MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Question
Chapter 7, Problem 4TY
To determine
To describe: The country that has the higher production possibilities frontier.
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Assume Mexico has the production possibilities to produce either 50 bottles of milk or 50 cartons of eggs using 100 worker hours. If Mexico decides to produce 30 bottles of milk, how many cartons of eggs can it produce?
Place the moveable point at the coordinate that shows this production possibility. Make sure that the point's coordinates are exactly correc
t.
Does the absolute PPP imply the relative PPP? What about the other way around?
Use the Solow model below to answer the question.
Y
Y₂
Y₁
K₁
K₂
K3
Y = Af (K, H)
dK
SY
K
Suppose that Y₁ is 1,458, Y₂ is 5,898, and Y3 is 11,618. The savings rate for this economy is 18%
and the depreciation rate is 5.4%.
If this economy is currently at a GDP of 1,458, what is the smallest amount of foreign aid which
would move the economy up to a GDP of 11,618?
Assume that all foreign aid becomes investment. Round your final answer to two decimal places.
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- Let’s think about two countries, Frugal and Smart. In Frugal, people devote 50% of GDP to making new investment goods, so ?=0.5, and their production function is ?=?‾‾√. In Smart, people devote 25% of GDP to making new investment goods, so ?=0.25 and their production function is ?=2?‾‾√. Both countries start off with ?=100. a. What is the amount of investment in each country this year? Frugal: Smart:arrow_forwardUse the Solow model below to answer the question. Y Y3 Y₂ Y₁ K₁₁ K₂ K3 Y = Af(K,H) dk SY K Suppose that Y₁ is 1,475, Y₂ is 6,184, and Y3 is 10,992. The savings rate for this economy is 30% and the depreciation rate is 8.2%. If this economy is currently at a GDP of 1,475, what is the smallest amount of foreign aid which would move the economy up to a GDP of 10,992? Assume that all foreign aid becomes investment. Round your final answer to two decimal places.arrow_forwardPlease discuss the convergence idea extensivelyarrow_forward
- what are 2 main factors of economic growth according to the PPFarrow_forward= 5√K and has a capital Country A produces GDP according to the following equation: GDP stock of 13,399. If the country devotes 13% of its GDP to producing or repairing investment goods, how much is this country currently investing? Rounds your answer to two decimal places.arrow_forwardAccording to economists, productivity can be increased by Group of answer choices - improving the education of workers - raising minimum wages - raising union wages - restricting trade with the foreign countriesarrow_forward
- Barcode technology spurred a lot of investment in retailing.How did it alter the retailing production function?What would a similar amount of investment have accomplised without the new technology?arrow_forwardSuppose there are two countries, India and Bangladesh. In country India, Real GDP grows by 3 percent each year. In country Bangladesh, Real GDP is the same each year: If Real GDP was $1000 billion last year, it is $1000 billion in the current year, and it will be $1000 billion next year. In which of the two countries would you prefer to live, ceteris paribus? Why? Explain.arrow_forwardCountry A produces GDP according to the following equation: GDP = 5√K and has a capital stock of 9,411. If the country devotes 13% of its GDP to producing or repairing investment goods, how much is this country currently investing? Rounds your answer to two decimal places.arrow_forward
- Country A produces GDP according to the following equation: GDP = 5√K or can be read as (5 square root of K), and has a capital stock of 10,000. If the country devotes 25% of its GDP to making investment goods, how much is this country investing? Additionally, if 1% of all capital goods depreciate every year, is the country’s GDP increasing, decreasing or remaining constant?arrow_forwardThe majority of the countries have saving rates that are below the golden rule level. Why is it difficult for the countries to increase in saving rate higher to reach the golden rule level? (Explain in words)arrow_forwardAssume we have two economies. Economy A has a level of GDP per capita of Ya(0) which is higher than Yb(0) but it is growing at a yearly rate of ga which is lower than that of B, gb. Q: Use the rules of the logs to find an expression in terms of Ya(0), Yb(0), ga, and gb for the period, t*, where the poor economy catches up with the rich economy, i.e. when GDP per capita in both economies coincide. Show your derivations.<arrow_forward
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