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Macro & Micro economics
Project description
“Macroeconomics: Imperfections, Institutions, & Policies “by Sokice and Carlin
Homework 1; due Thursday, May 22 at 1:00pm
Short Answer:
1.
Why do demographers think world population growth will decline? How does this relate to the
Demographic Transition?
2.
Per capita output before 1800 is characterized by which features ?
Per capita output after 1800 is characterized by which features?
3.
Does the Solow-Swan model suggest an economy can save to much? Why?
4.
One of Malthus’ arguments for his theory was that population grows exponentially necessarily
outpacing the growth in food production. This was wrong in the modern era. What can explain
why?
5.
Describe the conditional convergence prediction of the solow-swan model. Does the data
support it?
Model Analysis:
6.
Much of Malthus’ essay discusses the “Poor Laws”. He felt that the laws would encourage
higher birth rates among the impoverished in Britain. Using the Malthusian model from class,
what does an increase in birth rate do to equilibrium per capita output and population? What
does this suggest Malthus thought the poor laws would do in Britain?
7.
Western Europe was notoriously filthy just before 1800 AD. Using models from class, what
effect would improvements in sewage and water sanitation have on equilibrium population and
consumption per capita? What does this imply about countries in western Europe with higher
standards for hygiene?
8.
In the Solow-Swan model what happens to steady state output and capital per capita if police
are more effective so there is less vandalism (depreciation rate decreases) ?
9.
Suppose there is a government in the Solow-Swan model that taxes savings. So that savings =
(1-t)sY
t. .
Where t denotes the tax rate. First assume government spending is wasteful (so G
t
doesn’t change any variable directly, do note that the income accounting is different). What
happens to steady state capital and output per capita? What happens to saving and capital per
capita golden rule values?
10.
In the same setting as question 9 but now assume instead of government spending being
wasteful, it is directly rebated back to consumers. The government runs a balanced budget so
that : c
t
= (1-s)Y
t
+ G
t
and G
t
= tsY
t
. What happens to steady state capital and output per capita?
What happens to saving and capital per capita golden rule values? Can you explain why?
11.
Analyze the effect of an increase in population growth in the Solow-Swan model with technical
progress. Immediately after the change is per capita output and per capita capital stock
growing? What happens to the steady state values of the per capita growth rate of output, per
capita growth rate of capital, and the steady state value of per capita output?
12.
In the Solow model with human capital and technological progress, what effect does the saving
rate attributed to human capital have on the steady state value of output per capita?
