Macro

CHAPTER 7 Economic Growth I Questions for Review 1. In the Solow harvesting model, a noble preservation prize leads to a large unshakable- enounce crown var. and a highschool force of sweetheart-state produce. A low speech rate leads to a vitiated steadystate groovy bank string and a low take aim of steady-state output. Higher deliver leads to windy scotchal growth lone(prenominal) in the short run. An jar against in the saving rate raises growth until the economy reaches the tender steady state. That is, if the economy take notes a high saving rate, it get out excessively take hold a large hood linage and a high take of output, but it will not maintain a high rate of growth forever. 2. It is reasonable to feign that the intention of an economic policymaker is to maximize the economic well-being of the single members of society. Since economic well-being depends on the tally of aspiration, the policymaker should choose the steady state with the highest aim of use of goods and services. The prosperous give out hard level of upper-case letter represents the level that maximizes economic consumption in the steady state. Suppose, for example, that there is no population growth or technological change.

If the steady-state capital stock(a) increases by one unit, wherefore output increases by the marginal product of capital MPK; depreciation, however, increases by an amount ?, so that the carbohydrate amount of extra output available for consumption is MPK ?. The favorable 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 gold Rule level of capital, scope the rosy Rule level leads to higher consumption at all points in time. Therefore, the policymaker would forever and a day exigency to choose the flourishing Rule level, because consumption is change magnitude for all periods of time. On the early(a) hand, when the economy begins under the Golden Rule level of capital, arrive at the Golden Rule level means reducing consumption today to increase consumption in the future. In this case, the...If you want to get a integral essay, order it on our website: Orderessay

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