51.Supposethattherearediminishingreturnstocapital.SupposealsothattwocountriesarethesameexceptonehaslesscapitalandsolessrealGDPperperson.Supposethatbothincreasetheirsavingratefrom3percentto4percent.Inthelongrun a.bothcountrieswillhavepermanentlyhighergrowthratesofrealGDPperperson,andthegrowthratewillbehigherinthecountrywithmorecapital. b.bothcountrieswillhavepermanentlyhighergrowthratesofrealGDPperperson,andthegrowthratewillbehigherinthecountrywithlesscapital. c.bothcountrieswillhavehigherlevelsofrealGDPperperson,andthetemporaryincreaseingrowthinthelevelofrealGDPperpersonwillhavebeengreaterinthecountrywithmorecapital. d.bothcountrieswillhavehigherlevelsofrealGDPperperson,andthetemporaryincreaseingrowthinthelevelofrealGDPperpersonwillhavebeengreaterinthecountrywithlesscapital. 52.Otherthingsequal,relativelypoorcountriestendtogrow a.slowerthanrelativelyrichcountries;thisiscalledthepovertytrap. b.slowerthanrelativelyrichcountries;thisiscalledthefall-behindeffect. c.fasterthanrelativelyrichcountries;thisiscalledthecatch-upeffect. d.fasterthanrelativelyrichcountries;thisiscalledtheconstant-returns-to-scaleeffect. 53.Twocountriesarethesame,exceptoneispoorer.Assumingthetraditionalassumptionabouttheproductionfunctionismadethereare a.diminishingreturnstocapitalsothepoorcountrygrowsslower. b.increasingreturnstocapitalsothepoorcountrygrowsslower. c.diminishingreturnstocapitalsothepoorcountrygrowsfaster. d.increasingreturnstocapitalsothepoorcountrygrowsfaster. 54.Anincreaseinthesavingratewould,otherthingsthesame, a.increasegrowthmoreforapoorcountrythanforarichcountry,andraisegrowthpermanently. b.increasegrowthmoreforapoorcountrythanforarichcountry,butraisegrowthtemporarily. c.increasegrowthmoreforarichcountrythanforapoorcountry,andraisegrowthpermanently. d.increasegrowthmoreforarichcountrythanforapoorcountry,butraisegrowthtemporarily. 55.RealGDPperpersonis$10,000inCountryA,$20,000inCountryB,and$30,000inCountryC.Thesavingrateincreasesbythesamerateinallthreecountries.Otherthingsequal,wewouldexpectthat a.allthreecountrieswillgrowatthesamerate. b.CountryAwillgrowthefastest. c.CountryBwillgrowthefastest. d.CountryCwillgrowthefastest. 56.Assumingdiminishingreturns, a.theincreaseinoutputgrowthfromanincreaseinthesavingraterisesovertime,andthat,otherthingsthesame,richcountriesshouldgrowfasterthanpoorones. b.theincreaseinoutputgrowthfromanincreaseinthesavingratefallsovertime,andthat,otherthingsthesame,richcountriesshouldgrowfasterthanpoorones. c.theincreaseinoutputgrowthfromanincreaseinthesavingraterisesovertime,andthat,otherthingsthesame,poorcountriesshouldgrowfasterthanrichones. d.theincreaseinoutputgrowthfromanincreaseinthesavingratefallsovertime,andthat,otherthingsthesame,poorcountriesshouldgrowfasterthanrichones. 57.Thecatch-upeffectreferstotheideathat a.savingwillalwayscatch-upwithinvestmentspending. b.itiseasierforacountrytogrowfastandsocatch-upifitstartsoutrelativelypoor. c.populationeventuallycatches-upwithincreasedoutput. d.ifinvestmentspendingislow,increasedsavingwillhelpinvestmentto”catch-up.” 58.Thetraditionalviewoftheproductionprocessisthatcapitalissubjectto a.diminishingreturns,sothatotherthingsthesame,realGDPinpoorcountriesshouldgrowatafasterratethaninrichcountries. b.diminishingreturns,sothatotherthingsthesame,realGDPinpoorcountriesshouldgrowataslowerratethaninrichcountries. c.increasingreturns,sothatotherthingsthesame,realGDPinpoorcountriesshouldgrowatafasterratethaninrichcountries. d.increasingreturns,sothatotherthingsthesame,realGDPinpoorcountriesshouldgrowataslowerratethaninrichcountries. 59.Thelogicbehindthecatch-upeffectisthat a.workersincountrieswithlowincomeswillworkmorehoursthanworkersincountrieswithhighincomes. b.thecapitalstockinrichcountriesdeterioratesatahigherratebecauseitalreadyhasalotofcapital. c.newcapitaladdsmoretoproductioninacountrythatdoesn’thavemuchcapitalthaninacountrythatalreadyhasmuchcapital. d.Noneoftheaboveiscorrect. 60.CountryAhasrealGDPperpersonof100,000whilecountryBhasrealGDPperpersonof200,000.Allelseconstant,countryAwilleventuallyhaveahigherstandardoflivingthancountryBif a.thelevelofsavingperpersonis10,000incountryAand10,000incountryB. b.thelevelofsavingperpersonis12,000in countryAand15,000incountry B. c.Bothoftheabovearecorrect. d.Noneoftheabovearecorrect.