1.Consider an economy where population growth is 0, but technology growth is positive and equal tog.

Suppose that the population growth ratedecreases.

(a) What is the direction of change of steady state level of output per effective worker?

(b) What is the effecton the long run level of output per effectiveworker?

(c) What is the effecton the long run growth rate of aggregate output?

(increases/does not change/decreases)

2.In the Solow growth model, capital per worker in the new steady state will be higher if: (Choose ALL that applies)

-population growth rate increases

-depreciation rate increases

-saving rate increases

3.Suppose the marginal propensity to consume of a consumer is 0.8 and this consumer earns an extra $1200. The consumption spending of this consumer would be expected to increase by how much?

4.Suppose the production of a country is. And its depreciation rate is 0.07, population growth rate is 0.02, technology growth rate is 0.01, saving rate is 0.30.

(a)What is the long-run growth rate ofperworker output?(Enter decimals.Numbers only)

(b)What is the long-run growth rate ofaggregateoutput? (Enter decimals.Numbers only)

(c)(Fill in blanks) If the government want to increase the per-effective-worker consumption permanently,governmentshould(increase/decrease)saving rate to. This newsaving rate should be decimals. Round up to TWO decimals