Illustrate the transition of an economy to the steady state in a diagram, and explain it in words. Hint: Consider what would happen with capital per worker and output per worker if the economy was to the left or to the right of the steady state in a diagram.
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Illustrate the transition of an economy to the steady state in a diagram, and explain it in words. Hint: Consider what would happen with capital per worker and output per worker if the economy was to the left or to the right of the steady state in a diagram.
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- 12. Suppose an economy represented by the graph below started with K = 25, so it was in a steady state, but then disaster struck and most of the capital was destroyed. (Assume that no people were hurt so the labor force is the same size.) dK 25 K After the disaster would we expect the economy to grow or shrink? a. grow, I> dK b. grow, I dK d. shrink, I< dKWith the aid of the diagram, describe the four major sectors in an economy according to the macroeconomic point of view.In the Malthusian model, suppose that the quantity of land increases. Using diagrams, determine what effects this has in the long-run steady state and explain your results.
- In each state, which points are stable steady states?Suppose an economy is in a steady state and its investment rate increases. Use the Solow model to illustrate and explain why the increase in the investment rate will raise the steady-state output level.1. 2. Explain why macroeconomic analysis is particularly concerned with issues of economic growth, unemployment, inflation, and balance of payments? "Economic growth does not necessarily reduce the number of unemployed workers". Explain this statement.
- Go to a recent issue of The Economist magazine. In the back of each issue is a section called “economic indicators.” That section lists the most recent growth data for a substantial number of countries. Which countries around the world are growing most rapidly according to the most recent data? Which countries around the world are growing more slowly? Flip through the stories in The Economist to see if there is any explanation for the pattern that you observe. Write a brief essay on current general economic conditions around the world.Refer to Table 4.3 “The Model’s Prediction for Per Capital GDP” on page 83. Why is the “observed per capita GDP” in the last column 1.000 for the U.S.? A. The U.S. per capita GDP was $1,000 in real terms for the year given in the table B. It means the U.S. economy produces 100% of what it’s supposed to produce C. It means the U.S. economy uses 100% of all available capital in the country D. U.S. values are set, or normalized, to 1 while the other countries’ values are all relative to the U.S. valuesIn the circular flow model, the factors of production flow in the?
- Which growth theory sees the economy as a perpetual motion machine? sees the economy as a perpetual motion machine.Suppose in the economy in question 4) there is an increase in the saving rate from 6% up to 10%.Briefly explain how this will affect the following variables in the steady-state.capital per workera)b)investment per workerc)growth rate of output per workerd)growth rate of outputIn the neoclassical growth model, an increase in the growth of the labor force will Increase growth in income per capita Increase growth in income per capita but only in the short run Have no effect on growth of income per capita in the short or the long run Will reduce growth in income per capita Will reduce growth in income per capita over the short but not the long run In the neoclassical growth model, an increase in saving will Increase growth Increase growth but only temporarily Have no effect on growth in the short or the long run Will reduce growth We do not have enough information