Brock University Endogenous Growth Model True or False Questions Answer TRUE or FALSE for each question. No further explanation is needed. (a) In the endog

Brock University Endogenous Growth Model True or False Questions Answer TRUE or FALSE for each question. No further explanation is needed.
(a) In the endogenous growth model, assume that 6 = 2 and u = 0.75. In equilibrium, there will be
growth in the economy’s total output.
(b) The asymmetric information problem can partially explain the 2008 financial crisis, unlike the limited
commitment problem.
(c) Suppose some consumer gets utility from only current and future consumption. If the interest rate
falls, the substitution effect implies that the consumer will reduce their current consumption so they
can increase their savings and thus future consumption.
(d) Suppose some consumer gets utility from only current consumption and leisure. If the real wage falls,
the substitution effect implies that the consumer will reduce their current consumption and increase
their leisure time.
(e) Suppose a is the fraction of good borrowers in a credit market who will repay their loans. During
a recession, ot tends to fell, which results in an decrease in the size of the default premium that
borrowers fece.
(f) There is almost no correlation across countries between the level of output per capita in 1960 and
the average rate of growth in output per capita for the years 1960-2007. This is inconsistent with
the idea of convergence in the Solow model.
(g) Pareto optimality is a better measure of equity than efficiency.
(h) In the Solow model’s steady-state equilibrium, aggregate variables grow at the same rate as the
population.
(i) When positive externalities exist in a goods market, the quantity demanded for that good is too low.
fl) Consider the one-period model. Suppose U(C,l) =C2 +12, and w = 6, h = 24, ?r = 20 and T = 10.
In equilibrium, C, = 14.189.