the effect on the size of the spending multiplier, when the investment has an autonomous component and a component that varies directly with the level of real GDP . Concept Introduction: Government purchases: Government purchases are the tools of fiscal policy by which government increase or decrease the aggregate demand of the economy and control the macroeconomic indicators like inflation, unemployment , GDP growth rate.

Question

5. We learnt the following equation in the class: Ak = sy - (n + 8)k where y = ko. Now, I transform this equation into: Ak/k = sy/k - (n + 8). I want you to use a diagram to show the steady state solution of this equation (In the diagram, there will be two curves - one represents sy/k and one represents (n + 8). In the steady state, of course, Ak/k = 0). In this diagram, the x-axis is k. What will happen to this diagram if the value of n increases?

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Question

Chapter 11, Problem 6P

To determine

the effect on the size of the spending multiplier, when the investment has an autonomous component and a component that varies directly with the level of real GDP.

Concept Introduction:

Government purchases: Government purchases are the tools of fiscal policy by which government increase or decrease the aggregate demand of the economy and control the macroeconomic indicators like inflation, unemployment, GDP growth rate.

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5. We learnt the following equation in the class: Ak = sy - (n + 8)k where y = ko. Now, I transform this equation into: Ak/k = sy/k - (n + 8). I want you to use a diagram to show the steady state solution of this equation (In the diagram, there will be two curves - one represents sy/k and one represents (n + 8). In the steady state, of course, Ak/k = 0). In this diagram, the x-axis is k. What will happen to this diagram if the value of n increases?

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3. A country has the following production function: Y = K0.2L0.6p0.2 where Y is total output, K is capital stock, L is population size and P is land size. The depreciation rate (8) is 0.05. The population growth rate (n) is 0. We define: y = ½, k = 1 and p = . Land size is fixed. L a) Find out the steady state values of k and y in terms of p, the per capita land size.