Answer Key to sample problems for test 3

The original document on the I-drive had a number of irrelevant questions at the end. You should only work up through problem 27. The remaining problems are from some upcoming discussions.

1-C, 2-D, 3-D, 4-D, 5-B, 6-C,
7-D, 8-C, 9-C*, 10-D, 11-C,
12-C, 13-A, 14-A, 15-B, 16-D, 17-A, 18-B,
19-A, 20-D, 21-C, 22-C,
23-D, 24-C, 25-A, 26-B, 27-D.

*Problem 9 was originally marked as B. The correct answer is C. (Thanks W.F.)

Answer to HW#7, problem 2:

Physical capital, human capital, technology, and natural resources play important roles in influencing long-run growth in real GDP per capita. Increases in both physical capital and human capital help a given labor force to produce more over time. (For given L, as K and/or H increase, K/L and H/L increase, thereby increasing Y/L.) Although economic studies have suggested that increases in human capital may explain increases in productivity better than do increases in physical capital per workers, technological progress is probably the most important driver of productivity growth. (This would be a shifting up of the production function.) Although natural resources played a prominent role historically in determining productivity, today they play a less important role in increasing productivity than do increases in human or physical capital in most countries.

(This problem is #7 from the end of chapter problems in K&W, Ch. 9. The answer is in context of you having done the appropriate readings.)