Midterm 1 Answer Key - Midterm 1 Answer Key Multiple Choice...

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Midterm 1 Answer Key Multiple Choice Questions Version A Version B 1. B 1. B 2. C 2. C 3. B 3. A 4. D 4. B 5. C 5. C 6. A 6. B 7. B 7. D 8. C 8. C 9. A 9. A 10. C 10. C Short Answer Questions a. Higher b. k ss = 31.6, y ss = 6.3 c. k = 8 d. y’ = 4.06, growth rate of output = 1.5% e. Promised growth rate = 2.26% f. As a country approaches steady state, the growth rate tends to decrease. OR positive population growth would lower the steady state and cause lower growth rates. g. If the savings rate increases as income increases, the investment rate will increase over time, resulting in a higher steady state and higher rates of growth. The government can increase investment by encouraging private savings, attracting FDI, or simply running a budget surplus.
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a. Low corporate tax rates, stable government, low crime, proximity to markets, solid infrastructure, educated workforce, high unemployment, high level of social services, liberal trade policy, etc… b. Foreign direct investment increases the capital per worker in a country, increasing the productivity of each worker. Theoretically this will lead to
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