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MAE312-National Economic Policy

Question

Answered

Questions:

1. Using the Solow growth model, explain why the following two facts are inconsistent with each other: (i) The richest countries have income per capita about 10 times as high as the poorest countries. (ii) The richest countries may have national saving rates around 0.3; the poorest have rates around 0.05. (Hint: With the Cobb-Douglas production function, the steady-state per capita output in the Solow model is Y/N = {s/(n + d}, b/{1-b} , where s is the saving rate. Assume that the population growth rate n = 0.03, depreciation rate d = 0.07, and capital’s production elasticity b= 0.25 are the same across countries.)

2. (a) Using the IS-LM diagram, explain why monetary policy becomes ineffective when an unusually big negative demand shock hits the economy. Does fiscal policy become more or less effective in such circumstances? Explain graphically and intuitively

(b) Why did European countries refrain from using fiscal stimulus to combat the global economic crisis in 2008-10? 

3. (a) Suppose that output is at the full-employment level and that nominal wages are slow to adjust. Using the AD-AS framework to explain the short-run and long-run effects of the coronavirus on output and the price level. (Hint: How does the coronavirus affect the short-run and long-run aggregate supply curves and the aggregate demand curve?)

(b) Explain what the government can do to return output to its natural level. 

MAE312-National Economic Policy

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1 Assessment 1 (20 21 – Sem1 ) This a ssessment item requires you to apply your knowledge of key macroeconomic ideas and frameworks, applied and analytical skills, and use of written communication skill towards completion of the project. Please Note: Assignm ...

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Running head: ECONOMICS Economics Name of the Student: Name of the University: Authors Note: 1 ECONOMICS Answer 2: Part a: The transformation process of data clearly indicates that greater emphasis is placed on the actual GDPO that the rate of growth. Part b: The results clearly show that ...

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Task: Obtain the following macroeconomic data for Australia for the period 1990-2018: real GDP growth rates, unemployment rates, inflation rates, interest rates (cash rates), exchange rates (US$ per A$) and net exports growth rates. (1) Using the graphs and statistical summaries of the data collec ...

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