Economics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280595
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Chapter 24, Problem 4TY
To determine
Reason for higher
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Does the absolute PPP imply the relative PPP? What about the other way around?
True or false?
Consider two economies that spend different shares of their gross domestic product to R&D activities. Is it true that the economy with a larger share of R&D spending grows faster in the long-run?
Use the Solow model below to answer the question.
Y
Y₂
Y₁
K₁
K₂
K3
Y = Af (K, H)
dK
SY
K
Suppose that Y₁ is 1,458, Y₂ is 5,898, and Y3 is 11,618. The savings rate for this economy is 18%
and the depreciation rate is 5.4%.
If this economy is currently at a GDP of 1,458, what is the smallest amount of foreign aid which
would move the economy up to a GDP of 11,618?
Assume that all foreign aid becomes investment. Round your final answer to two decimal places.
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Economics: Principles and Policy (MindTap Course List)
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- what are 2 main factors of economic growth according to the PPFarrow_forward= 5√K and has a capital Country A produces GDP according to the following equation: GDP stock of 13,399. If the country devotes 13% of its GDP to producing or repairing investment goods, how much is this country currently investing? Rounds your answer to two decimal places.arrow_forwardAccording to economists, productivity can be increased by Group of answer choices - improving the education of workers - raising minimum wages - raising union wages - restricting trade with the foreign countriesarrow_forward
- Suppose there are two countries, India and Bangladesh. In country India, Real GDP grows by 3 percent each year. In country Bangladesh, Real GDP is the same each year: If Real GDP was $1000 billion last year, it is $1000 billion in the current year, and it will be $1000 billion next year. In which of the two countries would you prefer to live, ceteris paribus? Why? Explain.arrow_forwardBarcode technology spurred a lot of investment in retailing.How did it alter the retailing production function?What would a similar amount of investment have accomplised without the new technology?arrow_forwardCountry A produces GDP according to the following equation: GDP = 5√K or can be read as (5 square root of K), and has a capital stock of 10,000. If the country devotes 25% of its GDP to making investment goods, how much is this country investing? Additionally, if 1% of all capital goods depreciate every year, is the country’s GDP increasing, decreasing or remaining constant?arrow_forward
- Country A produces GDP according to the following equation: GDP = 5√K and has a capital stock of 12,254. If the country devotes 15% of its GDP to producing or repairing investment goods, how much is this country currently investing? Rounds your answer to two decimal places.arrow_forwardRuritania produces Widgets and Gizmos. If all of its factors of production are committed to making widgets exclusively, it can make 8 million units each year. If all of its factors are committed to making Gizmos exclusively, it can make 8 million units per year. Ruritania's Ministry of Growth has considered various plans to stimulate economic growth in the kingdom. Adjust the production possibilities frontier (PPF) on the graph to show the impact of a successful plan to improve the literacy rate. (Look at image)arrow_forward“The Sollow model shows that the saving rate does not affect the growth rate in the long-run, so we should stop worrying about the low US saving rate. Increasing the saving rate wouldn’t have any important effects on the economy.” Explain why you agree or disagree with this statement. Structured response required.arrow_forward
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