Author Question: A conservative central banker cares A) less about inflation and more about unemployment than the ... (Read 107 times)

123654777 · **on:** Jun 30, 2018

A conservative central banker cares

A) less about inflation and more about unemployment than the government.
B) more about economic growth and less about inflation.
C) more about inflation and less about unemployment than the government.
D) less about economic growth and more about inflation.

Question 2

Graphically illustrate and explain the effects of an increase in population growth 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 increase in population growth.

What will be an ideal response?

amynguyen1221 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

C

Answer to Question 2

An increase in the rate of population growth will also cause the required investment line to become steeper. This will also cause K/NA and Y/NA to fall over time. This implies that during the adjustment process Y will grow slower than the now more rapidly increasing NA. So, the growth rate of Y/N actually temporarily decreases here. Once the new equilibrium is achieved, K and Y will now grow more quickly as a result of the increase in population growth. However, the rate of growth of Y/N is still determined by the rate of TP.