Solow growth: Compute the current US investment rate (I/Y)
Not what you're looking for?
After reviewing the latest gures of investment rates for China and US, the
US Government is considering a scal policy manoeuver to increase investment
rate in US. In this question you are asked to use the Solow model to evaluate
the impact of this policy change. For simplicity assume that the US is a closed
economy so that
Y = C + G + I
where Y is GDP, C is private consumption, G is government consumption and I
is investment. Assume that the government currently taxes GDP at a 20% rate
and all tax revenues go to nance government consumption expenditures, which
are equal to 20% of GDP (so that G = 0:2Y ). The private sector consumes 80%
of after-tax GDP ((1-0.2)Y).
a) Compute the current US investment rate (I/Y)
Purchase this Solution
Solution Summary
The required investment rate (I/Y) is calculated for China and the United States investments.
Solution Preview
After reviewing the latest figures of investment rates for China and US, the US Government is considering a fiscal policy maneuver to increase investment rate in US. In this question you are asked to use the Solow ...
Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.