In the Solow Model, what is depreciation? O The erosion of capital over time. O Discounting of financial capital. O A diminished importance of a particular production process. O A decrease in the value of a currency relative to other currencies. In the Solow Model, what is investment? O The purchase of stocks, bonds, or other financial assets. O Corporate money management. Renovation of depreciated capital or the purchase of new capital. O Money not spent on consumption.

In the Solow Model, what is depreciation? O The erosion of capital over time. O Discounting of financial capital. O A diminished importance of a particular production process. O A decrease in the value of a currency relative to other currencies. In the Solow Model, what is investment? O The purchase of stocks, bonds, or other financial assets. O Corporate money management. Renovation of depreciated capital or the purchase of new capital. O Money not spent on consumption.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Command economies typically devoted a large share of output to investment. According to data in this chapter, the general pattern for levels of investment in transition economies through the 1990's demonstrates O an initial rapid decline in investment. O differing experiences for each country. O continued modest levels of investment for all transition economies. O a and b are correct. O a, b, and c
1) Assume an economy without population growth or technological progress. Their production function is given by y = 35k0.5. Their currency capital stock is 100, and the depreciation rate is 17.5%. Give a savings rate such that: Income per worker will grow over the current period а. b. Income per worker stay the same over the current period c. Income per worker will fall over the current period
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3. In the Golden Rule steady state in a Solow model with population growth, the marginal product of capital (MPK) is equal to the savings rate plus the population growth rate. population growth rate plus the depreciation rate. depreciation rate plus the savings rate. savings rate divided by the marginal product of labor. Savings rate divided by the growth rate.
The observation that short-term capital has become increasingly mobile internationally probably implies the BP curve has O A. become steeper O B. become flatter C. become unimportant D. become downward sloping
Answer all parts Suppose people can consume the income they earn or save and invest it at rate r?.A. If we tax wealth at a rate greater than r?, how are people likely to adjust their rate of savings? B. Use the Solow model to comment on how a wealth tax will likely affect the growth rate of the capital stock. How will this policy affect the growth rate of output per worker and how will this policy affect the wage rate for workers? C. To what extent is this wealth tax likely to reduce the influence of the wealthy in politics? D. In the Peterson Institute discussion, Greg Mankiw argues that accumulating wealth creates a pecuniary externality. What does Mankiw mean and how would you expect a wealth subsidy to affect the real wage for workers?
15. A Solow economy has production function $Y = K^{2/2}(AL )^{2/2}$. The savings rate is 30 percent. Depreciation is 1 percent. The labour force grows at 3 percent per year. Labour augmenting technological progress occurs at 1 percent per year. a. Provide a labelled diagram showing the Steady state equilibrium. b. Steady state GOP per effective worker grows at a rare of percent per year. c. Steady state GOP per worker grows at a rate of percent per year. d. Steady state GOP grows at a rate of percent per year. e. Show the Golden Rule equitibrium on your diagram. show all rough calculation
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Suppose a country's central bank announces that it is decreasing the long-run money growth rate to tame inflation. The country's currency will suddenly and its rate of depreciation will then O appreciate; rise O appreciate; fall O depreciate; rise O depreciate; fall
Depreciation a. does not change the amount of capital in the economy. b. is the decrease in the capital stock because of wear and tear. c. is also known as capital consumption. d. Both answers is the decrease in the capital stock because of wear and tear and is also known as capital consumption are correct.