Q1: Suppose that changing climate conditions lead to greater wear and tear on the nations capital stock, meaning an increase in the depreciation rate of capital. Which of the following is steady-state for this economy?
-The depreciation line would rotate upwards, leading to a reduction in steady-state capital and GDP.
-the investment curve would shift down while the depreciation line rotates upwards as well, leading to a reduction in steady-state capital and GDP
-the investment curve would shift down while the depreciation line rotates downwards as well, leading to an indeterminate effect on steady-state capital and GDP
- The depreciation line would rotate upwards, leading to a reduction in steady-state capital but maintain the same level for GDP.
Q2: Suppose that a country's population increases, increasing their labor force. which of the following best describe the changes to the newstead-state for this economy?
- The investment curve and the aggregates production curve shift up, leading to a rise in steady-state capital and GDP.
- The investment curve shifts up, leading to a rise in steady-state GDP
-The aggregates production curve shifts up, leading to a rise in steady-state GDP
-The investment curve and the aggregate production curve shift up while the depreciation line rotates downwards, leading to a rise in steady-state capital and GDP.