The data below describe averages for the economy of Solovia over the last 50 years:
National Savings Rate: 22.0%
National Income Share of Capital: 40.0%
National Income Share of Labor: 60.0%
Annual Growth of Labor Inputs: 1.0%
Annual Growth of Capital Inputs: Same as Growth in Real GDP
Technical Progress: 1.2%
Annual Money Supply Growth: 5.8%
Annual Growth in Monetary Velocity: 0.4%
a. What has been the average growth in total gdp in Solovia during this time? Explain.
b. What has been the average growth in gdp per worker in Solovia? Explain.
c. What has been the average inflation rate in Solovia over the past 50 years? Explain.
d. Some analysts have claimed that Solovians need to raise their national savings rate.
i. On what basis can this argument be made?
ii. What will be the long-run effects of such an increase in the savings rate? How differ from the long run?
iii. What might be the short-run effects of such an increase in the savings rate?