Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Chapter 8, Problem 3QQ
To determine
The Solow growth model.
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The government of "Arcadia" is considering
various proposals to increase the country's
GDP growth rates. Using the predictions of
the Solow growth model, please discuss the
merits of each of the proposed ideas for
generating growth in income. For each
proposal does your answer change in the
short and long run? That is, would you always
give the same advice?
a. Information campaign to encourage people
to save in an effort to increase national
savings rate.
o. Investment in building new roads connecting
villages to cities (in this case existing road
infrastructure is limited in the country)
What are the implication of economic growth that relate with Solow growth and Endogenous growth?
1. Draw a well-labeled graph that illustrates the steady-state of the Solow model with population growth. Use the graph to find what happens to steady-state capital per worker and income per worker in response to each of the following exogenous changes.a. A change in consumer preferences increases the saving rate.b. A change in weather patterns increases the depreciation rate.c. Better birth-control methods reduce the rate of population growth.
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- Now, in the Solow Model STEADY STATE of ANY ECONOMY that has positive rates of capital depreciation (10%), labor force growth (3%), and rise in worker effectiveness (2%), what is the rate of growth of: a. real GDP (Y) b. real GDP per worker (Y/L) c. real GDP per effective worker (Y/L*E)?arrow_forwardChapter 8: Economic growth I: Capital Accumulation and Population Growth Question: In the Solow growth model, the steady state level of output per worker would be greater if the .. .. rate rose or the ....... rate declined. ..... ..... Lütfen birini seçin: O a. depreciation / population growth b. population growth /saving saving; depreciation d. population growth/ depreciation population growth / savingarrow_forwardQ.2An economy described by the Solow growth model has the following production function: y = Vk. a.Solve for the steady-state value of y as a function of s, n, g, and d b. A developed country has a saving rate of 28 percent and a population growth rate of 1 percent per year. A less developed country has a saving rate of 10 percent and a population growth rate of 4 percent per year. In both countries, g = 0.02 and d = 0.04. Find the steady-state value of y for each country. c. What policies might the less developed country pursue to raise its level of income?arrow_forward
- 4.The Solow growth model differs from the Harrod-Domar because: a.Assumes that depreciation rate and population growth are exogenous b.Assumes that the rate of technological progress varies from country to country. c.Predicts that permanent growth is achievable only through technological progress d.Predicts that poorer countries will grow faster than richer countries.arrow_forwardSolve both 1.In the Solow growth model with population growth of 5 per cent and a labour augmenting technological progress of 3 per cent, the economy’s: Select one: a. number of workers grow at 5 per cent while the number of effective workers grow at 2 per cent. b. number of workers grow at 3 per cent while the number of effective workers grow at 8 per cent. c. number of workers grow at 5 per cent while the number of effective workers grow at 8 per cent. d. number of workers grow at 5 per cent while the number of effective workers grow at 3 per cent. 2. Schumpeter's “creative destruction” is an explanation of economic progress resulting from: Select one: a. new product producers driving incumbent producers out of business. b. breaking down barriers to trade and development. c. using up scarce natural resources to create new products. d. creating new methods to destroy the environment.arrow_forwardProblem 1: How can policymakers influence a nation’s saving rate? Problem 2: Draw a well-labeled graph that illustrates the steady state of the Solow model with population growth. Use the graph to find what happens to steady-state capital per worker and income per worker in response to each of the following exogenous changes. a. A change in consumer preferences increases the saving rate. b. A change in weather patterns increases the depreciation rate. c. Better birth-control methods reduce the rate of population growth. d. A one-time, permanent improvement in technology increases the amount of output that can be produced from any given amount of capital and labor.arrow_forward
- Population Growth and Technological Progress – End of Chapter Problem In the Solow model, how does a decrease in the rate of population growth n affect the steady-state value of each of the following variables? Increases Decreases Stays the same Answer Bank f. The growth of output per worker y c. Output per worker y d. The capital-output ratio k/y g. The growth rate of total output Y e. The marginal product of capital MPK b. Capital stock per worker k a. The savings rate sarrow_forwardIn the Solow growth model with population growth and technological progress, the growth rate of capital per effective worker is and the growth of output per worker is_ a. Positive, positive b. Zero, positive c. Zero, zero O d. Positive, zeroarrow_forwardIn the Solow–Swan model, a decrease in the rate of population growth will have what effect on the steady-state level of real GDP per capita? a. Increase b. No change in real GDP per capita because although it does change the rate at which output and population are growing, it will make both growth rates change by the same amount and so the output-population ratio will be unchanged c. Decrease d. No change in real GDP per capita because although it does change the level of labour, the level of capital will change to keep the capital-labour ratio the same as beforearrow_forward
- The Solow growth model accounts for ... A. why richer countries have higher savings rates. B. the patterns of international trade among countries. C. why people consume too much. D. business cycles. E. the level of research and development spending in an economy.arrow_forwardShows how the graph will look for the positive relation between growth rate which are solow growth and endogenous growth with standard of living of a particular country.arrow_forwardHow does the Solow growth model explain economic growth?arrow_forward
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