Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / Consider two countries A and B that have the same income distributions

Consider two countries A and B that have the same income distributions

Consider two countries A and B that have the same income distributions. In country A there is a strong credit market (well developed financial system that extends credit to most) and the government supported network of co-insurance (think unemployment benefits) funded by taxation. In country B there is not a well developed credit market and the government decides spend money on public goods like parks, education, and roads. 1. Draw consumption functions for both countries without government (assume they have the same autonomous consumption) 2. Which countries output responds more to a fall in investment? Why? (Show with graph) 3. Now add in the government, and assume that the same fall in investment occurs. Which country has a larger fall in output? Why? (Show with a graph or equation)

Feb 01 2020 View more View Less

Answer (UnSolved)

question Get Solution

Related Questions