b. random; exogenousExplanation / Answer
7. Option e.
With the same level of investment, with the advancement of technology productivity increases which shift the production function upwards. Increase in capital and investment would increase the output but would not shift the production function.
8. Option e
With the advancement in technology the productivity increases which causes outward shift but a net negative investment would lead reduced output levels which causes the production function to move downward.
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