Consider the following data on the factor endowments of two countries, A and B. Reminder. In order to get full credit you must show ALL calculations!! Countries А В Labor Force 24 100 Capital Stock What is the capital/labor ratio in the country that is relatively capital abundant? Round to two decimal places. 70 92
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- Orthodox or conventionaleconomists say that to address unequal growth between the rich and the poor, the world economy needs to grow Do you agree with this idea? Why or why not? Whatdoes the term “de-develop” mean? Is it a positive or a negative idea? Explain your According to investopdia.com,a steady-state economy is an economy structured to balance growth with environmental integrity, seeking to find an equilibrium between production growth and population growth. This type of economy aims for the efficient use of natural resources but also seeks a fair distribution of the wealth generated from the development of those resources. Is this type of economy more plausible than continued, unlimited economic growth? Why or why not? How can humanity possibly find a balance between economic growth and social justice?With regards to economic growth, can Foreign Direct Investment (FDI) affect poverty? and how?Suppose you are a highly regarded international economic advisor. You have beenasked to assess the possibilities of growth in an African country. It is a countryabundant in labour and some natural resources. The capital to labour ratio is low. Ithas a free market economy. You have found that this country does not have a verystrong and healthy banking system; however, the political system is stable and thegovernment does a good job protecting property rights. Assess this country’sprospects for growth. Recommend two things that would enhance the country’sgrowth.
- Suppose that two countries are exactly alike in every respect except that capital depreciates at afaster rate in Country A than in Country B due to harsh climate conditions. In which country willthe Golden Rule level of capital per worker be higher? Illustrate graphically.A) Suppose there are two countries that are identical in every way with the following exception: Country A has a higher saving rate than country B. Given this information, we know with certainty that A) Country A will experience capital widening b) growth rate of output per sopita in the steady state is same in two countries c) K/N is higher in country B d) growth rate of output per capita in the steady state is higher in country A B) When expectations are taken into account, a policy to reduce budget deficit may not lead to a fall in output in the current period. Which of the followings cannot be listed as factor that offsets the detrimental impact of fiscal contraction on the output in the short run? a) Increasing tax rates harshly to finance deficit. b) Credibility of the deficit reduction program. c) Cutting wasteful spending and leaving room for future tax cuts. d) Backloading the deficit reduction, leaving larger cuts in government spending to the future while only small cuts…If Y = A*(K*L)^.5 a. What is the equation for the steady state capital per worker k* in terms of savings rate deprectation rate population growth rate and technology? b. If technology doubles how much does the steady state of capital increase by?
- Assume that a country's per-worker production is y = k1/2, where y is output per worker and kis capital per worker. Assume also that 10 percent of capital depreciates per year (= 0.10) 2 andthere is no population growth or technological change.a. If the saving rate (s) is 0.4, what are capital per worker, production per worker, andconsumption per worker in the steady state?b. Solve for steady-state capital per worker, production per worker, and consumption perworker with s = 0.6.c. Solve for steady-state capital per worker, production per worker, and consumption perworker with s = 0.8.d. Is it possible to save too much? Why?In Ghana, the capital share of GDP is about 40 percent, the average growth in output is about 2 percent per year, the depreciation rate is about 3 percent per year, and the capital–output ratio is about 1.5. Suppose that the production function is Cobb–Douglas and that Ghana has been in a steady state.a. What must the saving rate be in the initial steady state? [Hint: Use the steady-state relationship, sy = (δ + n + g)k.]b. What is the marginal product of capital in the initial steady state?c. Suppose that public policy alters the saving rate so that the economy reaches the Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state? Compare the marginal product at the Golden Rule steady state to the marginal productin the initial steady state. Explain.d. What will the capital–output ratio be at the Golden Rule steady state? (Hint: For the Cobb–Douglas production function, the capital–output ratio is related to the marginal product of…In Ghana, the capital share of GDP is about 40 percent, the average growth in output is about 2 percent per year, the depreciation rate is about 3 percent per year, and the capital–output ratio is about 1.5. Suppose that the production function is Cobb–Douglas and that Ghana has been in a steady state.a. What must the saving rate be in the initial steady state? [Hint: Use the steady-state relationship, sy = (δ + n + g)k.]b. What is the marginal product of capital in the initial steady state?c. Suppose that public policy alters the saving rate so that the economy reaches the Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state? Compare the marginal product at the Golden Rule steady state to the marginal productin the initial steady state. Explain.d. What will the capital–output ratio be at the Golden Rule steady state? (Hint: For the Cobb–Douglas production function, the capital–output ratio is related to the marginal product of…
- Why doesn't capital flow from rich to poor countries? Please mention the theoretical and empirical arguments.Question 1:In Ghana, the capital share of GDP is about 40 percent, the average growth in output is about2 percent per year, the depreciation rate is about 3 percent per year, and the capital–output ratiois about 1.5. Suppose that the production function is Cobb–Douglas and that Ghana has beenin a steady state.a. What must the saving rate be in the initial steady state? [Hint: Use the steady-staterelationship, sy = (δ + n + g)k.]b. What is the marginal product of capital in the initial steady state?c. Suppose that public policy alters the saving rate so that the economy reaches the GoldenRule level of capital. What will the marginal product of capital be at the Golden Rule steadystate? Compare the marginal product at the Golden Rule steady state to the marginal productin the initial steady state. Explain.d. What will the capital–output ratio be at the Golden Rule steady state? (Hint: For the Cobb–Douglas production function, the capital–output ratio is related to the marginal product…does financial development facilitate the economic growth in a country? Explain 3 ways that financial development affects economic growth.
