1. _______ and _______ are the two factors that determine how the stock of capital changes over time

2. Which of the following causes capital deepening to come to an end?

a. The marginal principle

b. The principle of diminishing returns

c. The principle of opportunity cost

d. The reality principle

3. A higher saving rate leads to a permanently higher rate of growth. _______ (True/False)

4. Germany and Japan after World War II. Much of the stock of capital in the economies of Japan and Germany was destroyed duringWorldWar II. Use the Solow model graph to show and explain why growth in these economies after the war was higher than that in the United States.

5. Faster Depreciation. Suppose a society switches to equipment that depreciates rapidly. Use the Solow model graph to show what will happen to the stock of capital and output if the rate of depreciation increases.