EBK MACROECONOMICS
10th Edition
ISBN: 9780134896571
Author: CROUSHORE
Publisher: VST
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 1AP
a.
To determine
To describe: Impact on consumption of a worker, if destruction of portion of the nation’s capital stock in a war.
b.
To determine
To describe:
Impact on consumption of a worker, if permanent increase in the rate of immigration.
c.
To determine
To describe: Impact on consumption of a worker, if permanent increase in energy prices.
d.
To determine
To describe: Impact on consumption of a worker, if there is temporary rise in the saving rate.
e.
To determine
To describe: Impact on consumption of a worker, if there is permanent increase in the labor force.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
In a standard Solow growth model that is calibrated in per-worker terms, what happens to the level of output when the saving rate (“s”) rises? How does the increase in “s” impact long-term output growth? How does the level of consumption change initially when savings rates rise? What happens to consumption over time?
We presented two versions of the Solow growth model. (1) In the simple version, there is no technological progress. Show in this simple version that at the steady state output per worker (GDP per worker) depends positively on the saving rate, and negatively on the population growth rate. What’s the growth rate of GDP at the steady state? What’s the growth rate of GDP per worker at the steady state? (2) In the version of the model with technological progress, what’s the growth rate of GDP at the steady state? What’s the growth rate of capital per worker at the steady state? What’s the growth rate of GDP per worker at the steady state? Show your steps
In the absence of technological progress, an increase in the saving rate will affect which of the
following variables in the long run in the Solow model?
output per worker
capital per worker
the level of investment
all of the above
Knowledge Booster
Similar questions
- Explain why consumption per worker grows at a different rate than in Solow model II (with population growth)arrow_forwardLong run economic growth a) An economy is in its steady-state. According to the Solow model, what will happen to output per worker if the saving rate were to increase? Draw a diagram to illustrate. b) According to the Solow model, an increase in the saving rate is not always desirable. Why not? c) In the world economy, we see a great disparity of income per person. Yet the Solow model predicts conditional convergence – that poor countries will grow faster than rich countries and eventually converge to the same level of income per person as the rich countries. According to the Solow model, what conditions must be met for convergence to occur?arrow_forwardConsider the Solow growth model in which population evolves according to: N′ = (1 + n)N where N is the population (labor force) in the current period, N′ is the population (labor force) in the future period, and n is the population growth rate. There are public health expenditures that takes the form of government spending, G = gN, where G is the current period government spending on health care, g is the per-capita health spending in the current period. The production technology is given by Y = zKαN1−α where Y is the output of the consumption good, z is the total factor productivity, K is the current period capital stock, aN is the labour input, and 0 < α < 1 is a parameter. Consumers save a constant fraction, s, of their disposable income, where 0 < s < 1. (a) Suppose that the economic is hit by a pandemic (e.g. Covid-19). The government responds to the pandemic by raising the public health spending per person (e.g spending on vaccination) temporarily (i.e. one-period…arrow_forward
- Consider the Solow growth model in which population evolves according to: N′ = (1 + n)N where N is the population (labor force) in the current period, N′ is the population (labor force) in the future period, and n is the population growth rate. There are public health expenditures that takes the form of government spending, G = gN, where G is the current period government spending on health care, g is the per-capita health spending in the current period. The production technology is given by Y = zKαN1−α where Y is the output of the consumption good, z is the total factor productivity, K is the current period capital stock, aN is the labour input, and 0 < α < 1 is a parameter. Consumers save a constant fraction, s, of their disposable income, where 0 < s < 1. (a) Suppose that the economic is hit by a pandemic (e.g. Covid-19). The government responds to the pandemic by raising the public health spending per person (e.g spending on vaccination) temporarily (i.e. one-period…arrow_forwardConsider the Solow growth model in which population evolves according to: N′ = (1 + n)N where N is the population (labor force) in the current period, N′ is the population (labor force) in the future period, and n is the population growth rate. There are public health expenditures that takes the form of government spending, G = gN, where G is the current period government spending on health care, g is the per-capita health spending in the current period. The production technology is given by Y = zKαN1−α where Y is the output of the consumption good, z is the total factor productivity, K is the current period capital stock, aN is the labour input, and 0 < α < 1 is a parameter. Consumers save a constant fraction, s, of their disposable income, where 0 < s < 1. Suppose that the economic is hit by a pandemic (e.g. Covid-19) which causes a temporary decrease in total factor productivity, z, as certain sectors in the economy (e.g. entertainment, travel etc.) cannot deliver…arrow_forwardIn this question, you will explore how changes in the saving rate and the rate of technological progress affect an economy’s growth. In addition, you will examine how the golden rule saving rate depends on the production function. Consider the Solow (neoclassical) growth model with aggregate production function Y = K^alpha(AN)^(1-alpha). Each period lasts a year.arrow_forward
- The amount of education the typical person receives varies substantially among countries. Suppose you were to compare a country with a highly educated labor force and a country with a less educated labor force.Assume that education affects only the level of the efficiency of labor. Also assume that the countries are otherwise the same: they have the same saving rate, the same depreciation rate, the same population growth rate, and the same rate of technological progress. Both countries are described by the Solow model and are in their steady states. What would you predict for the following variables?a. The rate of growth of total income.b. The level of income per worker.c. The real rental price of capital.arrow_forwardThe amount of education the typical person receives varies substantially among countries. Suppose you were to compare a country with a highly educated labor force and a country with a less educated labor force. Assume that education affects only the level of the efficiency of labor. Also assume that the countries are otherwise the same: they have the same saving rate, the same depreciation rate, the same population growth rate, and the same rate of technological progress. Both countries are described by the Solow model and are in their steady states. What would you predict for the following variables? a. The rate of growth of total income. b. The level of income per worker. c. The real rental price of capital. d. The real wage.arrow_forwardSuppose that a country is at its golden-rule steady state. After an election, the newly elected government increases the goods and services tax (GST). In Solow's (1956) model, what would happen to (a) the saving per capita and consumption per capita,arrow_forward
- Assume that an economy is described by the Solow model in the long run. The rate of population growth in this economy isn=0.01 and the rate of technological growth is g= 0.02. What are the long-run (steady state) growth rates of total GDP, GDP per worker, and GDP per effective worker?arrow_forwardThe amount of education the typical person receives varies substantially among countries. Suppose you were to compare a country with a highly educated labor force and a country with a less educated labor force.Assume that education affects only the level of the efficiency of labor. Also assume that the countries are otherwise the same: they have the same saving rate, the same depreciation rate, the same population growthrate, and the same rate of technological progress. Both countries are described by the Solow model and are in their steady states. What would you predict for the following variables? a)The real wage.arrow_forwardIs the following statement true, false, or uncertain? According to the Solow growth model, an increase in the saving rate should lead to a decline in consumption per person in the long run.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education