18 Questions
What is the relationship between financial openness and GDP per capita according to the text?
GDP per capita decreases when the interest rate is lower than the rate of return on capital.
How does financial openness affect the convergence process in an economy?
It accelerates the convergence process by increasing capital inflows.
Why do countries with higher productivity growth receive more capital inflows according to the text?
Their increased productivity leads to a higher return on investment, attracting more capital inflows.
What happens to a country's capital stock per capita when it borrows from abroad?
It increases due to higher investment levels.
In an open economy, how does an increase in savings rate affect GDP per capita?
It increases GDP per capita by boosting investment levels.
Why do countries with higher productivity growth lend to abroad rather than borrow according to the text?
Higher productivity enables countries to invest surplus funds abroad for higher returns.
In a closed economy, what happens to the capital stock per capita (kc) when savings (s) is low?
kc is low because the cost of capital (Rc) is high
What is the relationship between the capital stock per capita (k) and the return on capital (MPK) in a closed economy?
MPK decreases as k increases due to diminishing returns to capital
In an open economy with access to world capital markets, what determines the capital stock per capita (kc) for a country?
The world interest rate (r*)
How does access to world capital markets affect a country's GDP per capita?
It increases GDP per capita by allowing more capital investment
What is the relationship between the capital supply curve (KS) and the capital demand curve (KD) in a closed economy?
KS is a vertical line, and KD is a downward-sloping curve
What is the condition for capital market equilibrium in a closed economy?
All of the above
According to the given information, what determines the output per capita in an open economy?
The level of capital stock per capita (k) and the productivity parameter (A)
In an open economy with access to world capital markets, what is the shape of the capital supply (KS) curve in the (k, r) space?
Horizontal line
If the initial capital stock per capita (k0) is less than the steady-state level (k*) in an open economy, what is the impact of financial openness on capital convergence?
The economy converges to the steady-state instantaneously by borrowing from abroad
According to the information provided, what is the relationship between the capital stock per capita (k) and the world interest rate (r*) in an open economy?
k is independent of r* as it is determined by the world capital markets
If the initial capital stock per capita (k0) is greater than the steady-state level (k*) in an open economy, what is the expected capital flow direction?
Capital will flow out of the economy as domestic investors seek higher returns abroad
What is the impact of financial openness on the production function and the diminishing returns to capital in an open economy?
Financial openness does not change the production function, and diminishing returns to capital still exist
Explore the effects of financial openness on GDP per capita through 3 macroeconomic questions. Learn how financial openness impacts GDP per capita and accelerates the convergence process.
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