Which of the following best describes the catch-up effect? Question 14 options: It is easier for a country to grow fast and "catch up" with richer countries if it starts out relatively poor. Saving will always "catch up" with investment spending. If investment spending is low, increased saving will help investment to "catch up." Rich countries aid relatively poor countries so as to help them "catch up."

Catch-up effect says that all countries will converge to their steady state level of income per…

Answered: Which of the following best describes…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The question is based on open economy Macroeconomics (photo attached).
A nation's potential output/GDP is best described as: The maximum level of output/GDP which can be produced with a nation's resources. The maximum growth rate of output/GDP a nation can sustain by keeping both taxes and interest rates low. The maximum growth rate of output/GDP a nation can sustain by keeping interest rates low. The maximum growth rate of output/GDP a nation can sustain by keeping taxes low. A high-employment level of output/GDP.
Consider country A, which is a closed economy. Suppose that A’s private saving is 280 and investment is 250. What is the public saving? Consider country B, which is a closed economy. B’s private saving is 500, its government spending is 100, budget deficit is 50, consumption is 1000. what is the B’s investment and the disposable income, Y – T (Y is the total income, T is tax revenue)?
Consider the basic Macroeconomic model involving: Private sector consumption: C = co+c1(Y-T); Y = GDP, T = Taxes Tax function: T = to+t1Y Business sector investment: I = io+i2r, r=interest rate Government spending: G = Go Exports: X = xo+x1x; x = Exchange rate of the dollar Imports: M = mo+m1Y+m2x; x = Exchange rate (a) Identify and explain the parameters: co, t1, i2, and m2. (b) Solve this model for the equilibrium GDP (Y*).
Assume that a country experiences a permanent increase in its saving rate. Which of the following will occur as a result of this increase in the saving rate?
Given a closed economy where there is no public sector. Production in the economy can be described with the following production function: Y = F (K, AL) = Kα(AL)1−α where Y is the productive capacity of the economy, K is the capital stock, L is the labor force, and A is knowledge. Think of AL as a single factor of production where knowledge and the amount of labor are multiplied together. Let's call the multiplier (ie AL) the efficiency of labor. Given that A = 1.5 and saving is a fixed rate of the production, or s = 33%. The capital stock shrinks by 3% per year, while the population grows is nobody Finally, α = 0.4. Answer the following questions based on the above criteria. (a) Show mathematically that the marginal productivity of labor and capital is positive but diminishing. Explain in words and with a picture what the term positive but diminishing marginal productivity means. (b) Show mathematically that saving and investment are equivalent in a closed economy (c) Show…
In the small closed economy of Bonretia, the currency is the denar. Statistics for last year show that private saving was 50 billion denars, taxes were 40 billion denars, government purchases of goods and services were 30 billion denars, there were 20 billion denars in transfer payments by the government, and GDP was 70 billion denars. What were consumption and investment in San Bonretia? Please read carefully before solve
The diagram at the right shows two paths for aggregate consumption. One grows at a rate of 2 percent per year; the other grows at 3 percent per year but begins at a lower level. a. Suppose the economy jumps from Path 1 to Path 2 in Year 0 because its rate of capital accumulation increases. What is the opportunity cost in this economy for this increase in capital accumulation? The opportunity cost in this economy for this increase in capital accumulation is shown by Area A b. Suppose the economy jumps from Path 1 to Path 2 in Year 0 because its rate of R&D expenditures increases. The greater R&D leads to technological improvements that generate the higher growth rate. What is the opportunity cost to this economy for the increase in R&D expenditures? The opportunity cost to this economy for the increase in R&D expenditures is shown by Area B Etext pages Grapher Area A Area B Area (A+B) C Consumption The Opportunity Cost of Economic Growth Area A 10 Years 18 Path 2: 3% growth Path 1: 2%…
Suppose that every additional 3 percentage points in the investment rate boosts GDP growth by 1 percentage point. Assume also that all investment must be financed with consumer saving. Note: Investment rate = Investment/GDP The economy is currently characterized by $12 trillion $2 trillion Consumption: Saving (= Investment): GDP: $14 trillion If the goal is to raise the growth rate by 2 percentage points, a. by how much must investment increase? billion b. by how much must consumption decline? : billion
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Scenario 1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. Refer to Scenario 1. This economy’s government is running a
The government of Prime Minister Shinzo Abe said it would oﬀer some $15 billion in ﬁnancing for businesses hit by the novel coronavirus and spend about $4 billion directly to prop up the economy.“As the top priority for the time being, we have to put all our eﬀort into keeping businesses alive,” Mr. Abe said.Still, in a $5 trillion economy, the measures may not be big enough to dig the country out of a big hole. SMBC Nikko Securities economist Junichi Makino said he expected the Japanese economy to shrink at an annualized pace of 5.8% in the January-to-March period following a 7.1% contraction in the last quarter of 2019.Japan is set to oﬀer emergency no-interest loans of about $1,900 to newly jobless people and others in trouble, and the borrowers may not have to pay the money back if they can’t ﬁnd work. Businesses at risk from the virus can access ﬁnancing or loan guarantees from the government QUESTIONS: 1. How would the financing plan designed to supports businesses impact the…

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	It is easier for a country to grow fast and "catch up" with richer countries if it starts out relatively poor.
	Saving will always "catch up" with investment spending.
	If investment spending is low, increased saving will help investment to "catch up."
	Rich countries aid relatively poor countries so as to help them "catch up."