Final Answer Key

Final Answer Key - Final Exam Answer Key Multiple Choice...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Final Exam Answer Key Multiple Choice Questions Version A Version B 1. D 1. B 2. B 2. D 3. D 3. A 4. C 4. C 5. C 5. B 6. B 6. C 7. B 7. C 8. B 8. D 9. D 9. A 10. A 10.D 11. C 11. C 12. A 12. B Short Answer Questions Suppose that the economy of Namibia can be represented by the production function 3 1 5 k y = . The investment rate in Namibia is 40% and the depreciation rate is 5%. (Worth 16 points) a. When n = 0, k ss = 253 and y ss = 31.6 b. When n = 0.1, k ss = 48.7 and y ss = 18.3 c. Any positive population growth decreases income per capita through capital dilution. d. Countries will low or negative population growth may experience a decrease in income per capita, as the growing elderly population increases the number of dependents per worker. It will be difficult for workers to support the relatively large non-working, elderly population. External Debt and Foreign Direct Investment (Worth 16 points) a. According to the Solow Growth Model, increases in investment in capital will lead to higher growth rates and a higher steady state income per person. In the absence of high domestic savings rates, countries can boost investment by taking on external debt. The idea being, that once their growth rates increase, they can begin to repay their creditors. Taking on external debt may be especially important if experts believe a country is in a “poverty trap” because in this case growth will also be accompanied by higher domestic savings rates.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
b. “Free Market Shock Therapy” refers to the set of conditions that are commonly
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/05/2010 for the course ECON 114 taught by Professor Cindybenelli during the Summer '08 term at UCSB.

Page1 / 3

Final Answer Key - Final Exam Answer Key Multiple Choice...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online