1.Which of the following features helps explain why sustained improvements in li
ID: 2439876 • Letter: 1
Question
1.Which of the following features helps explain why sustained improvements in living standards are possible in the Solow but not the Malthus model?
a. Productivity can increase in the Solow model.
b. Population can increase in the Solow model.
c. The Solow model allows for diminishing marginal product of capital.
d. The Solow model allows for investment in the inputs.
2. Which of the following features does technology have in common with the other inputs such as physical and human capital?
a. It is a public good.
b. It has positive externalities.
c. It is generated through investment.
d. It generates creative destruction.
3.In class we discussed research on offshore oil wells in Brazil and their impact on nearby communities. Which of the following best describes the problems discovered by that research?
a. Oil revenues failed to generate tax revenues for local governments.
b. Tax revenues failed to generate increased government spending at the local level.
c. Increased government spending failed to increase incomes or expand access to public goods and services.
d. Higher incomes failed to raise welfare.
4. Which of the following is an example of a poverty trap?
a. Countries with corrupt governments are poor.
b. The poor pay less in taxes.
c. The poor can not afford enough food to work productively, so they earn little.
d. Countries where most workers are in agriculture tend to be poor.
5. What policy will be effective in solving the savings, technology, and population growth poverty traps?
a. Lowering the population growth rate.
b. Increasing the savings rate.
c. Increasing productivity.
d. A big push of foreign aid.
Explanation / Answer
1> a. Productivity can increase in the Solow model.
Malthus model assumed a consant technogy which is time invariant.
2> c. It is generated through investment.
Innovation on technology requires investment in R&D.
3> c. Increased government spending failed to increase incomes or expand access to public goods and services.
In reality, the income didn't increase much as a result.
4> c. The poor can not afford enough food to work productively, so they earn little.
There is a cycle in this situation, that nation can not get out of that.
5> d. A big push of foreign aid.
A trap can only be avoided if an external hand is there to make it out of the trouble.
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