28 29 # Question with the answer 30 # What is the impact on r and I, if there is a negative shock to investment by 31 32 # New input 33 Ic1-Ic-500 # Autonomous investment 34 35 #Model output 36 S1-Y-Cc-Cy* (Y-TX)-G # National savings 37 r1-(S1-Ic1)/(Ir) # Endogenous: Compute 38 I1=Ic1+Ir*(ro) # Other Endogenous: Investments 39 40 # Print results 41 paste("r1 = ", r1) 42 paste("I1 = ", I1) 43 44 45 46 47 48 # Questions # (a) What is the impact on r and I, if G increases by 500? File: F

Why might private markets tend to provide too few incentives for the development of new technology?

What is a production technology?

Exercise D25 What role does government play in stabilizing the economy and what are the tradeoffs that must be considered?

What are the three main goals of macroeconomics?

How did John Mayhem Keynes define economics?

Can you think of ways that globalization has helped you economically? Can you think of ways that it has not?

Would you expect capital deepening to result in diminished1etmns? Why or why not? Would you expect improvements in technology to result in diminished returns? Why or why not?

Becky and Sarah are sisters 1who share a room. Their room can easily get messy, and their parents am always telling them to tidy it. Here are the costs and benefits to both Becky and Sarah, of taking the time to clean their room: If both Becky and Sarah clean, they each spends two hours and get a clean room. If Becky decides not to clean and Sarah does all the cleaning, then Sarah spends 10 hours cleaning (Becky spends 0) but Sarah is exhausted. The same would occur for Becky if Sarah decided not to clean—Becky spends 10 hours and becomes exhausted. If both girls decide not to clean, they both have a dirty room. What is the best outcome for Becky and Sarah? What is the worst outcome? (It would help you to construct a prisoners dilemma table.) Unfortunately, we know that the optimal outcome will most liker not happen, and that the sisters probably will choose the worst one instead. Explain what it is about Beckys and Sarahs reasoning that will lead them both to choose the worst outcome.