CHAPTER 11
Quick Check
1. a. True, in a closed economy, and if saving includes public and private saving.
b. False. The economy will eventually reach a steady state where output per worker does
c. True. In the model without depreciation, there is no steady state. A constant saving rate
d. Uncertain. See the discussion of the golden-rule saving rate.
e. Uncertain/False. It is likely that the U.S. rate is below the golden rule rate and that
f. Uncertain. The U.S. capital stock is below the golden rule, but that does not necessarily
g. False. Even if you accept the premise (that educational investment increases output, as
2. Disagree. An increase in the saving rate does not affect growth in the long run, but does increase
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3. Assume that the economy begins in steady state. One decade after an increase in the saving rate,
Dig Deeper
4. a. This would likely lead to a higher saving rate, so output per worker and output per person
b. Treat an increase in female participation as a one-time increase in employed labor. In this
5. A transformation to a fully funded system leads to an increase in the saving rate. Ignoring any
6. a. K/N=(s/(2))2; Y/N=s/(4)
7. a. Yes.
8. a. Substituting from problem 7 part (e) implies K/N=1.
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d. K / N Y / N
t1.00 1.00
9. a. Review the steps on pages 230-231
b. K/N = (0.15/.075)2 = 4
c. K/N=(0.2/0.075)2 =7.11
b. For fiscal year 2013, the budget deficit (including the off budget items) was 4.1% of
c. The savings rate in China is much higher than in the United States.
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