Question

Discuss and illustrate graphically how a decrease in saving rate will affect the steadystate level of...

Discuss and illustrate graphically how a decrease in saving rate will affect the steadystate level of capital and output. Also illustrate graphically the transition of capitaland output fromtheir old steady state level to new one.

( Solow Model, please graph (two of them) and explain in details)

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

decrease in savings basically lead to level effect, the level of per cpita output is decreased in equilibrium,

as savings are decreased the investment will decrease relative to the depreciation thus the steady state of capital will start to fall and also the steady stats of output,

the balance is restored at a lower level of steady state of output and capital,

in the digram on Y asix there is output and we can see that steady state of output will also decrease,

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Graphically illustrate the Solow model in equilibrium. Label completely. Explain the model. 2. Beginning in...
1. Graphically illustrate the Solow model in equilibrium. Label completely. Explain the model. 2. Beginning in a state of equilibrium in the Solow model, graphically illustrate the destruction from a sizeable portion of the capital stock from a war. In a second graph, graphically illustrate the long-run equilibrium.
As an economy adjusts to a decrease in the saving rate, according to Solow model, we...
As an economy adjusts to a decrease in the saving rate, according to Solow model, we would expect output per worker -none of the other answers is correct. -to decrease at a permanently higher rate. -to return to its original level. -to increase at a permanently higher rate. -to decrease at a constant rate and continue decreasing at that rate in the steady state.
Decrease in saving rate in Solow model. Please explain with graphs
Decrease in saving rate in Solow model. Please explain with graphs
True or False and explain why: Assume two economies are identical in every way except that...
True or False and explain why: Assume two economies are identical in every way except that one has a lower saving rate. According to the Solow growth model, in the steady state the country with the lower saving rate will have a lower level of total output and a lower rate of growth of output per worker as/than the country with the higher saving rate. Support your answer with a graph of the solow model.
Hi,This question is very important and I need a quick response from you today/br/Ha Consider a...
Hi,This question is very important and I need a quick response from you today/br/Ha Consider a version of the Solow model where the population growth rate is 0.05. There is no technological progress. Capital depreciates at rate ? each period and a fraction ? of income is invested in physical capital every period. Assume that the production function is given by: ?t = ?t1/2 ?t1/2 , where ?t is output, ?t is capital and ?t is labour. a. Derive an...
In the solow model, how does increasing or decreasing population growth affect the graph? How does...
In the solow model, how does increasing or decreasing population growth affect the graph? How does the saving rate affect the graph? Please explain and show examples.
Use the IS-LM model to graphically illustrate the impact of a sudden decrease in demand for...
Use the IS-LM model to graphically illustrate the impact of a sudden decrease in demand for money (due to an increase in the use of internet banking) on the output and interest rate in an economy in the short run. Write down the impact on Y, C, U and I.   Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium levels; iv. the direction the curves shift; and v. the new short-run equilibrium.
Question 1 Suppose congress passes significant tax cuts on household income but does not reduce spending,...
Question 1 Suppose congress passes significant tax cuts on household income but does not reduce spending, so that the government budget deficit is larger. Use the Solow growth model of Chapter 8 to graphically illustrate the impact of the tax cut on the steady-State level of capital per worker and the steady state level of output per worker. (Hint: in answering this question, think deeply how a larger government budget deficit affect savings) Make sure you label correctly the: a...
Assume that a war reduces a country's labor force but does not directly affect its capital...
Assume that a war reduces a country's labor force but does not directly affect its capital stock. If the economy was in a steady state before the war and the saving rate does not change after the war, then, over time, capital per worker will ______ and output per worker will ________ as it returns to the steady rate a) decline, increase b) increase, increase c) decline, decrease d) increase, decrease Please explain why
Which of the following statements about the Solow growth model is FALSE? A. The higher steady-state...
Which of the following statements about the Solow growth model is FALSE? A. The higher steady-state capital per capita, the higher the output/income per capita. B. The higher output/income per capita, the higher consumption per capita. C. Golden-rule capital per capita must be a steady state, but not all steady-state is also a golden-rule. D. Golden-rule capital per capita can be achieved by setting the saving rate at the appropriate level.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT