Explain whether uncertainty should cause policy makers to do more ...

[ashley]

Explain whether uncertainty should cause policy makers to do more or do less to stabilize the economy.
 
  What will be an ideal response?

Question 2

Assume that an economy experiences both positive population growth and technological progress. Once the economy has achieved balanced growth, we know that the capital per worker ratio (K/N) is
 
  A) constant.
  B) growing at a rate of gA - gN.
  C) growing at a rate of gN.
  D) growing at a rate of gA.
  E) growing at the same rate as Y/N.

[bookworm410]

Answer to Question 1

As uncertainty increases, policy makers should do less. Alternatively, more active policies would actually lead to more uncertainty. This is based on, as Blanchard notes, multiplicative uncertainty.

Answer to Question 2

E

[ashley]

Gracias!

[xiaomengxian]

Excellent