4. Consider the long-run theory of investment, saving, and growth. Which of the following statements concerning national saving is true? An increase in the rate of saving will lead to a short-run reduction in national income, but to higher economic growth in the long run. A country's saving rate is unrelated to its growth rate. An increase in the rate of saving will lead to a reduction in consumption and therefore to both a short-run and a long-run decrease in national income. An increase in the rate of saving will cause an immediate increase in national income, but may cause a drop in national income in the long-run. An increase in the rate of saving will always be offset by a reduction in private investment.

4. Consider the long-run theory of investment, saving, and growth. Which of the following statements concerning national saving is true? An increase in the rate of saving will lead to a short-run reduction in national income, but to higher economic growth in the long run. A country's saving rate is unrelated to its growth rate. An increase in the rate of saving will lead to a reduction in consumption and therefore to both a short-run and a long-run decrease in national income. An increase in the rate of saving will cause an immediate increase in national income, but may cause a drop in national income in the long-run. An increase in the rate of saving will always be offset by a reduction in private investment.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter20: Economic Growth

Section: Chapter Questions

Problem 20RQ: For a high-income economy like the United States, what aggregate production function elements are...

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1) Consider a country in which three goods (A, B, and C) are produced. The following table shows data for prices and quantities produced for two years. Quantities produced Unit prices Q1 Q2 P1 P2 Good A 51 45 10 14 Good B 23 54 10 6 Good C 6 12 10 8 Taking year 1 as the base year, what is the growth rate of real GDP between years 1 and 2? a. 0.75% b. 38.75% c. 14.75% d. 375.5% 2) Consider a country in which three goods (A, B, and C) are produced. The following table shows data for prices and quantities produced for two years. Quantities produced Unit prices Q1 Q2 P1 P2 Good A 51 45 10 14 Good B 23 54 10 6 Good C 6 12 10 8 Using year 1 as the base year, what is the value of the GDP deflator between years 1 and 2? Hint: Remember that the GDP deflator is a way of measuring the aggregate change in prices from one period to…
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5. Suppose that the economy's production function is Y = √K√LA where K is capital, L is labor, and A is the state of technology. Suppose that the saving rate (s) is equal to 2.4%, the rate of depreciation of capital (8) is equal to 3%, the number of workers grow at 0.7% per year and the rate of technological progress is 3%. (a) Find the steady state values of: i. 11. capital stock per effective worker output per effective worker growth rate of output per effective worker
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5. Capital investment in less-developed countries The following graph shows the production possibilities curves (PPCS) of two hypothetical countries, Dwarika and Gandhar. Each economy produces only two sets of goods, consumer goods and capital goods. Although both countries had identical production capabilities in 2013, Gandhar had a larger population and a greater need for consumer goods. In 2013, Gandhar produced 60 million units of consumer goods and just enough capital to replace the existing capital that was worn out in that year. Dwarika produced only 40 million units of consumer goods and more than enough capital goods to replenish its depreciated capital. Assume that both countries produce efficient levels of output. On the following graph, use the black point (X symbol) to show the combination of goods that were produced in Gandhar in 2013. Dashed drop lines will automatically extend to both axes. Then use the purple point (diamond symbol) to show the combination of goods that…
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		An increase in the rate of saving will lead to a short-run reduction in national income, but to higher economic growth in the long run.
		A country's saving rate is unrelated to its growth rate.
		An increase in the rate of saving will lead to a reduction in consumption and therefore to both a short-run and a long-run decrease in national income.
		An increase in the rate of saving will cause an immediate increase in national income, but may cause a drop in national income in the long-run.
		An increase in the rate of saving will always be offset by a reduction in private investment.