Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please give the right choice of these 2 question as photo shows. In the augmented Solow model, what is the effect of a permanent increase

Please give the right choice of these 2 question as photo shows.

image text in transcribedimage text in transcribed
In the augmented Solow model, what is the effect of a permanent increase in the productivity level A on the long-run rental rate of capital (R*)? Assume that Y = AFUQ, ZtNt) = AKf(ZtNt)1_G. A. Higher A increases the marginal product of capital, which increases the demand for capital and then increases 53*. B. Higher A increases the marginal product of capital, which increases the demand for capital and then R". However, it also increases investment, which then increases the supply of capital in the long-run. The total effect is a decrease in R*. C. Higher A increases the marginal product of capital, which increases the demand for capital and then 5"\". However, it also increases investment, which then increases the supply of capital in the long-run. The total effect is an increase in If\". D. Higher A increases the marginal product of capital, which increases the demand for capital and then R". However, it also increases investment, which then increases the supply of capital in the longrun. Both effects cancel out and R\" is unchanged. In the augmented Solow model, which of the following shocks generate no jump (contemporaneous change) in the evolution of any per-efficiency unit variable k, y, c, i ? A. A higher saving rate (s). B. An increase in population growth (n). C. A change in the importance of capital in production (a). D. An increase in productivity ( A)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Understanding Econometrics With Economic Applications

Authors: Dennis Halcoussis

1st Edition

0030348064, 9780030348068

More Books

Students also viewed these Economics questions