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Macroeconomic Analysis 2003

Macroeconomic Analysis 2003. Golden Rule of Saving and Capital Accumulation. How does a higher saving rate affect the level of output in the steady state?. High saving country. Low saving country. Saving rate affects level of income but not the growth rates .

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Macroeconomic Analysis 2003

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  1. Macroeconomic Analysis 2003 Golden Rule of Saving and Capital Accumulation Lecture 3

  2. Lecture 3

  3. How does a higher saving rate affect the level of output in the steady state? High saving country Low saving country Saving rate affects level of income but not the growth rates Lecture 3

  4. How does the technological advancement affect the per capita capital and per capita output in the steady state? Advanced Technology Primitive Technology Lecture 3

  5. Golden Rule for Saving and Capital Accumulation C-max Kg Kss Lecture 3

  6. Golden Rule of Saving Lecture 3

  7. A Numerical Example for the Golden Rule of Saving Lecture 3

  8. How High Should be the Saving Rate? Saving Rate that Maximises Consumption C-max = 1.25 y = 0.5*k0.5 y=2.5 Consumption k = 25 s5 s4 s1 s2 s*=1.25 Saving rate Lecture 3

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  15. Optimal Saving and Consumption in Two Period Model Lecture 3

  16. A Three Period Optimal Consumption-Saving Model Lecture 3

  17. Four Optimisation Conditions Lecture 3

  18. Consumption and Savings in Three Periods Lecture 3

  19. Policy Issues:Tax, Saving and Consumption • What is the impact in consumption and saving in the above model • If there is a 20 percent tax on interest income? • If there is a 20 percent subsidy in it? • What sort of tax system is better for increasing the ratio of saving? Does a higher rate of VAT promote saving or consumption? • Does a higher rate of tax on labour income encourage or discourage saving? • Does a higher rate of tax on pension income increase saving or consumption? Lecture 3

  20. Which sectors are hit hard when the labour income is taxed more heavily than the capital income? Do workers in the Service sector lobby for Higher capital income tax? Lecture 3

  21. Which Sectors are important for a higher economic growth in the Yorkshire and Humberside region? (annual growth rates) Lecture 3

  22. Why is the Manufacturing Sector So Important for Economic Growth? Lecture 3

  23. Lecture 3

  24. Exercises • Calculate the saving rate consistent with the golden rule • Study of Relative income levels across regions in the UK • Study of economic growth in Hulls and Humberside • Which are the leading sectors of Economic Growth in the UK and in the Yorkshire and Humberside? Lecture 3

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