The 2020 Economic Report of the President on your country contained the following statements: "Devoting a large share of national output to investment would help restore rapid productivity growth and rising living standards in this period of COVID-19." Do you agree with this claim? Explain.
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- Consider a country that is initially in steady state. Suppose the saving rate increases. Moreover, the population growth rate increases by 1% but the capital depreciation rate falls by 1%. According to the Solow–Swan model, the per capita capital stock increases, and the country moves to a new, highersteady state level of per capita income.Answer true, false, or uncertain. Please briefly explain your answerA country has the per-worker production function yt=6(kt)0.5, where yt is output per worker, and kt is the capital-labor ratio. The capital depreciation rate is 0.1, and the population growth rate is 0.1. The saving function is St=0.1Yt, where St is total national saving, and Yt is total output. The steady-state value of investment per worker isChina invests almost 50 percent of its annual production in new capital compared to 15 percent in the United States. Capital per hour of labor in China is about 25 percent of that in the United States. Explain which economy has the higher real GDP per hour of labor, the faster growth rate of labor productivity, and which experiences the more severe diminishing returns.
- Refer to Problem 1 for data and assume now that the population growth rate increases to 5%. Calculate the new steady state values of the capital-labor ratio and output. Explain your answer graphically and compare the new values of the capital-labor ratio and output per worker to those obtained in Problem 1. Problem 1 The following graph describes Chile’s economy before the devastating earthquake of February 27, 2010. Assume Chile was its steadystate capital-labor ratio before the earthquake. a) On the same graph, identify the new capital-labor ratio immediately after this event. b) Describe how the capital-labor ratio will change in the aftermath of Chile’s earthquake.If the incremental capital output ratio is 3 and the ratio of saving to national income is 9%, according to the Harrod-Domar model the growth rate of income is Group of answer choices zero 3% 6% 12%Which of the following statements are correct? state which ones are definitely incorrect and why. a. Capital grows when investment is higher than depreciation b. The growth rate of capital increases when investment is higher than depreciation c. For a given rate of depreciation of capital, a rise in the ratio of investment to capital will raise the growth rate of capital d. There are no rich countries wth low investment ratios, and no poor countries with high investment ratios e. A country can only invest more than it saves if it borrows from abroad. f. The scatter diagram of capital output ratios vs investment rates does not show a perfect correlation. Therefore there is something wrong with the model of the way capital grows g. A country that increases its saving rate will be able to have more rapid growth of capital for as long as it maintains this higher savig rate h. A country that increases its saving rate will be able to have more rapid…
- The government of a small island country is concerned about a few things and has hired you as an economic consultant to do some economic analysis for 2020. First, the government is worried that the inflation rate in the country is too high. This could reduce the purchasing power and the standards of living of the residents. Second, it suspects that the residents are importing too much goods and services from foreign countries. This could result in unemployment in the island. Third, and finally, it fears that the entrepreneurs are making too much profit and this could lead to unrest in the country. The government has been able to calculate the following statistics (converted to dollars), which you will use to carry out your assignment. All the data pertain to 2020. All the numbers except for real GDP are in nominal terms. The base year in this country for the calculation of real GDP is 2019. GDP Information: Nominal GDP = $106,000,000 Real GDP = $100,000,000 Expenditures: Consumption =…The government of a small island country is concerned about a few things and has hired you as an economic consultant to do some economic analysis for 2020. First, the government is worried that the inflation rate in the country is too high. This could reduce the purchasing power and the standards of living of the residents. Second, it suspects that the residents are importing too much goods and services from foreign countries. This could result in unemployment in the island. Third, and finally, it fears that the entrepreneurs are making too much profit and this could lead to unrest in the country. The government has been able to calculate the following statistics (converted to dollars), which you will use to carry out your assignment. All the data pertain to 2020. All the numbers except for real GDP are in nominal terms. The base year in this country for the calculation of real GDP is 2019.Suppose some of the country's capital is suddenly destroyed. If the depreciation rate, savings rate, and production function remain unchanged, then the real growth rate will _____ in the short run and the steady-state level of capital will _____ increase, decrease, or stay the same?
- Country A and country B both have the production function Y= F(K,L)= K 1/2 L 1/2 Assume that neither country experiences population growth nor technological progress and that 5% of capital depreciates each year. Assume further that country A saves 10% of output each year and country B saves 20% of output each year. Using your answer from part (a) and the steady-state condition that investment equals depreciation, find the steady-state level of capital per worker for each country. Then find the steady-state levels of income per worker and consumption per worker. (b) Suppose that both countries start off with a capital per stock per worker of 2. What are the levels of income per worker and consumption per worker? Remembering that the change in the capital stock is investment less depreciation, use a calculator to show how the capital stock per worker will evolve over time in both countries. For each year, calculate income per worker and…The output of an economy is characterized by a Cobb-Douglas production function with constant return to scale and an output elasticity with respect to capital equal to 0.3. Also given are the following parameters: 30% saving rate, 5% depreciation rate, 2% population growth rate, and the technology factor is 2. a). Find the capital-labour ratio, and also the output, consumption and investment on a per capita basis in the steady state equilibrium. b). Is a government policy that raises the saving rate to 40% socially desirable? Explain your answer with reference to a comparison of this new steady state equilibrium and the initial steady state equilibrium in a) above. c). If the initial capital-labour ratio is 30, is the economy operating efficiently in the sense that welfare cannot be improved? Explain concisely. What if the initial capital-labour ratio is 15? Again explain concisely.Other things equal, countries that offer investors higher rates of return attract more capital than countries that offer lower rates. True False
