Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
expand_more
expand_more
format_list_bulleted
Question
Chapter 8, Problem 4QQ
To determine
The Solow growth model.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Which of the following statements is most accurate about advanced economies?
A. Economies experience a positive growth trend over the short run but experience significant variability in the long run.
B. Economies experience a positive growth trend over the long run but experience significant variability in the short run.
C. Economies experience positive and stable growth over both the long run and short run.
D. Economies experience little long-run growth in output but can experience significant growth in the short run.
Assume that a country's per-worker production is y = k/2, where y is output per worker and k is
capital per worker. Assume also that 10 percent of capital depreciates per year (= 0.10) 2 and
there is no population growth or technological change.
a. If the saving rate (s) is 0.4, what are capital per worker, production per worker, and
consumption per worker in the steady state?
b. Solve for steady-state capital per worker, production per worker, and consumption per
worker with s = 0.6.
c. Solve for steady-state capital per worker, production per worker, and consumption per
worker with s = 0.8.
A policy that increases saving
a.
will worsen economic growth, but improve health outcomes.
b.
will worsen economic growth and health outcomes.
c.
will improve economic growth, but worsen health outcomes.
d.
will improve economic growth and health outcomes.
Knowledge Booster
Similar questions
- Please explain in detail the right option as well as the wrong Options A decrease in the saving rate in a steady-state economy would cause A. an upward shift in the saving per worker curve and an increase in the steady-state capital per worker. B. a downward shift in the saving per worker curve and a decrease in the steady-state capital per worker. C. a leftward movement along with the saving per worker curve and a decrease in the steady-state capital per worker. D. a rightward movement along with the saving per worker curve and an increase in the steady-state capital per worker.arrow_forwardHow does a tax on interest income influence the economic growth rate? A tax on interest income drives a wedge between the interest rate _______ by borrowers and the interest rate _______ by lenders, which _______ the amount of saving and investment and _______ the economic growth rate. A. received; paid; lowers; slows B. paid; received; increases; increases C. received; paid; increases; increases D. paid; received; lowers; slows Thanksarrow_forwardIf the economy has more capital than in the Golden Rule steady state, reducing the saving rate will increase both steady-state income and steady-state consumption. increase steady-state income but decrease steady-state consumption. decrease steady-state income but increase steady-state consumption. O decrease both steady-state income and steady-state consumption.arrow_forward
- In the C+I+G+X+M equation, investment would include which of the following? A. The export of heavy machinery B. The purchase of shares or equities by households C. The expansion of an aluminium smelter D.An increase in government funding for the policearrow_forwardIn the endogenous growth model, more time spent accumulating human capital implies A. more consumption in the near term and a higher growth rate of consumption. B. more consumption in both the short and long run. C. less consumption in the near term and no change in the growth rate of consumption. D. less consumption in the near term, but a higher growth rate of consumption in the future. O E. more consumption in the near term, but a lower growth rate of consumption in the future.arrow_forward3. Calculate the steady state level of investment in an economy with a savings rate of 15%, population growth of -1%, depreciation of 10%, and a= 2/3. Show your work.arrow_forward
- According to the neoclassical growth model: A. The equilibrium growth rate can never change B. The rate of population growth is negatively correlated with output per capita. C. A change in the savings rate does not affect a countrys welfare D. Savings and investments are never equal.arrow_forwardInvestment in capital is important because it A-decreases productivity. B-leads to lower taxes. C-increases productivity. D-leads to higher taxes.arrow_forward41. Assume that a country's per-worker production is y=1.5k3/4, where y is output per worker and k is capital per worker. Assume also that 10 percent of capital depreciates per year and there is no population growth or technological change. a. If the saving rate (s) is 0.15, what are capital per worker, production per worker, and consumption per worker in the steady state? b. Solve for steady-state capital per worker, production per worker, and consumption per worker with s-0.3. c. Solve for steady-state capital per worker, production per worker, and consumption per worker with s-0.45. d. Is it possible to save too much? Why?arrow_forward
- QUESTION 4 In the Solow model, if a country's saving rate increases, the country: a. Stays at a constant high steady state b. Stays at a constant low steady stateC. Moves from a relatively low steady state to one that is higher d. Moves from a relatively low steady state to one that is lower, e. Moves from a relatively high steady state to one that is lower Clear my choice If the current capital stock per person in South Korea is greater than the current capital stock per person in China and total factor productivity is the same in both countries, according to the Solow model: a. Both South Korea and China initially will grow at the same rate and have the same steady state b. China initially will grow faster than South Korea, but each will have the same steady state c.China initially will grow faster than South Korea and will have a higher steady state d. China initially will grow slower than South Korea, but each will have the same steady state е. China initially will grow faster than…arrow_forwardNational saving equals private saving plus government saving, which in turn equals A. GDP + NFP C - G. B. GDP + C + G. C. C+ S + T. D. GDP + NFP.arrow_forwardBecause capital is subject to diminishing returns,higher saving and investment do not lead to highera. income in the long run.b. income in the short run.c. growth in the long run.d. growth in the short run.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education