Discuss the following statements:a. The Keynesian multiplier is higher the higher is the degree of openness of the economy'.b. 'There is no easy policy answer when it comes to dealing with a negative supply shock'.Consider the following economy. The production function is F(K,L) = K0.3 Lº.7. The saving rateand the depreciation rate are respectively: s = 0.10 and 8 = 0.07. Population growth is 1%, i.e.n = 0.01.c. Derive the capital accumulation equation for this economy.d. Find the steady state value of the capital stock per capita.e. Suppose that the initial capital stock per capita is: k = 1.5. Discuss the process ofconvergence of the economy to the steady state using the appropriate diagram.f. Calculate the optimal saving rate of the economy and discuss whether the economy at thesteady state over or under-accumulates capital.

A Keynesian multiplier is stated that the total effect is more than the dollar that is spent by the…

Answered: Discuss the following statements: a.…

Discuss the following statements: a. The Keynesian multiplier is higher the higher is the degree of openness of the economy.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter10: Aggregate Supply

Section: Chapter Questions

Problem 2.3P

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