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Economics

1. Assume we can apply the model of an economy open to capital flows that is discussed to the economy of Avataria.

(a) If the saving rate does not change, but the population growth rate rises, what will happen with Avataria's GDP per capita? What will happen with its GNP per capita? How do these results contrast with the Solow model presented?

(b) Now assume that the value of ?, capital's share in the production function of Avataria, is 0.5. If the world rental price of capital, rw, doubles, by what factor will the level of GDP per worker in Avataria change?

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9473769

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