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Suppose that all economies have the same value for capital’s share of income. A developed country has a saving rate of 28% and a population growth rate of 1% per year. A less-developed country has a saving rate of 10% and a population growth rate of 4% per year. In both countries, the rate of […]

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.

Why does growth occur in AK growth models?Why does growth occur in two-sector growth models? Which is more likely to increase the growth rate of the standard of living: a decrease in income tax rates or a tax cut targeted at corporate spending on research and development? Briefly explain.

In 2011, the growth rate of the United States  Was about 1.5%, and real GDP per capita was about $48,100. The growth rate in India was 7.2%, and real GDP per capita was about $3,700. The growth rate in Kenya was 6.1%, and real GDP per capita was about $1,700. Is it possible that the

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.

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

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

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

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

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