Suppose that the economy is originally in a steady state of capital. Illustrate graphically the effect...

Suppose that the economy is originally in a steady state of capital. Illustrate graphically the effect on capital per worker when the savings rate decreases.
Suppose that the economy is originally in a steady state of capital. Illustrate graphically the effect on capital per worker when the population growth rate increases.

Expert Solution

Rahul Sunny answered 6 months ago

Suppose that the the economy is in a steady state where the capital stock per worker...

Suppose that the the economy is in a steady state where the capital stock per worker is above the golden-rule level. Illustrate this situation. To obtain the golden rule steady state, how should house- holds change their rate of savings? Suppose that the saving rate decreases at time t0. On a graph plot c, k, and i against t and show how the economy adjusts between the original and the new steady-state. Briefly explain why each variable is changing in...

Suppose the Canadian economy is currently in a steady state with less capital than in the...

Suppose the Canadian economy is currently in a steady state with less capital than in the Golden Rule steady state. Using a graph, show what happens to output, consumption, investment, and capital in the transition of the Canadian economy towards the Golden Rule steady state.

multiple choice questions. 1. Suppose that an economy is in it's steady state and the capital...

*multiple choice questions*. 1. Suppose that an economy is in it's steady state and the capital stock is above the golden rule level. Assuming that there is no population growth or technological change, if the saving rate falls: (a). Output, consumption, investment and depreciation will decrease. (b). Output and investment will decrease, and consumption and depreciation will increase, and then decrease but Finally approach levels above their initial state. (c). output and investment will decrease, and consumption and depreciation will...

Graphically illustrate the effect of an increase in government purchases

Graphically illustrate the effect of an increase in government purchases. Explain the government spending multiplier effect by using at least 200 words.

The Solow growth model Suppose an economy was in steady state with population growing at 2%...

The Solow growth model Suppose an economy was in steady state with population growing at 2% yearly, and suddenly its population growth rate doubles to 4% yearly. What happens to this economy in the short and long run? Illustrate with a diagram.

Suppose the economy is in a long-run equilibrium. a. Draw a diagram to illustrate the state...

Suppose the economy is in a long-run equilibrium. a. Draw a diagram to illustrate the state of the economy. Be sure to show aggregate demand, short run aggregate supply, and long-run aggregate supply. b. Now suppose that a stock market crash causes aggregate demand to fall. Use your diagram to show what happens to output and the price level in the short run. What happens to the unemployment rate? c. Use the sticky-wage theory of aggregate supply to explain what...

Consider an economy in steady state (or on a “balanced growth path”)without population growth. Suppose that...

Consider an economy in steady state (or on a “balanced growth path”)without population growth. Suppose that a mysterious new disease (COVID-19) suddenly kills half of the population. We are interested in the effect this likely has on kapital and output per person , both in the short and the long run. How will this affect in the Solow-model? Show with a graph

. Suppose we started out at the steady state capital stock in the basic Solow growth...

. Suppose we started out at the steady state capital stock in the basic Solow growth model. If the government increased the budget deficit (ceteris paribus) with no effect on the demand for loanable funds from private businesses, then we would expect to see what effects on a. the nation’s capital stock as we move from the original steady state to the new one (and output per worker, y).

19. Explain and graphically illustrate the effect of a decrease in consumer wealth on consumer spending,...

19. Explain and graphically illustrate the effect of a decrease in consumer wealth on consumer spending, aggregate expenditures (AE) 20. Explain and graphically illustrate the effect of decrease in excess capital stock, on investment spending, aggregate expenditures (AE) a 21. Explain and graphically illustrate the effect of increase in consumer debt on aggregate expenditures (AE)

A) If an economy is in a steady state with no population growth or technological change...

A) If an economy is in a steady state with no population growth or technological change and the marginal product of capital is greater than the depreciation rate: steady-state consumption per worker would be higher in a steady state with a higher saving rate. steady-state consumption per worker would be higher in a steady state with a lower saving rate. the depreciation rate should be decreased to achieve the Golden Rule level of consumption per worker. the economy is following...

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