QUESTION9 According to the Solow model (you may assume no population growth and

Question

QUESTION9 According to the Solow model (you may assume no population growth and no technology growth), if the government follows policies that increase the savings rate to the golden rule level S G, this will lead to an immediate increase in output and a long run increase in output O immediate increase in both consumption and investment immediate decrease, but a long run increase, in consumption immediate increase, but a long run decrease, in investment QUESTION 10 In an economy with no technology growth, if the depreciation rate 5 decreases this will O decrease the growth rate of output per worker both in the short run and in the long run increase the growth rate of output per worker both in the short run and in the long run O decrease the growth rate of output per worker in the short run butnot in the long run increase the growth rate of output per worker in the short run but not in the long run

Explanation / Answer

9. The correct answer is C. Consumption initially falls but then finally increases in the long run.

10. The correct answer is D. There is a short run change and not a long run change.

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