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Solve and show your work please Question 6: Discuss the following statements: a. The Keynesian multiplier is higher the higher is the degree of openness
Solve and show your work please
Question 6: Discuss the following statements: a. The Keynesian multiplier is higher the higher is the degree of openness of the economy\". b. 'There is no easy policy answer when it comes to dealing with a negative supply shock'. Consider the following economy. The production function is FEK, L) = K"'3L'7. The saving rate and the depreciation rate are respectively: 5 = 0.10 and 6 = 0.07. Population growth is 1%, Le. 11 = 0.01. Derive the capital accumulation equation for this economy. cl. Find the steady state value ofthe capital stock per capita. e. Suppose that the initial capital stock per capita is: k: 1.5. Discuss the process of convergence of the economy to the steady state using the appropriate diagram. f. Calculate the optimal saving rate of the economy and discuss whether the economy at the steady state over or under-accumulates capitalStep by Step Solution
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