Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Chapter 27, Problem 11CQ
To determine
Check whether the people of high income per capita countries will help or hurt the low income per capita countries.
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Why is saving important for economic growth and development?
Distinguish between saving and investment.
GDP=33,000 C=18,000 G=6,500 T=6,750 What are public, private, and national savings?
Chapter 27 Solutions
Economics: Private and Public Choice
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- Economics It would seem that a higher Steady State level of Y/L (y*) and K/L (k*) is a good thing. We know that a high level of "s" leads to a higher Steady State. Show with diagrams why a rate of saving of, say, 80 or 90 percent may not be so good as far as the people in the economy are concerned.arrow_forwardif two countries have the same Savings rates why is there Growth rates different?arrow_forwardDraw a graph of "catch-up" displaying low saving rates, low levels of health, and low levels of education in a country.arrow_forward
- Why does most countries have different investment priorities?arrow_forwardY=F (K, L) = AK0.3L0.7 Country L (millions) K (trillions) Y (GDP) X 78 0.26 1.1 Y 100 0.84 1.6arrow_forwardThe Economist article, "Low interest rates leave savers with few good options", states that savers are likely to respond to low rates in one of the following three ways: Lincrease athletic activity, go back to school, or, spend more on entertainment O re-watch the movie Trading Places, invest in Treasury bills, or, move to Germany save more and spend less, set aside less money due to higher returns, or, decrease investments in risky assets save less and spend more, set aside more money to make up for low returns, or, increase investments in risky assetsarrow_forward
- Why is there a trade-off between the amount of consumption that people can enjoy today and the amount of consumption that they can enjoy in the future? Why can’t people enjoy more of both? How does saving relate to investment and thus to economic growth? What role do banks and other fifinancial institutions play in aiding the growth process?arrow_forwardDraw a graph of the supply and demand of loanable funds. Then, show how the interest rate will be affected when the following scenarios occur: a. The government implements a program that reduces investment tax credits. b. The government budget deficit is reduced by 30%. (Hint: Does the government still need to borrow?) c. More foreigners are saving their money in U.S. banks.arrow_forwardThe majority of the countries have saving rates that are below the golden rule level. Why is it difficult for the countries to increase in saving rate higher to reach the golden rule level? (Explain in words)arrow_forward
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