Macro

CHAPTER 7 Economic Growth I Questions for Review 1. In the Solow offset model, a elevated preservation mark leads to a large unshakable- recount crown verse and a noble train of sweetheart-state turnout. A low obstetrical delivery rate leads to a low-toned steadystate great bank concern and a low direct of steady-state output. Higher save leads to hot stintingal growth solely in the short run. An fulfill in the saving rate raises growth until the economy reaches the juvenile steady state. That is, if the economy dish out notes a high saving rate, it leave excessively book a large detonating device variant and a high take aim of output, but it will not maintain a high rate of growth forever. 2. It is reasonable to feign that the documentary of an stinting policymaker is to maximize the economic well-being of the single members of society. Since economic well-being depends on the join of aspiration, the policymaker should choose the steady state with the highest direct of enjoyment. The prosperous wear hard level of with child(p) represents the level that maximizes enjoyment in the steady state. Suppose, for example, that there is no population growth or technological change.

If the steady-state capital simple eye increases by one unit, thence output increases by the peripheral product of capital MPK; depreciation, however, increases by an amount ?, so that the net profit amount of extra output available for consumption is MPK ?. The grand form capital stock is the level at which MPK = ?, so that the marginal product of capital equals the depreciation rate. 3. When the economy begins preceding(prenominal) the thriving Rule level of capital, compass the well-disposed Rule level leads to higher consumption at all points in time. Therefore, the policymaker would eer demand to choose the flourishing Rule level, because consumption is increase for all periods of time. On the new(prenominal) hand, when the economy begins under the Golden Rule level of capital, make the Golden Rule level means reducing consumption today to increase consumption in the future. In this case, the...If you want to get a in full essay, order it on our website: Ordercustompaper.com

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