Module M09 Quiz: Savings, Capital Formation and Growth
25 questions ยท Introductory ยท Mix of multiple choice, calculation, and short answer
How to use
Attempt each question before clicking Show Answer. For calculation questions, write out your working before checking.
Question 1
Lesson L01 ยท Nx < 0 (Current Account Deficit) Implies Domestic Investment Exceeds National Saving (S < I).
In an open economy
Type: Short Answer
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Answer: S and I are unrelated
c
Question 2
*Lesson L01 ยท *
If Y = $2
Type: Short Answer
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Answer: calculate net exports (NX).
calc
Question 3
Lesson L01 ยท Growth
Explain the "twin deficits" hypothesis in one sentence.
Type: Short Answer
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Answer: A government budget deficit reduces national saving
which can widen the current account deficit if investment is unchanged.
Question 4
Lesson L01 ยท Not Vice Versa.
Which of the following would NOT affect national saving (S) in S = I + NX?
Type: Multiple Choice
- A) Household consumption
- B) Government spending
- C) Investment
- D) Net exports
Show Answer
Answer: C) Investment
Investment is determined by saving and net exports
Question 5
Lesson L01 ยท A Current Account Surplus (Nx > 0) Implies National Saving Exceeds Domestic Investment (S > I).
If a country runs a current account surplus
Type: Short Answer
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Answer: S and I are unrelated
a
Question 6
Lesson L02 ยท ฮ Is The Depreciation Rate โ The Fraction Of Capital That Wears Out Each Period.
In the capital accumulation equation ฮK = I โ ฮดK
Type: Short Answer
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Answer: Output growth rate
b
Question 7
*Lesson L02 ยท *
If K = $3
Type: Short Answer
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Answer:
Question 8
Lesson L02 ยท Growth
Why is depreciation necessary in the Solow model?
Type: Short Answer
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Answer: Depreciation prevents indefinite capital accumulation
creating a stable long-run equilibrium.
Question 9
*Lesson L02 ยท *
If Y = $1
Type: Short Answer
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Answer: calc
Question 10
Lesson L02 ยท Leading To A Higher Steady State Capital Stock.
What happens to steady-state capital if the saving rate increases?
Type: Multiple Choice
- A) K* rises
- B) K* falls
- C) K* stays the same
- D) K* becomes negative
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Answer: A) K rises*
A higher saving rate raises the saving curve
Question 11
Lesson L03 ยท When Saving/Investment Exceeds Depreciation
In the Solow diagram
Type: Short Answer
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Answer: Output is falling
a
Question 12
Lesson L03 ยท 25
If y = k^0.5
Type: Short Answer
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Answer:
Question 13
Lesson L03 ยท Growth
Why does the Solow model predict that saving rate increases only have a level effect?
Type: Short Answer
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Answer: Higher saving raises k* and y*
but growth stops at the new steady state. Sustained growth requires TFP.
Question 14
Lesson L03 ยท New K = (0.30/0.05)^2 = 36; Y* = 36^0.5 = 6.*
If s rises from 0.25 to 0.30 in y = k^0.5
Type: Short Answer
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Answer:
6
Question 15
Lesson L03 ยท Growth
What is the key driver of sustained per-capita growth in the Solow model?
Type: Multiple Choice
- A) Capital accumulation
- B) Population growth
- C) Technological progress
- D) Government spending
Show Answer
Answer: C) Technological progress
Only TFP growth (A) can sustain rising living standards indefinitely in the Solow framework.
Question 16
Lesson L04 ยท A Higher Saving Rate Raises The Saving Curve
In the steady-state condition sf(k*) = ฮดk*
Type: Short Answer
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Answer: Output falls
a
Question 17
Lesson L04 ยท ~14.62
If y = k^0.4
Type: Short Answer
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Answer:
Question 18
Lesson L04 ยท Intro
Why does MPK fall as k rises in the Solow model?
Type: Short Answer
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Answer: Each additional unit of capital adds less output than the previous one due to fixed labour.
growth
Question 19
Lesson L04 ยท Mpk = ฮ ร (Y/K*) = 0.35 ร (2.22/9.77) โ 0.0795.*
If ฮฑ = 0.35 and y* = 2.22
Type: Short Answer
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Answer:
0.0795
Question 20
Lesson L04 ยท Growth
What is the "Golden Rule" saving rate?
Type: Multiple Choice
- A) The rate that maximises steady-state consumption
- B) The rate that minimises taxes
- C) The rate that balances the budget
- D) The rate that eliminates inflation
Show Answer
Answer: A) The rate that maximises steady-state consumption
The Golden Rule saving rate maximises steady-state consumption per worker.
Question 21
Lesson L05 ยท Growth
How does human capital (H) differ from physical capital (K) in the Solow model?
Type: Short Answer
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Answer: Human capital (skills
education) cannot be as easily traded or imported as physical capital.
Question 22
Lesson L05 ยท (1.09)^2 โ 1.1881; $1
If a worker earns $1
Type: Short Answer
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Answer:
$1,306.91
Question 23
Lesson L05 ยท Intro
Why might over-investment in low-demand qualifications reduce the return to education?
Type: Short Answer
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Answer: Excess supply of certain degrees can depress wages without raising productivity.
growth
Question 24
Lesson L05 ยท Growth
Which of the following policies would most directly raise human capital (H)?
Type: Multiple Choice
- A) Building infrastructure
- B) Subsidising R&D
- C) Expanding vocational training
- D) Cutting corporate taxes
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Answer: C) Expanding vocational training
Vocational training directly increases workers' skills (H).
Question 25
Lesson L05 ยท The Average Return Is 8โ10% Per Additional Year Of Schooling.
What is the approximate return to education (Mincer return) per additional year of schooling in Australia?
Type: Multiple Choice
- A) 3โ5%
- B) 8โ10%
- C) 15โ20%
- D) 25โ30%
Show Answer
Answer: B) 8โ10%
Internationally