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Practice Questions

Office Hours: The Solow Model Practice Questions

For the following two questions, recall Country A’s economy from the video:

GDP: 5√K
Country A invests 25% of GDP
K=10,000
K depreciates (D) at 1% per year

How much is Country A consuming?

*

a. 375

b. 400

c. 475

d. 500

e. Cannot be determined from the given information

At what point will Country A be in steady state? *

a. K=13453

b. K=15625

c. D=13453

d. D=15625

e. A and C

f. B and D

Country B has the following economic conditions: GDP=2√K, initial capital stock (K)=2,500. If this country is consuming 25, what percent of the country’s GDP is being invested? *

a. 20%

b. 30%

c. 40%

d. 50%

e. None of the above.

For the following two questions, suppose two countries have the following economic conditions:

Country A’s GDP=5√K, it invests 25% of GDP each year, its capital stock is 10,000 and depreciates at 1% each year.
Country C’s GDP=5√K, it invests 50% of GDP each year, its capital stock is 10,000 and depreciates at 1% each year.

Once both countries achieve steady state, which country will consume a higher proportion of its GDP? *

a. Country A

b. Country C

Once both countries achieve steady state, which country will have higher consumption? *

a. Country A

b. Country C

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Principles of Economics Macroeconomics

Course (86 videos)

GDP

What Is Gross Domestic Product (GDP)?

Interactive Practice

Nominal vs. Real GDP

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Real GDP Per Capita and the Standard of Living

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Practice Questions

The Wealth of Nations and Economic Growth

Basic Facts of Wealth

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Growth Rates Are Crucial

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What Caused the Industrial Revolution?

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Growth Miracles and Growth Disasters

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The Importance of Institutions

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Geography and Economic Growth

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The Puzzle of Growth

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Growth, Capital Accumulation, and the Economics of Ideas

Introduction to the Solow Model

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Physical Capital and Diminishing Returns

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The Solow Model and the Steady State

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Office Hours: The Solow Model

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Human Capital and Conditional Convergence

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The Solow Model and Ideas

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Office Hours: The Solow Model: Investments vs. Ideas

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The Economics of Ideas

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Patents, Prizes, and Subsidies

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TED Talk: How Ideas Trump Crises

The Idea Equation

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Savings, Investment, and the Financial System

Saving and Borrowing

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What Do Banks Do?

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Intro to Stock Markets

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Intro to the Bond Market

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Office Hours: The Bond Market

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Four Reasons Financial Intermediaries Fail

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The Great Recession

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Personal Finance

How Expert Are Expert Stock Pickers?

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Can You Beat the Market?

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Investing: Why You Should Diversify

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Who Is More Rational? You or the Market?

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Econ Duel: Rent or Buy?

Unemployment and Labor Force Participation

The Economics of Choosing the Right Career

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Defining the Unemployment Rate

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Is Unemployment Undercounted?

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Frictional Unemployment

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Structural Unemployment

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Cyclical Unemployment

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Labor Force Participation

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Women Working: What’s the Pill Got to Do With It?

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Inflation and Quantity Theory of Money

Zimbabwe and Hyperinflation: Who Wants to Be a Trillionaire?

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Measuring Inflation

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Quantity Theory of Money

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Causes of Inflation

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Costs of Inflation: Price Confusion and Money Illusion

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Costs of Inflation: Financial Intermediation Failure

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Inflation Throughout the Ages: What Would You Do?

Office Hours: Costs of Inflation

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Why Governments Create Inflation

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Business Fluctuations

Intro to Business Fluctuations

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The Aggregate Demand Curve

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The Long-Run Aggregate Supply Curve

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The Short-Run Aggregate Supply Curve

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Changes in Velocity

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Understanding the Great Depression

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Office Hours: Using the AD-AS Model

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Office Hours: Multiple Shocks with the AD-AS Model

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Business Cycle Theories

Game of Theories: The Keynesians

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Game of Theories: The Monetarists

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Game of Theories: Real Business Cycle

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Game of Theories: The Austrians

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Game of Theories: The Great Recession

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Monetary Policy and the Federal Reserve

Monetary Policy and the Fed

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The U.S. Money Supplies

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The Money Multiplier

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How the Fed Worked: Before the Great Recession

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How the Fed Works: After the Great Recession

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The Federal Reserve as Lender of Last Resort

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Monetary Policy: The Best Case Scenario

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Monetary Policy: The Negative Real Shock Dilemma

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When the Fed Does Too Much

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Fiscal Policy

Introduction to Fiscal Policy

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Fiscal Policy: The Best Case Scenario

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The Limits of Fiscal Policy

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The Dangers of Fiscal Policy

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Fiscal Policy and Crowding Out

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Principles of Economics: Macroeconomics

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