28. Consider the Solow model with exogenous growth. Assume that because of global warming the depreciation rate increases. Illustrate the change in the steady state. What happens to the growth rate of standard of living in the new steady state?
29.Suppose the government of a small open economy passes an investment tax exemption to stimulate investment. Using the classical open economy model, what will the effects of this investment tax exemption?
30.Suppose a government decides to increase taxes Using the long-run model of the economy, graphically illustrate the impact of on GDP. Be sure to label the axes, the curves, the initial equilibrium values, the direction curves shift, and the terminal equilibrium values.
Q.28
Ans.
Solow developed a model that explained the responsibility of labor,
capital, and technology (complete factor benefit) to money related
growth.
The growth accounting equation shows that the pace of growth of
potential yield approaches growth in technology in addition to the
weighted normal growth pace of labor and capital.
Growth in potential GDP = Growth in technology + WL (Growth in
labor) + WC (Growth in capital)
The model shows that the economy's beneficial cutoff and potential
GDP increase for two reasons, accumulation of such commitments as
capital, labor, and rough materials used in progress, and discovery
and utilization of new headways that make the commitments to the
creation methodology continuously helpful—that is, prepared to
convey more product and adventures for a comparative proportion of
data
The condition shows that enhancements in technology are a higher
priority than capital in increasing an economy's expectation of
living.
In the given inquiries we have been educated that in light of the
an unnatural weather change deterioration rate has expanded.
This will contrarily affect the way of life. Also, due to higher
devaluation rates and unavoidable losses to capital, the best way
to support growth in potential GDP per capita is through mechanical
change or growth in absolute factor productivity.
28. Consider the Solow model with exogenous growth. Assume that because of global warming the depreciation...
28. Consider the Solow model with exogenous growth. Assume that because of global warming the depreciation rate increases. Illustrate the change in the steady state. What happens to the growth rate of standard of living in the new steady state?
1.Consider the Solow model with exogenous growth. Assume that because of global warming the depreciation rate increases. Illustrate the change in the steady state. What happens to the growth rate of standard of living in the new steady state?
1.Suppose the government of a small open economy passes an investment tax exemption to stimulate investment. Using the classical open economy model from chapter 6, what will the effects of this investment tax exemption? Suppose a government decides to increase taxes. 2.Using the long-run model of the economy developed in Chapter 3(national income), graphically illustrate the impact of on GDP. Be sure to label the axes, the curves, the initial equilibrium values, the direction curves shift, and the terminal equilibrium...
1.Suppose the government of a small open economy passes an investment tax exemption to stimulate investment. Using the classical open economy model from chapter 6, what will the effects of this investment tax exemption? Suppose a government decides to increase taxes. 2.Using the long-run model of the economy developed in Chapter 3(national income), graphically illustrate the impact of on GDP. Be sure to label the axes, the curves, the initial equilibrium values, the direction curves shift, and the terminal equilibrium...
Consider the third stage of the Solow model of economic growth, with population growth and technological progress. (i) What is meant by a steady-state equilibrium? Use the capital accumulation equation in your answer. (ii) Illustrate an economy at a steady-state equilibrium. [There should be three curves in your diagram]
Consider the Solow model with the following parameters/exogenous variables: ?̅, ?̅ , ?̅, ?̅, ?̅, and ?0. In the standard model, we assume that each unit of investment can be converted into future capital one-for-one. Relative to the standard Solow model, in this exercise we include a new parameter to capture the “marginal efficiency of investment.” That is, we introduce the parameter ?̅ which reflects the rate that investment can be converted into future capital stock. This term shows up...
Consider the Solow growth model with depreciation rate and population growth rate n. The equation of motion for the capital stock and the per worker production function in this economy are given by: Ak= s(f(k) - (8 + n) k y= f(k) = k1/4 a). Suppose adoption of modern birth control methods in a developing country causes the population growth rate to decrease. What happens in the main Solow diagram: what curve(s) shin, what happens to the steady- state level...
Suppose from now on that because of a virus, people become afraid of using currency and decide to deposit all the currency in banks, and carry money exclusively in the form of demand deposits. 1. What happens to the money supply? 2.It sometimes happens that during a severe recession the unemployment rate decreases a bit long before the economy recovers. Why does that happen? 3.Consider the Solow model with exogenous growth. Assume that because of global warming the depreciation rate...
Suppose a government decides to increase taxes. 30. Using the long-run model of the economy developed in Chapter 3, graphically illustrate the impact of on GDP. Be sure to label the axes, the curves, the initial equilibrium values, the direction curves shift, and the terminal equilibrium values.
3) Consider the Solow model with population growth and labor-augmenting technological progress. Suppose that the aggregate production function is Cobb- Douglas, i.e. Y = AK"(E · L)1-a, where A is a constant, while E denotes technological progress and grows at rate g. Labor grows at an exogenous rate n, and capital depreciates at rate d. As usual, people consume a fraction (1 – s) of their income. a. Use a graph similar to what we have seen in class to...