The graph on the right shows output per worker f(K/N). investment per worker sf (K./N), and depreciation per worker &K,/N for an economy. Suppose the government initially has a balanced budget, then changes s policies and starts running a government budget deficit. How would this change impact the graph? 1.) Using the point drawing tool, depict the initial steady-state level of output per worker before the government changes its policies. Label your point 'A'. 2.) Using the 3-point curved line drawing tool, depict the impact on output per worker in this economy if the government starts running a budget deficit. Label your curve appropriately. Carefully follow the instructions above and only draw the required objects. The new budget deficit will result in the country having output per worker in the long run. Output per worker, Y/N (KIN) SK./N st(K,/N)

The graph on the right shows output per worker f(K/N). investment per worker sf (K./N), and depreciation per worker &K,/N for an economy. Suppose the government initially has a balanced budget, then changes s policies and starts running a government budget deficit. How would this change impact the graph? 1.) Using the point drawing tool, depict the initial steady-state level of output per worker before the government changes its policies. Label your point 'A'. 2.) Using the 3-point curved line drawing tool, depict the impact on output per worker in this economy if the government starts running a budget deficit. Label your curve appropriately. Carefully follow the instructions above and only draw the required objects. The new budget deficit will result in the country having output per worker in the long run. Output per worker, Y/N (KIN) SK./N st(K,/N)

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter16: Creating An Environment For Growth And Prosperity

Section: Chapter Questions

Problem 14CQ

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Question 1:In Ghana, the capital share of GDP is about 40 percent, the average growth in output is about2 percent per year, the depreciation rate is about 3 percent per year, and the capital–output ratiois about 1.5. Suppose that the production function is Cobb–Douglas and that Ghana has beenin a steady state.a. What must the saving rate be in the initial steady state? [Hint: Use the steady-staterelationship, sy = (δ + n + g)k.]b. What is the marginal product of capital in the initial steady state?c. Suppose that public policy alters the saving rate so that the economy reaches the GoldenRule level of capital. What will the marginal product of capital be at the Golden Rule steadystate? Compare the marginal product at the Golden Rule steady state to the marginal productin the initial steady state. Explain.d. What will the capital–output ratio be at the Golden Rule steady state? (Hint: For the Cobb–Douglas production function, the capital–output ratio is related to the marginal product…