Compare the effect of an increase in the savings rate on the growth rate of Y/L...

Compare the effect of an increase in the savings rate on the growth rate of Y/L and K/L in the Solow model and the AK endogenous growth model.( Distinguish between short-run and longrun effects on the growth rate.) What accounts for the difference?

Solutions

Expert Solution

Both the exogenous solow model and endogenous Ak model is being explained with increase in savings rate

Rahul Sunny answered 2 years ago

Next > < Previous

Related Solutions

Demonstrate graphically the effect an increase in the personal savings rate will have in the bond market.

Demonstrate graphically the effect an increase in the personal savings rate will have in the bond market. Show and explain the effect of increased savings on bond prices and interest rates. How would this change affect capital spending?

The dividend-growth model, suggests that an increase in thedividend growth rate will increase the value...

The dividend-growth model, suggests that an increase in the dividend growth rate will increase the value of a stock. However, an increase in the growth may require an increase in retained earnings and a reduction in the current dividend. Thus, management may be faced with a dilemma: current dividends versus future growth. As of now, investors’ required return is 10 percent. The current dividend is $0.9 a share and is expected to grow annually by 5 percent, so the current...

A) Explain why the steady state growth rate is independent of the savings rate in the...

A) Explain why the steady state growth rate is independent of the savings rate in the Solow growth model? B) Suppose two economies A and B exhibit the same exogenous growth rate of the labour force. There is no technical progress and the savings propensities are the same in both economies. The initial capital stock in country A is much larger than that of country B. Compare the transitional dynamics and the steady state growth paths of the two economies.

A country has a savings rate of 10%, a population growth rate of 3%, depreciation rate...

A country has a savings rate of 10%, a population growth rate of 3%, depreciation rate of 1% and a technology growth rate of 2%. What is the long-run growth rate of total income per capita according to the Solow model? Group of answer choices 2% 7% 3% we do not have enough information to calculate the long-rung growth rate

Does the rate of actual economic growth have any effect on the rate of potential growth...

Does the rate of actual economic growth have any effect on the rate of potential growth and why may one country experience a faster rate of growth than another? word count is 1000 words

a) Explain how and why an increase in the level of savings affects the long-run growth...

a) Explain how and why an increase in the level of savings affects the long-run growth of real income. b) Explain the role of diminishing returns, and what this implies for relative growth rates across countries. c) Carefully describe and explain one government policy that could increase the long-run growth of real income. NO HANDWRITING PLEASE! Please provide the explanations and graphs in text/word formate. Thanks in advance.....

Distinguish between an Income Effect and a Substitution Effect of an increase in the wage rate.

According to the Solow-Swan model of growth, government policies which are designed to increase the savings...

According to the Solow-Swan model of growth, government policies which are designed to increase the savings rate will have no effect on growth in the very long run and may, under certain circumstances, actually reduce aggregate consumption in the long run. Please evaluate the statement as either TRUE,FALSE or UNCERTAIN. Please illustrate your answers with diagrams and/or algebra when appropriate.

The rate of increase in velocity is 2 percent a year, the money growth rate is...

The rate of increase in velocity is 2 percent a year, the money growth rate is 17 percent a year, and the inflation rate is 12 percent a year. What is the real GDP growth rate? The real GDP growth rate is __ percent a year.

When prices increase the interest rate effect A. will increase and the aggregate demand for goods...

When prices increase the interest rate effect A. will increase and the aggregate demand for goods and services will decrease. B. will decrease and the aggregate demand for goods and services will decrease. C. will not be affected. D. will increase and the aggregate demand for goods and services will increase.

Subjects