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Consider the model in Section 18.4.2. Suppose that the world consists of two countries with constant and equal populations, and constant savings rates, s1 > s2. Suppose that the production function in each country is given by (18.15), with k' corresponding to the highest capital-labor ratio in any country experienced until then. There is no technological progress, and both countries start with the same capital-labor ratio.
(a) Characterize the steady-state world equilibrium (i.e., the steady-state capital-labor ratios in both countries).
(b) Characterize the output per capita dynamics in the two economies. How does an increase in γ affect these dynamics?
(c) Show that the implied income per capita differences (in steady state) between the two countries are increasing in γ. Interpret this result.
(d) Do you think this model provides a plausible mechanism for generating large income differences across countries? Substantiate your answer with theoretical or empirical arguments.
From the graph that you picked, what would be the result during the winter if hotel rates stayed at their summer level?.
In a small country, there is a single firm producing good X. The local demand curve is given by P=100-Q. The firm's marginal cost curve is MC=2Q. The world price of good X is Pw=30. a) In free trade, what will be the domestic production of good X.
Draw the US consumption possibility frontier under the assumption that it can trade at Canada's rate of transformation.
In this chapter, we showed that a monetary expansion in an economy operating under flexible exchange rates leads to an increase in output and a depreciation of the domestic currency.
1. The widget industry is perfectly competitive. The industry demand and supply functions for widgets are given below. Qd = 424 - 40P Qs = 40 + 8P a. What is the equilibrium price and quantity for the industry
The plan is to make an initial deposit today and then deposit an additional $2,500 a year for the next three years, starting one year from today. The account pays a 3% rate of return. How much does the Bluebird Company need to deposit today.
Household spending is given by the following equation: C = $100 + 0.70Yd and Intended Investment = $125. (a) Calculate the equilibrium level of income in the economy, and explain why this is the case.
Should it invest in doubling production capacity?
An immediate problem was that the Treasury didn't really know what most of these mortgages actually were worth (25 percent of their face value, 75 percent, or somewhere in between?), nor did it know the condition of all of these houses, some of wh..
Statistics for the economy as a whole are D= $2,000 billion, R= $200 billion, C/D= 0.2=ratio of currency to transactions deposits, N/D= 2.0= ratio of nontransactions deposits to transactions deposits, MMF/D = 1.6 = ratio of retail money-market mut..
The market demand curve for an industry with two identical firms is P =102-2Q, where Q = Q1+ Q2.The constant per unit marginal cost is 2 for each firm. i) If the firms form a cartel to maximize industry profit What is the industry level of output
Plot the two earnings functions you have computed. During what year does John pass Ivan?
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