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Use the Solow model to plot and analyze the impact of increasing the savings rate on capital stability and
b. Use the IS-LM model to plot and analyze the impact of expansionary fiscal policies on total output.
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- Suppose a government is able to permanently reduce its budget deficit. Use the Solow growthmodel to graphically illustrate the impact of a permanent government deficitreduction on the steady-state capital–labor ratio and the steady-state level of output perworker.Be sure to label the: a. axes; b. curves; c. initial steady-state levels; d. terminal steady-state levels;and e. the direction curves shift.Optimists maintain that China's debt is not a major concern because they can, "simply grow their way out of it." This is not very reassuring because Chinese economic growth rates have been the lowest in a quarter-century. true because Chinese economic growth rates have been even higher than the rate of growth in total debt. irrelevant because the borrowers were in many cases local governments. O possible but only if interest rates rise.I have to analyze, using the IS-LM model, the macroeconomiceffects of an increase in savings in the short term and its implications for long-term growth. Specifically, I have to suppose that households (consumers) lose confidence and start saving more for any level of disposable income. The question is: Using the IS-LM model, show the effect of an increase in saving on production,investment and consumption, assuming that the Central Bank modifies the money supply when income changes, so that the LM curve is flat.
- China has seen a steep rise in total debt from 150% of GDP in 2008 to 250% today (the Economist, Nov. 15, 2018). Suppose the Chinese government addresses this with a package of spending cuts. (a1) What is the effect of China’s fiscal policy on the national saving rate? Use the Solow growth model to predict the effects on China’s steady-state income per capita. (a2) How does your answer change if the fiscal policy reduces government activities that have productivity effects? Please justify your answers along with drawing the graph of the Solow growth model.Assume i=0%, beta=1. Consumer has income of 80 in year 1, 100 in year 2. Now suppose gov't gives consumers a free check of 10 in year 1. Suppose consumers are naive (they don't anticipate the free check is financed by borrowing from China, which needs to be paid back through more tax in period 2). Consumer believes they will consume ____ in year 2. Hint: when consumers are naive, they will believe they have 80+10=90 income in period 1, and 100 income in period 2.Is is possible for federal investment to have a negative rate of return? Yes, if the spending results in a strong crowding-out effect or if state and local governments substitute towards federal investment by reducing stateand local investment. Either would potentially reduce future productivity and output (GDP), resulting in a negative return. Yes, if the spending results in a weak crowding-out effect or if state and local investments complement the increase in federal investment by. Either would potentially reduce future productivity and output (GDP) and hence result in a negative return. No. At worst, federal investment can have no future return as the expenditure offered some form of service (ex. jobs training) or useful infrastructure (ex. highways). No. If in the future there were a negative return, the federal government would increase expenditures again to offset it.
- An increase in the budget deficit is the result of: A) Expansionary monetary policy; B) Contractionary monetary policy; C) Expansionary fiscal policy; D) Contractionary fiscal policy. Company tax is a: (a) Progressive, direct tax; (b) Progressive, indirect tax; (c) Proportional direct tax; (d) Regressive indirect tax. In the base year, a country produced 50 units of output at a price of R6,00 each for a nominal GDP of R300. This year it produces 60 units of output at a price of R8,00 each. What is the percentage change in real GDP since the base year? (a) 5%; (b) 10%; (c) 20%; (d) 15%.I have to analyze, using the IS-LM model, the macroeconomic effects of an increase in savings in the short term and its implications for long-term growth. Specifically, I have to suppose that households (consumers) lose confidence and start saving more for any level of disposable income. Can you please answer the following question (using graphs too): How does the loss of consumer confidence affect production, investment andprivate savings? Does the attempt to save more necessarily lead to increased savings? Or will it lead to a decrease in savings?Assume i=0%, beta=1. Consumer has income of 80 in year 1, 100 in year 2. Now suppose gov't gives consumers a free check of 10 in year 1. Suppose consumers are naive (they don't anticipate the free check is financed by borrowing from China, which needs to be paid back through more tax in period 2). Consumer actually consumes ____ in year 2. Hint: when consumers are naive, they will believe they have 80+10=90 income in period 1, and 100 income in period 2. Hint 2: when year 2 comes, gov't needs to pay back the debt.
- I have to analyze, using the IS-LM model, the macroeconomiceffects of an increase in savings in the short term and its implications for long-term growth. Specifically, I have to suppose that households (consumers) lose confidence and start saving more for any level of disposable income. Can you please answer the following question (using graphs too): Using the IS-LM model, show the effect of an increase in saving on production,investment and consumption, assuming that the Central Bank modifies the money supply when income changes, so that the LM curve is flatOver the past two years the world has been dealing with the global pandemic. To keep theeconomy going, the government of Jamaica increased their level of government spending.a. Using the IS-LM model, explain the impact of the increased government spending on interestand income.b. Discuss THREE positive impacts that borrowing to finance government spending could haveon a Caribbean country of your choice.The US Government is facing major budget deficit deciding between implementing fiscal and monetary policy to boost output back to potential output. In the presence of expectations, using the IS-LM model graph the effects on the US economy from a contractionary fiscal policy? What would happen if this change is perceived as permanent by investors? Graph and explain. What would happen if the government was perceived as wasteful? Graph and explain.
