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Foreign aid: Consider a Solow economy that begins with a capital stock equal to $300 billion, and suppose its steady-state level of capital is $500 billion. To its pleasant surprise, the economy receives a generous gift of foreign aid in the form of $100 billion worth of capital (electric power plants, machine tools, etc.).
(a) Use the Solow diagram, other graphs, and the mathematics of the Solow model to explain what happens to the economy, both immediately and over time. By what proportion does consumption per person initially increase? What happens to consumption in the long run?
(b) Suppose instead of starting below its steady state, the economy begins in steady state, with a capital stock equal to $500 billion. Answer part (a) for this case.
(c) Summarize what this exercise teaches you about the possible consequences of foreign aid. In this example, does foreign aid exert a long-run effect on the welfare of poor countries? What is the benefit of foreign aid?
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1.nbspnbspnbspnbspnbsp suppose a monopolist manufacturer sells his products through a monopolist retailer.nbsp the
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Fifty years ago, there were primarily only 3 major companies in the US supplying automobiles. Today, with the expansion of global markets there are many companies selling autos in the US market. About how many companies sell autos in the US market? W..
consider a market where demand is p10-2q and supply is pq2. there is a consumption positive externality of 2.5unit of
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