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?
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.
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Which of the following is a macroeconomic statement?
A) Real domestic output of seafood increased 12 percent from 2015 to 2016. B) The U.S. inflation rate was two percent in 2016. C) The price of cell phones decreased by 18 percent last year. D) Motorcycle manufacturer productivity decreased by three percent in 2016.
Which of the following about business cycles is true?
a. A "depression" is a recession that is mild and relatively brief. b. The expansions and contractions of real world business cycles last varying lengths of time. c. The timing of business fluctuations is regular and, therefore, easily predictable. d. During the recessionary phase of the business cycle, the rate of unemployment is generally quite low.