Question

General Solow Model Supose initially the economy stays at the steady state k*, y*, i*, c*. At time t0, an imminent trade war makes people expect a higher inflation rate in the future. Higher inflation would benefit the borrower while hurt the lender. Therefore, rational people has less incentive to save. As a result, the saving rate s decreased to s'

(f) Explain what is the golden saving rate, sgold in one sentence. Suppose s > s' > sgold, which of the two time path for ct you draw above is more likely to happen. What if s > sgold > s' and sgold > s > s' ?

(g) (Open Question) Do you think the saving rate in US is above or below the sgold? What is the reason causing the saving rate at such level? Could you make a policy proposal so that people could achieve a higher well-being by using General Solow Model to justify your argument.

Answer #1

1.)
In the Solow model with constant technological knowledge (A), when
the economy reaches a steady state:
A) catching-up growth occurs.
B) cutting-edge growth occurs.
C) growth stops.
D) both catching-up and cutting-edge growth occur.
2.) Capital is output that is:
A) invested in the stock market.
B) used to produce other goods.
C) invested in the bond market.
D.) consumed.
3.) Better ideas or technological knowledge causes:
A) the production function to shift upward.
B) the investment function to...

Consider a numerical example using the Solow growth model: The
production technology is Y=F(K,N)=K0.5N0.5 and people consume after
saving a proportion of income, C=(1-s)Y. The capital per worker,
k=K/N, evolves by (1+n)k’=szf(k)+(1-d)k.
(a) Describe the steady state k* as a function of other
variables.
(b) Suppose that there are two countries with the same steady
state capital per worker k* and zero growth rate of
population(n=0), but differ by saving rate, s and depreciation
rate, d. So we assume that...

Answer the following questions using the basic Solow growth
model, without population growth or technological progress.
(a) Draw a diagram with per worker output, y, consumption, c,
saving, s and investment, i, on the vertical axis and capital per
worker, k, on the horizontal condition. On this diagram, clearly
indicate steady-state values for c, i, and y. Briefly outline the
condition that holds in the steady- state (i.e. what is the
relationship between investment and the depreciation of
capital?).
(b)...

Multiple Choice
11. Prepayment risk is:
A. the risk you will not receive the cash flows on a
mortgage-backed security
B. the risk that you will receive the cash flows sooner than
expected and be forced to invest at a lower rate.
C. the risk that you will receive the cash flows later than
expected and not be able to invest at current, higher rates.
12. Based on the video Inside the Meltdown, it appeared
that the main reason Lehman...

Delta airlines case study
Global strategy. Describe the current global
strategy and provide evidence about how the firms resources
incompetencies support the given pressures regarding costs and
local responsiveness. Describe entry modes have they usually used,
and whether they are appropriate for the given strategy. Any key
issues in their global strategy?
casestudy:
Atlanta, June 17, 2014. Sea of Delta employees and their
families swarmed between food trucks, amusement park booths, and
entertainment venues that were scattered throughout what would...

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