Government in the Solow growth model Foreign aid in the Solow model

A.Government in the Solow growth model 1.Why is the equilibrium condition at present sp + sg = I? We work with following assumptions: 1. Closed economy with study income accounts identity Y = C + I + G 2. all(prenominal) savings atomic number 18 invested Before the inception of tax all of the consumers savings represent the get on Investment. The introduction of tax reduces the net income of the tete-a-tete sector and flows to the organization. What is non pass by the organisation will be relieve and is wherefore part of the investment. Gov-ernment and consumer savings represent now the meat investment. revitalize taxes with gov-ernment expending and government savings leads to the new equality for take which con-sists of private consumption, private savings, government consumption and government sav-ings. outlay is the join of private consumption and government consumption. Replacing the elemental equation with the calculated figures leads us to the resul t of i=sg+sp. under ar the equations shown for this solution.

FormulasFigures as an example y = c + I y = cp + tax + sp tax = cg + sg y = cp + cg + sg + sp c = cp + cg cp + cg + i = cp + cg + sg + sp i = sg + sp10000 = 7000 + 3000 10000 = 5000 + 3000 + 2000 3000 = 2000 + 1000 10000 = 5000 + 1000 + 1000 + 3000 7000 = 5000 + 2000 5000 + 2000 + 3000 = 5000 + 2000 + 1000 + 2000 3000 = 1000 + 2000 Shown in the diagram below is that taxes reduce private consumption and savings, making them government consumption and government savings. amount investments are made up of private savings and government savings. Output total / Investment to tal Intuitively, all that matters, ! If you exigency to get a large essay, order it on our website: BestEssayCheap.com

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