Answered: QUESTIONS 3 1. Explain the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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QUESTIONS 3

1. Explain the implication of the Ramsey model in terms of

Pareto Efficiency
Dynamic Efficiency

2. Assume that the economy is in a steady state and there is an unexpected permanent increase in the rate of depreciation δ. Using the appropriate diagram show:

What is the best response to this change?
Does consumption initially increase or decrease?

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