Author Question: Explain whether uncertainty should cause policy makers to do more or do less to stabilize the ... (Read 62 times)

ashley · **on:** Jun 30, 2018

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 · **Reply #1 on:** Jun 30, 2018

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