ec hw 2
golden rule level of capital accumulation is the steady state with the highest level of
consumption per worker
in the case of an unanticipated inflation
creditors with an unindexed contact are hurt because they get less than they expected in real terms
during hyperinflation real tax revenue of the government often drops substantially because of the
delay between when a tax is levied and when it is collected
in the steady state with no population growth or technological change, the capital stock does not change because investment equals
depreciation
unlike the long-run classical model, the solow growth model
describes changes in the economy over time
if the national saving rate increases, the
economy will grow at a faster rate until a new, higher, steady-state capital labor ratio is reached
the golden rule level of the steady state capital stock
implies a choice of a particular saving rate
the cost of reprinting catalogs and price lists because of inflation are called
menu cost
compared to periods of lower rates of inflation, during hyperinflation all of the following occur except
relative prices do a better job of reflecting true scarcity
the major source of government revenue in most countries that are experiencing hyperinflation is
seigniorage
the cost of unexpected inflation, but not of expected inflation are
the arbitrary redistribution of wealth between debtors and creditors
in the solow growth model, the assumption of constant returns to scale means that
the number of workers in an economy does not affect the relationship between output per worker and capital per worker
a variable rate of inflation is undesirable because
variable inflation leads to greater uncertainty and risk as compared to constant inflation