Question

2. The theory of economic growth has the golden rule of saving rate. According to the theory, if the savings rate is in line with the golden law, what will be the benefits? If the savings rate is higher than the golden law, what will be the consequences?

Answer #2

If savings rate is in line with the golden law than its benefits are

. It maximise the steady state level of growth of consumption. It means the consumption is at its highest level permanently.

. The consumer will be at its highest level of satisfaction at this point.

. The economy will grow at a good rate.

If saving is higher than the golden law than its consequences are-

. Interest rate will fall in an economy this leads to low investment in an economy.

. Demand for product and services will fall for a period of time.

. There will be more borrowing in the economy by businessmen and consumers.

PLEASE DO LIKE

answered by: anonymous

Why might it not be a good idea to implement the golden-rule
savings rate? What are the benefits?

US Steady State and Golden Rule: In the US, the
capital share of GDP is 45%, the average annual growth rate of GDP
is 4%, the depreciation rate is 5% per year, and the capital-output
ratio is estimated to be 3. Assuming, a constant returns production
function (i.e., Cobb-Douglas) and that the US is in a steady state,
answer the following:
a) Find the savings rate.
b) Find the MPk
c) Find the MPk if US moved to the Golden...

With the aid of appropriate diagram(s), explain how the Golden
Rule level of capital is decided without population growth and
technological progress and what could do to reach the Golden Rule
level if the initial steady state is higher than the Golden Rule
level? What will happen to the real income, consumption and
investment?

An economy has the following Cobb-Douglas production
function:
Y = Ka(LE)1-a
The economy has a capital share of 1/3, a saving rate of 24
percent, a depreciation rate of 3 percent, a rate of population
growth of 2 percent, and a rate of labor-augmenting technological
change of 1 percent. It is in steady state.
a. Does the economy have more or less capital than at the Golden
Rule steady state? How do you know? To achieve the Golden Rule
steady...

In a country called Nubaria, the capital share of GDP is 40
percent; the average growth in output is 4 percent per year; the
depreciation rate is 5 percent per year; and the capital-output
ratio is 2.5. Suppose the production function is Cobb-Douglas and
Nubaria is in a steady state.
What is the saving rate in the initial steady state?
What is the marginal product of capital in the initial steady
state? What is the economic interpretation of this number?...

What is Malthus’ theory of economic growth (or lack of growth)?
Has it ever been valid?

What is Malthus’ theory of economic growth (or lack of growth)?
Has it ever been valid?

full page answer:
What is Malthus’ theory of economic growth (or lack of growth)?
Has it ever been valid?

Please explain how a higher savings rate may lead to higher
economic growth.

Consider how unemployment would affect the Solow growth model.
Suppose that output is produced according to the production
function Y = Kα [(1 – u)L]1-α where K is
capital, L is the labor force, and u is the natural rate of
unemployment. The national saving rate is s, the labor force grows
at rate n, and capital depreciates at rate δ.
a. Write a condition that describes the golden rule
steady state of this economy.
b. Express the golden rule...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 8 minutes ago

asked 10 minutes ago

asked 13 minutes ago

asked 17 minutes ago

asked 19 minutes ago

asked 19 minutes ago

asked 19 minutes ago

asked 19 minutes ago

asked 20 minutes ago

asked 33 minutes ago

asked 33 minutes ago