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Foreign aid: Consider a Solow economy that begins with a capital stock equal to $300 billion, and suppose its steady-state level of capital is $500 billion. To its pleasant surprise, the economy receives a generous gift of foreign aid in the form of $100 billion worth of capital (electric power plants, machine tools, etc.).
(a) Use the Solow diagram, other graphs, and the mathematics of the Solow model to explain what happens to the economy, both immediately and over time. By what proportion does consumption per person initially increase? What happens to consumption in the long run?
(b) Suppose instead of starting below its steady state, the economy begins in steady state, with a capital stock equal to $500 billion. Answer part (a) for this case.
(c) Summarize what this exercise teaches you about the possible consequences of foreign aid. In this example, does foreign aid exert a long-run effect on the welfare of poor countries? What is the benefit of foreign aid?
Gross Domestic Product involves a calculation of the total value of the goods and services generated within an economy in a stated or identified time period. The main difference between real GDP and nominal GDP is that nominal GDP does not consider h..
Assume there is a simultaneous increase in government expenditure also reduction in the funds provide.
Use the theory of ethical relativism and the Center for American Progress report to consider the recent bans on foreign law. Propose two (2) advantages and two (2) disadvantages of using foreign or international law in legal disputes. Provide a ratio..
What is meant by "retrospective" billing of health care expenses. How can a system of retrospective billing impact health care expenditures
According to the rule for optimal input usage, a firm should hire a person as long as her marginal revenue product is greater than her marginal cost to the company.
Illustrate what would it raise more money than today, less money, or the same amount of money.
The FOMC wants to expand the money supply by $120 million and decides to buy bonds on the open market. Suppose the reserve requirement is 40% and banks do not hold any excess reserves. Which of the following is an alternative monetary policy that the..
q1. derive step by step the steady state level of capital and output per worker for each one of the models below basic
Do some research on the Internet to determine what fiscal policy initiatives the U.S. government used to address the economic crisis of 2008-2009. Which initiatives seem to have been most effective?
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Suppose demand is still described by P=5.10-0.80Q and supply is described by P=1.90+0.20Q. If there are no price controls, what would be the equilibrium price?
Mary consumes two goods, Diet Coke (X) and Cheeseburgers (Y). Mary’s Utility function is represented by U(X,Y) = 3XY2 . Her marginal utility function for X is MUx = 3Y2 . Her marginal utility function for MUy = 6XY.Write an expression for Mary’s budg..
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