Graphically illustrate and explain the effects of an increase in the rate of depreciation (?) on the Solow growth model. In your graph, clearly label all curves and equilibria
What will be an ideal response?
The depreciation line becomes steeper and at the initial K/N depreciation is now greater than investment. In this case, K/N and Y/N will fall. If depreciation is greater than saving, it is also greater than investment. Alternatively, there is insufficient investment to offset the amount of capital that wears out. So, the capital stock will decrease. This will cause a reduction in K/N, Y/N, and S/N. As Y/N falls, so will C/N.
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If velocity does not change and if real GDP and the quantity of money grow at the same rate, then the price level
A) does not change and the inflation rate is zero. B) falls and the inflation rate is negative. C) rises and the inflation rate is negative. D) falls and the inflation rate is positive. E) rises and the inflation rate is positive.
Countries that have a trade surplus have a:
A. positive net capital outflow. B. positive net capital inflow. C. negative net capital outflow. D. positive foreign direct investment.
Which of the following is a distinguishing feature of a natural monopoly?
a. A rising average total cost curve b. A declining average total cost curve c. A declining marginal cost curve d. A vertical average total cost curve
Suppose the market demand for good X is given by QXd = 20 - 2PX. If the equilibrium price of X is $5 per unit then consumer surplus is
A. $75. B. $100. C. $25. D. $50.