There is evidence that people with more education make more money than those with less education. Use the life cycle model to explain whether these statements are true, false, or uncertain.
a) Well-educated people maintain higher levels of consumption and savings than less-educated people
b) The saving rate of well-educated people is higher than the saving rate of less-educated people.
c) In recessions consumption of well-educated people decreases more than the consumption of less-educated people. Assume that the credit market is imperfect and there are liquidity constraints. Explain your answers.
Assume that the digital revolution leads to the use of robots in the workplace. The production function becomes where R stands for the number of robots.
a) Use growth accounting to predict the increase in total output in response to an increase in the number of robots by 6 percent. lie The nominal interest rate on government bonds equals Spercent and inflation equals 3 percent. The rate of GOP growth is equal to the result obtained in
(b). Use the debt dynamics equation and graph to explain whether or not the level of public debt in percent of GDP can be stabilized if the government runs a primary surplus.
c) Use the neoclassical investment model (equation and graphs) to assess the impact of an increase in the number of robots on investment (in traditional physical capital K).
Use the ADAS model to EXPLAIN and GRAPH what happens to output and the price Nye! in the short run and in the long run in response to
a) Decrease in the rate of unemployment u, which is one of the arguments in the production function
b.Increase in government spending that has been expected
c) Increase in life expectancy which is not accompanied by a change in the number of working years.
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