# Questions from Lectures, with answers provided by Ron Lee. The list was kindly compiled by a student in the class. Note that there is duplication in the.

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Questions from Lectures, with answers provided by Ron Lee. The list was kindly compiled by a student in the class. Note that there is duplication in the iClicker questions in the following list. I have answered some questions multiple times. Answers are highlighted in red.

Ronald Lee, UC Berkeley, 20112 16. Consequences of Population Size in Relation to Land Ronald Lee Econ/Demog 175 March 11, 2011

Ronald Lee, UC Berkeley, 20113 Q. In our simple economy, population growth will always A.Lead to lower wages. B.Lead to higher rents on land. C.Sometimes lead to lower wages and higher rents D.It is impossible to say E.Two of the above statements are true. (After reaching point of land scarcity where diminishing returns to labor begin).

Ronald Lee, UC Berkeley, 2011 Lecture 17. Surplus, Optimal Population, and Malthus Ronald Lee Econ/Demog 175 March 15, 2011 4

Ronald Lee, UC Berkeley, 2011 Q1. Outside the region of abundant land, and before the MPL=s, when the population is larger, the income going to landowners is: A.Greater B.Unchanged C.Smaller D.Impossible to say 5

Ronald Lee, UC Berkeley, 2011 Q2. According to the theory discussed in the last lecture, serfdom or slavery: A.Can only arise if the land is densely settled. B.Might not arise when the land is sparsely settled. C.Cannot occur when population is sparse if there is also a landowning class that does not work. D.None of the above. 6

Ronald Lee, UC Berkeley, 2011 Q3. Which statement about surplus is correct? A.Total surplus is the difference between total output and the per capita subsistence needs of the population. B.Surplus always increases as population increases. C.Surplus is greatest at some intermediate size of population. D.If the weather is bad for agriculture some year, we would expect surplus to be higher. 7

Ronald Lee, UC Berkeley, 2011 Q4. Which statement is true about the optimal size of population under our assumptions? A.The average person is always better off if the population is smaller. B.Landowners will always be better off if the population is larger. C.Workers will always be better off if the population is smaller. D.The population that maximizes military power will always be larger than the population that maximizes per capita income E.The population that maximizes total surplus is less than or equal to the population that maximizes per capita income. 8

Ronald Lee, UC Berkeley, 20119 Q5. If the whole mortality curve is higher, then what happens to w*, the wage at which population growth is zero? A.w* will be lower due to the worse health conditions. B.w* will not change, because it depends on other forces. C.w* will be higher because fertility will have to be higher to achieve zero population growth. D.None of the above.

Ronald Lee, UC Berkeley, 201110 Q6. The Malthusian system is stable which means that if a temporary shock does not change the relationships, then: A.All the variables will gradually return to their original values. B.It will not be displaced even temporarily from equilibrium. C.It will return to equilibrium, but not necessarily to the same values as before.

Ronald Lee, UC Berkeley, 201111 Lecture 18. Malthus (cont.) Ronald Lee Econ/Demog 175 March 17, 2011

Ronald Lee, UC Berkeley, 201112 Q. The germ theory of disease is accepted and everyone starts washing their hands and boiling water. At the same time, a law is passed reducing the legal age at marriage from 21 to 18. What happens? A.The equilibrium wage rises. B.The equilibrium wage falls. C.Either is possible; we can’t say.

Ronald Lee, UC Berkeley, 201113 Lecture 19. Boserup Ronald Lee Econ/Demog 175 March 29, 2011

Ronald Lee, UC Berkeley, 201114 Q. According to Malthus, would a program of breaking up the estates of large land owners and distributing the land to landless workers improve human welfare in the long term? A. Yes, poverty would be reduced. B. This program would temporarily reduce poverty but in the long term, wages would be the same as before. C. The number of poor people would be increased. D. Two of the above. E. All of the above.

Ronald Lee, UC Berkeley, 201115 Q. A foreign aid program introduces a family planning program and a health care program to a poor Third World country. What effect on human welfare should we expect from a Malthusian or other perspective? A.Due to more rapid population growth from lower mortality, welfare will decline. B.Better health and lower mortality will be of great value in themselves to the people, so their welfare will rise. C.Population growth rates will fall due to lower fertility, so welfare will be better than otherwise. D.Each of these three could be defended as an answer, but not all at the same time.

Ronald Lee, UC Berkeley, 201116 Q. Following Boserup’s thinking, more dense populations might lead to technological progress because A.Transportation and communications are cheaper in a denser population. B.The rewards to innovation are greater when population is dense. C.A denser population can sustain an urban population, which is more likely to be technologically innovative. D.All of the above. E.Two of the above.

Ronald Lee, UC Berkeley, 201117 Lecture 21. Pop and Environment (cont.) and start Pop Aging Ronald Lee Econ/Demog 175 April 5, 2011

Ronald Lee, UC Berkeley, 201118 Q. Boserup argues that as population growth makes a resource become more scarce, society defines new property rights in that resource. Which of the following are examples? A.Land B.Water C.Ozone layer D.Biodiversity E.Two of the above

Ronald Lee, UC Berkeley, 201119 Q. Nonrenewable resources are finite and can be used up, like oil, but renewable resources last forever. True or False? A.True B.False C.It depends…

Ronald Lee, UC Berkeley, 201120 Q. Which of the following would not be an example of natural capital? A.The hole in the ozone layer. B.A rain forest. C.Sunlight falling on the earth. D.Top soil E.A fishery

Ronald Lee, UC Berkeley, 201121 Q. Public policy should seek to maximize which of the following, in your opinion? A.Per capita income. B.A mix of population size and per capita income, say U=Pop 1/2 y 1/2. C.A mix of population size, per capita income, and biodiversity or well-being of other species of plants and animals. D.Any of the above, but only at a sustainable level. E.Some other criterion. There is no single right answer; this is just asking for your personal view.

Ronald Lee, UC Berkeley, 201122 Lecture 22. Population Aging Ronald Lee Econ/Demog 175 April 7, 2011

Ronald Lee, UC Berkeley, 201123 Q. Which one of the following statements is true? A.If one more year of work leads to a higher pension thereafter, then the pension accrual is positive. B.If pension accrual is positive, then one more year of work leads to a higher pension thereafter. C.If the implicit tax is positive then pension accrual must be negative. D.All of the above. E.Two of the above (B and C).

Ronald Lee, UC Berkeley, 201124 Q. The tax force to retire A.Is bigger if the implicit tax is generally higher. B.The tax force to retire is higher if the payroll tax is lower. C.is positively associated with labor force participation at older ages. D.All of the above.

Ronald Lee, UC Berkeley, 201125 Q. If the analysis of Gruber and Wise is correct, then which of the following actions would be expected to raise labor force participation at older ages? A.reduce payroll tax rates. B.raise the pension benefit level for each additional year a person works. C.Both of the above.

Ron Lee, UC Berkeley, 201126 Lecture 23. Economics of Aging and Retirement (2) Ronald Lee Econ/Demog 175 April 12, 2011

Ron Lee, UC Berkeley, 201127 Q. Which one of the following statements is true? (duplicates an earlier question) A.If one more year of work leads to a higher pension thereafter, then the pension accrual is positive. B.If pension accrual is positive, then one more year of work leads to a higher pension thereafter. C.If the implicit tax is positive then pension accrual must be negative. D.All of the above. E.Two of the above. (B and C)

Ron Lee, UC Berkeley, 201128 Q. The tax force to retire A.Is bigger if the implicit tax is generally higher. B.The tax force to retire is higher if the payroll tax is lower. C.is positively associated with labor force participation at older ages. D.All of the above.

Ron Lee, UC Berkeley, 201129 Q. If the analysis of Gruber and Wise is correct, then which of the following actions would be expected to raise labor force participation at older ages? A.reduce payroll tax rates. B.raise the pension benefit level for each additional year a person works. C.Both of the above.

Lecture 23. Finish Retirement, Start Pension Theory Ronald Lee Econ/Demog 175 April 19, 2011 Ronald Lee, UC Berkeley, 201130

Ron Lee, UC Berkeley, 201131 Q. The tax force to retire A.Is bigger if the implicit tax is generally higher. B.The tax force to retire is higher if the payroll tax is lower. C.is positively associated with labor force participation at older ages. D.All of the above.

Ron Lee, UC Berkeley, 201132 Q. If the analysis of Gruber and Wise is correct, then which of the following actions would be expected to raise labor force participation at older ages? A.reduce payroll tax rates. B.raise the pension benefit level for each additional year a person works. C.Both of the above.

Q. In a stationary population, the rate of return is: A.Zero B.Minus 100% C.Plus 100% D.Undefined E.None of the above (True only if there is no productivity growth.) Ronald Lee, UC Berkeley, 201133

Q. The implicit rate of return A.Will be higher if the benefits are reduced and the contribution rate stays the same; B.Will be higher if benefits stay the same and the contribution rate is reduced; C.Will be higher if mortality is higher and contributions and benefits are the same; D.None of the above. Ronald Lee, UC Berkeley, 201134

Q. A defined contribution pension system is A.A system in which each contributor has his or her own account backed up by real assets, like a IRA. B.A system in which each contributor pays defined amounts into the system. C.A system in which each contributor gets a specified benefit level regardless of the contributions he or she has made. D.A system with a guaranteed implicit rate of return. E.Two of the above. (Note that in a Notional Defined Contribution system, NDC, there are no real assets, however.) Ronald Lee, UC Berkeley, 201135

UC Berkeley, Ron Lee, 201136 Lecture 25. Social Security Ronald Lee Econ/Demog 175 April 19, 2011

UC Berkeley, Ron Lee, 201137 Q. The implicit rate of return A.Will be higher if the benefits are reduced and the contribution rate stays the same; B.Will be higher if benefits stay the same and the contribution rate is reduced; C.Will be higher if mortality is higher and contributions and benefits are the same; D.None of the above.

UC Berkeley, Ron Lee, 201138 Q. A defined contribution pension system is A.A system in which each contributor has his or her own account, usually backed up by real assets, like an IRA. B.A system in which each contributor pays defined amounts into the system. C.A system in which each contributor gets a specified benefit level regardless of the contributions he or she has made. D.A system with a guaranteed implicit rate of return. E.Two of the above (A and B).

UC Berkeley, Ron Lee, 201139 Q. Which of the following statements is true? A.Our Social Security system is in worse shape than the French system. B.To fix our system by increasing revenues, we would need to raise the payroll tax by about 8%, starting immediately. C.Because the US Social Security system is Pay As You Go, it does not have a trust fund. D.All of the above. E.None of the above.

UC Berkeley, Ron Lee, 201140 Q. Which of the following statements are false? A.The Social Security replacement rate is about 40%. B.The Trust Fund is projected to be exhausted around 2037. C.The payroll tax rate for Social Security is around 25%. D.It violates economic rationality to invest in government bonds earning only 3% real rate of return when it is possible to earn an average return of 7% in the stock market. E.Two of the above. (C and D).

UC Berkeley, Ron Lee, 201141 Q. Which of the following policy options is really a cut in benefits? A.Raising the normal age at retirement. B.Reducing the size of the cost of living adjustment. C.Raising the early age at retirement. D.Indexing the benefit level to inflation rather than to the nominal wage level. E.All of the above.

UC Berkeley, Ron Lee, 201142 Lecture 26. Social Security, and Which Generations Win or Lose Through Public Transfers? Ronald Lee Econ/Demog 175 April 21, 2011

UC Berkeley, Ron Lee, 201143 Q. Which of the following statements is true? A.Our Social Security system is in worse shape than the French system. B.To fix our system by increasing revenues, we would need to raise the payroll tax by about 8%, starting immediately. C.Because the US Social Security system is Pay As You Go, it does not have a trust fund. D.All of the above. E.None of the above.

UC Berkeley, Ron Lee, 201144 Q. Which of the following statements are false? A.The Social Security replacement rate is about 40%. B.The Trust Fund is projected to be exhausted around 2037. C.The payroll tax rate for Social Security is around 25%. D.It violates economic rationality to invest in government bonds earning only 3% real rate of return when it is possible to earn an average return of 7% in the stock market. E.Two of the above.

UC Berkeley, Ron Lee, 201145 Q. Which of the following policy options is really a cut in benefits? A.Raising the normal age at retirement. B.Reducing the size of the cost of living adjustment. C.Raising the early age at retirement. D.Indexing the benefit level to inflation rather than to the nominal wage level. E.All of the above.

27. Population and Economic Growth Ronald Lee Econ/Demog 175 April 26, 2011 UC Berkeley, Ronald Lee, 201146

Q. In a steady state with no technical progress, which growth rates are equal? A. Per capita income and population B. Population and total output C. Capital and Population D. Capital and per capita income E. Two of the above (B and C) UC Berkeley, Ronald Lee, 201147

Q. Other things equal, if the population growth rate is more rapid then, in steady state, A.Per capita income is lower B.Capital per worker is less C.Per capita income falls without limit D.Total output rises more rapidly E.One of the above is false (C) UC Berkeley, Ronald Lee, 201148

UC Berkeley, Ron Lee, 201149 Lecture 28. The Theoretical Basis for Population Policy Ronald Lee Econ/Demog 175 April 28, 2011

UC Berkeley, Ron Lee, 201150 Q. Which Soc Sec policy change would be enough to solve the long term imbalance? A.Index benefits to prices rather than wages B.Raise the payroll tax by four percentage points. C.Raise retirement age from 67 to 70. D.Eliminate the income cap for payroll tax. E.Two of the above. (A and B).

UC Berkeley, Ron Lee, 201151 Q. The case for laissez faire regarding fertility rests on which of the following statements? A.Social welfare is nothing more than the sum of the individual utilities of its members. B.Individuals strive to maximize their own utilities through the choices they make, including choices about fertility. C.Parents are altruistic towards their children, so the decisions they make about fertility also reflect their children’s interests. D.All of the above. E.Two of the above.

UC Berkeley, Ron Lee, 201152 Q. What feature of the commons was essential to Hardin’s argument? A.It was owned in common, so each herder was free to choose how many cows to graze on it. B.The marginal social cost of adding a cow was greater than the marginal individual cost. C.When all herders were done making their choices, the total social cost of the last cow exceeded the total social benefit. D.All of the above.

UC Berkeley, Ron Lee, 201153 Q. The case for government intervention (against laissez faire) rests on which of the following statements? A.The costs and benefits faced by individuals choosing fertility are different than the full social costs and benefits of their fertility. B.Potential parents will take into account the taxes their children will pay as adults, helping to pay the costs of Social Security. C.All of the above D.None of the above.

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