THE UNIVERSITY OF SYDNEY

Macroeconomic Theory: ECON5002

Week Six

PRACTICE QUESTIONS

1. Which of the following best describes a situation where research is considered

appropriable?
a. research that is easily copied by another firm
b. research that is well suited to its commercial purpose
c. research that translates into many new products
d. all of the above
e. none of the above

2. Assume the production function is represented by the following: Y=f(K,NA). Given
this production function and the constant returns to scale assumption, output will
increase by 5% when which of the following occurs?
a. K or NA increase by 5%
b. K and N increase by 5%
c. N and A increase by 5%
d. N or A increase by 5%
e. all of the above


Use the following information to answer the following questions.
The rate of depreciation is 12% per year, the population growth rate is 2% per year and the
growth rate of technology is 3% per year.

3. Which of the following equals the annual growth rate of ‘effective labor’ in the
steady state in this economy?
a. 2%
b. 3%
c. 5%
d. 12%
e. 17%

4. Which of the following represents the level of investment needed to maintain a
constant capital stock (K)?
a. .02K
b. .03K
c. .05K
d. .12K
e. .17K

 5. Assume that an economy experiences both positive population growth and
technological progress. In this economy, which of the following is constant when
balanced growth is achieved?
a. Y/NA
b. I
c. S
d. all of the above
e. none of the above

6. Assume that an economy experiences both positive population growth and
technological progress. Once the economy has achieved balanced growth, we know
that the capital per effective worker ratio (K/NA) is
a. growing at a rate of δ + gA + gN
b. growing at a rate of gA + gN
c. growing at a rate of gA
d. growing at a rate of gN
e. none of the above

7. Assume that an economy experiences both positive population growth and
technological progress. Once the economy has achieved balanced growth, we know
that
a. I/NA = δK/NA
b. I = δK
c. S/NA = (gA+gN)K/NA
d. S/NA = (δ+gA+gN)K/NA
e. none of the above

8. Assume that the production function for an economy is represented by the
following: Y = NA. Which of the following expressions is equal to labor productivity
for this economy?
a. A
b. Y/A
c. 1/A
d. N/A
e. none of the above