Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 23, Problem 5DQ
To determine
The impact of change in investment in U.S.
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Explain the following as effects of low policy rates to the growth of an economy:
1. It can cause inflationary pressure
2. It might lead to a boost in economic growth
3. Investments are more desirable
4. There will be relatively low borrowing cost for government.
China 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.
Discuss the challenges for the Chinese economy in sustaining the accelerated rate of economic growth.
Chapter 23 Solutions
Economics: Principles & Policy
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