Chapter 11

Question 1

What is the average saving ratio in the U.S. since 1970, and how does it compare to Germany and Japan?

Answer 1

The U.S. saving ratio has averaged 17%, while it’s 22% in Germany and 30% in Japan.

Question 2

What was the saving rate in Egypt in 2015 as a percentage of GDP?

Answer 2

The Egyptian saving rate in 2015 was approximately 9.6% of GDP.

Question 3

How does a lower saving rate impact the long-term output and standard of living?

Answer 3

A lower saving rate affects the level of output and the standard of living because output depends on the amount of capital, and capital accumulation is influenced by saving.

Question 4

What are the two key relations that determine output in the long run?

Answer 4

The amount of capital determines the amount of output, and the amount of output produced determines the amount of saving, which, in turn, determines the amount of capital accumulated over time.

Question 5

In the absence of technological progress and assuming a constant labor force, how is output per worker (Y/N) related to capital per worker (K/N)?

Answer 5

Output per worker (Y/N) is related to capital per worker (K/N) as Y/N = F(K/N), where higher capital per worker leads to higher output per worker.

Question 6

What is the relationship between output (Y) and investment (I) when private saving is proportional to income (S = sY)?

Answer 6

The relation between output and investment is such that It = sYt, meaning that investment is proportional to output, with higher output leading to higher investment.

Question 7

((Kt+1)/N) - (Kt/N) = (Kt/N)𝛿 + s(Yt/N)

Having this equation
Kt+1 = (1-𝛿)Kt +It,
How could we obtain the Equation in the Prompt?

𝛿: Depreciation rate

Answer 7

Replace investment by the expression It = “sYt”, and divide both sides by N: