2i). In the Solow model, output per head goes down as capital per head

increases, because of diminishing returns.

(a) True

(b) False

(c) Ambiguous

2ii). Consider the empirical evidence on the Solow growth model when the

population growth rate, depreciation and savings rate is the same across

countries.

(a) The Solow growth model is supported because we see poorer

countries growing faster than richer countries.

(b) The Solow growth model is not supported by a large sample of

countries over a short period of time.

(c) The Solow growth model cannot be tested for a large set of countries

because it requires knowledge of each country's steady state.

(d) The Solow growth model is supported by unbiased data for a small

sample of countries over a long period of time.

2iii). The Solow growth model with technological progress:

(a) Predicts that poorer countries will grow faster than richer countries.

(b) Assumes that the rate of technological progress varies from country to

country.

(c) Predicts that there will be no per capita growth in the long run.

(d) Is supported by the empirical data if the savings rate, population growth

rate and depreciation rate are allowed to vary from country to country

2iv). The Solow growth model differs from the Harrod-Domar because:

(a) It predicts that poorer countries will grow faster than richer countries.

(b) It assumes that the rate of technological progress varies from country

to country.

(c) It predicts that permanent per capita growth is achievable only through

technological progress.

(d) It assumes that the depreciation rate and population growth are

exogenous.

2v).If a country was growing at a rate of 2% per year, how long would it take for

that country to double its income:

(a) 7 years.

(b) 20 years.

(c) 35 years.

(d) 12 years.

2vi)In Acemoglu, Johnson, and Robinson (AER, 2001), the authors use data on

settler mortality rates primarily because

(a) It is correlated with current income per capita.

(b) It is correlated with current institutions through its impact on early

institutions.

(c) It is correlated with current GDP per capita.

(d) It is correlated with other determinants of current GDP per capita.

2vii).In Acemoglu, Johnson and Robinson (AER, 2001), the authors find that

(a) OLS estimates of the impact of institutions on income per capita are

smaller than instrumental variable (two-stage least squares) estimates.

(b) OLS estimates of the impact of institutions on income per capita are

larger than instrumental variable (two-stage least squares) estimates.

(c) OLS estimates of the impact of institutions on income per capita are

about the same as instrumental variable (two-stage least squares)

estimates