1.    Briefly define the following terms:

a.    Growth accounting.

b.    Productivity growth slowdown

2.    Use the one-third rule to answer the following questions.

a.    Suppose that the capital per hour of work increased by 24 percent. This increase in the capital per hour of work will increase GDP per hour of work by how much?

b.    Suppose that the capital per hour of work increased by 12 percent and GDP per hour of work increased by 6 percent. Technology also hanged. The change in technology increased GDP per hour of work by how much?

c.    Suppose that the capital per hour of work increased by 15 percent and technological change increased GDP per hour of work by 4 percent. What is the total change in GDP per hour of work?

3.         Explain the classical growth theory.

Answer the following multiple choice questions.

4.         Suppose that real GDP per hour of work grew by 6 percent last year and the capital per hour of work grew 9 percent. Using the one third rule, by how much did the increase in capital per hour of work increase real GDP per hour of work?

a.    6 percent

b.    4 percent

c.    3 percent

d.    2 percent

5.         Why was there a slowdown in productivity growth in the 1970s?

a.    The labor force engaged in less education and training in the 1970s.

b.    Workers had less capital to work with then in previous decades.

c.    The energy price increases caused research efforts to be directed at saving energy rather than increasing productivity.

d.    The oil crisis in the 1970s decreased aggregate demand.

6.         What best explains why the real wage is always driven to the subsistence level in the classical model?

a.    Population growth occurs, shifting the labor supply curve rightward.

b.    Population growth occurs, shifting the labor supply curve leftward.

c.    Growth is not possible so the labor demand curve never shifts.

d.    Investment in capital decreases labor demand, shifting labor demand leftward.

7.         Neoclassical growth theory emphasizes

a.    growth in capital per worker.

b.    the concept of a subsistence wage.

c.    labor supply and demand.

d.    no limit to the increase in the standard of living.

8.         New growth theory predicts that

a.    economic growth is only temporary.

b.    economic growth can last indefinitely

c.    economic growth is eroded by changes in taxes.

d.    government policies can do nothing to foster increased growth.