What will happen to the steady-state equilibrium level of output and capital stock in an economy if:
a) there is an increase in the savings rate.
b) there is a deterioration of human capital.
What will be an ideal response?
a) If there is an increase in the savings rate of an economy, it will have a steady-state equilibrium with a higher level of capital stock and income than the initial steady-state equilibrium levels.
b) If there is deterioration of human capital in an economy, it will have a steady-state equilibrium with a lower level of capital stock and income than the initial steady-state equilibrium levels.
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When a customer takes out a loan from a bank, this loan is:
a) a liability for the bank. b) savings for the bank. c) a loss for the bank. d) an asset for the bank.
Which of the following is not considered a legitimate concern of a large public debt?
A. Bankruptcy of the federal government. B. Disincentives created by higher taxes. C. Crowding-out of private investment. D. Increased income inequality.