6. Suppose Zambia is an open economy in the long run described by the following equations: Y=C+I+G+NX, Y=4000 C-240+0.8(Y-T) I-740-20r T-800 G-500 NX-300-100e, r=r*-2%, Where Y is national output/income, C is consumption, I is investment, r-r* is world interest rate, G is government spending, T is taxes and 'e' is real exchange rate. a) Solve for national saving, private saving, investment, trade balance (net exports), and equilibrium exchange rate. b) Graph the equilibrium condition for this economy.

6. Suppose Zambia is an open economy in the long run described by the following equations: Y=C+I+G+NX, Y=4000 C-240+0.8(Y-T) I-740-20r T-800 G-500 NX-300-100e, r=r-2%, Where Y is national output/income, C is consumption, I is investment, r-r is world interest rate, G is government spending, T is taxes and 'e' is real exchange rate. a) Solve for national saving, private saving, investment, trade balance (net exports), and equilibrium exchange rate. b) Graph the equilibrium condition for this economy.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 12SCQ: If a country is running a government budget surplus, why is (T - G) on the left side of the...

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In Ghana, the capital share of GDP is about 40 percent, the average growth in output is about 2 percent per year, the depreciation rate is about 3 percent per year, and the capital-output ratio is about 1.5. Suppose that the production function is Cobb-Douglas and that Ghana has been in a steady state. a. What must the saving rate be in the initial steady state? [Hint: Use the steady-state relationship, sy = (6 + 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 Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state? Compare the marginal product at the Golden Rule steady state to the marginal product in the initial steady state. Explain.
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In Ghana, the capital share of GDP is about 40 percent, the average growth in output is about 2 percent per year, the depreciation rate is about 3 percent per year, and the capital–output ratio is about 1.5. Suppose that the production function is Cobb–Douglas and that Ghana has been in a steady state.a. What must the saving rate be in the initial steady state? [Hint: Use the steady-state relationship, 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 Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state? 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 of…
In Ghana, the capital share of GDP is about 40 percent, the average growth in output is about 2 percent per year, the depreciation rate is about 3 percent per year, and the capital–output ratio is about 1.5. Suppose that the production function is Cobb–Douglas and that Ghana has been in a steady state.a. What must the saving rate be in the initial steady state? [Hint: Use the steady-state relationship, 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 Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state? 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 of…
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14... Consider this statement: “Devoting a larger share of national output to investment would help to restore rapid productivity growth and rising living standards.” Under what conditions is the statement accurate?