Author Question: Game theory analysis of macro policy suggests that as voters become more short-sighted A) policy ... (Read 59 times)

KimWrice · **on:** Jun 30, 2018

Game theory analysis of macro policy suggests that as voters become more short-sighted

A) policy makers will be tempted to raise taxes.
B) policy makers will be forced to balance the budget.
C) policy makers will adopt policies today to achieve balanced budgets in the future.
D) all of the above
E) none of the above

Question 2

Assume the economy has achieved the balanced growth steady state. Explain what factors determine the rates of growth of each of the following variables when balanced growth is achieved: output per effective worker, capital per effective worker, output per worker, output, and consumption per worker.

What will be an ideal response?

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

Answer to Question 1

E

Answer to Question 2

When balanced growth is achieved, K/NA and Y/NA are constant so their rates of growth are 0. K and Y must, therefore, grow at the same rate as NA which equals the sum of population growth and rate of TP. The rate of growth of Y/N will equal the rate of growth of TP. C will grow at the same rate as Y.