December 2020

Suppose the government decides to impose a tax on consumption, which discourages consumption and encourages saving. Use the AK growth model to explain the likely effect on the balanced growth path.

The government allows households to save taxfree for retirement through IRAs and 401(k) plans. Suppose that these plans increase the national saving rate. Use the AK growth model to answer the following questions: a. What effect would these plans have on the growth rate of the standard of living? b. Suppose that these plans also reduce government

The world’s population growth rate is expected to decrease during the twenty-first century. Use the two-sector growth model to explain how this will affect the growth rate of the standard of living in the world.

An article in the Economist about economic growth in Africa contains the following statement: One [of the big drivers of Africa’s growth] is the application of technology. Mobile phones have penetrated deep into the bush. More than 600m Africans have one; perhaps 10% of those have access to mobileinternet services. The phones make boons like savings accounts

Some studies have projected that Brazil’s informal, or underground, economy may be as large as 40% of the country’s GDP. An article about Brazil’s informal economy states: Companies that operate outside the law save money by avoiding tax and welfare payments, allowing them to compete despite being inefficient, but informality also denies them the possibility

The AK growth model highlights the importance of private capital accumulation in generating economic growth. India has devoted a substantial portion of its high level of private saving to finance government debt. Use the AK growth model to show the effect on India’s growth rate of the standard of living if India’s private saving were available to finance private

The two-sector growth model developed by Paul Romer shows that the rate of laboraugmenting technological change depends on the proportion of the labor force devoted to research and development and on the productivity of researchers. a. Suppose that government subsidies for green energy lead to a larger fraction of the labor force devoted to research

One determinant of the productivity of labor Is the human capital, or the skills and education of the labor force. Use the CIA World Factbook Web site (https://www.cia.gov/library/publications/ the-world-factbook/) to look up education expenditures as a percentage of GDP. Which countries spend the most on education? The least? Are there any general relationships between the level

If the inflation rate turns out to be greater than the expected inflation rate, will the expected real interest rate be higher or lower than the actual real interest rate? Explain under what circumstances lenders gain and borrowers lose if the inflation rate differs from the expected inflation rate.

Using data from the St. Louis Federal Reserve(FRED) (http://research.stlouisfed.org/fred2/), analyze the money supply. a. Find data from FRED for the M1 Money Stock (M1SL) and the M2 Money Stock (M2SL) from 1959 to the present b. Using the data found above, calculate M1 as a proportion of M2 for each of the years. c. Explain