Author Question: Analysis of U.S. growth rates shows that growth rate of output tends to be highest in which year of ... (Read 124 times)

luminitza · **on:** Jun 30, 2018

Analysis of U.S. growth rates shows that growth rate of output tends to be highest in which year of a presidential administration?

A) the first
B) the second
C) the third
D) the fourth

Question 2

Graphically illustrate and explain the effects of a reduction in the saving rate on the Solow growth model. In your answer, you must clearly label all curves and the initial and final equilibria. In your answer, explain what happens to the rate of growth of output per worker and the rate of growth of output as the economy adjusts to this decrease in the saving rate.

What will be an ideal response?

Harbringer · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

D

Answer to Question 2

The graph is easy. The saving rate reduction causing the saving/investment function to shift down. K/NA and Y/NA will fall to some permanently lower level. The growth rates of Y and Y/AN will temporarily decrease and then return to their original levels.