Q: An economy begins in steady state with an investment rate of 20
An economy begins in steady state with an investment rate of 20 percent, a corporate tax rate of 25 percent, a real interest rate of 2 percent, a depreciation rate of 7 percent, and a price of capital...
See AnswerQ: Suppose the user cost of capital in an economy with no corporate
Suppose the user cost of capital in an economy with no corporate income tax is 10 percent. (a) What is the user cost if the corporate tax rate rises to 20 percent? 30 percent? (b) Suppose an economy’s...
See AnswerQ: Consider the user cost of capital in the presence of taxes,
Consider the user cost of capital in the presence of taxes, starting with equation (17.5). Suppose the price of capital, pk , is constant, so there is no capital- gain term. What is new, however, is...
See AnswerQ: Create a graph of the investment rate in physical capital, such
Create a graph of the investment rate in physical capital, such as we might use in studying the Solow growth model. In doing this, you will learn to appreciate some of the subtleties in the National I...
See AnswerQ: Suppose a condominium can be rented for $1,000 a
Suppose a condominium can be rented for $1,000 a month, it depreciates at 10Â percent per year, the annual interest rate is 5Â percent, and the tax rate relevant for the mortgage...
See AnswerQ: Suppose the economy is hit with a temporary positive TFP shock.
Suppose the economy is hit with a temporary positive TFP shock. For example, suppose weather conditions are temporarily very favorable for agriculture. (a) Analyze the effect of the shock in the labor...
See AnswerQ: What is the economic interpretation of the intertemporal budget constraint in equation
What is the economic interpretation of the intertemporal budget constraint in equation (18.6)? Does this interpretation apply to the primary budget deficit or the total deficit? Why?
See AnswerQ: To what extent were the U.S. budget deficits of
To what extent were the U.S. budget deficits of the 1980s and 2000s caused by higher spending versus lower tax revenues? Using the Economic Report of the President, explain which categories of spendin...
See AnswerQ: Consider an economy that exists for three periods: period 1,
Consider an economy that exists for three periods: period 1, period 2, and period 3. In each period, the government must satisfy the budget constraint Bt+1 =(1 + i)Bt + Gt − Tt . (a) Write this budget...
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