Macroeconomics 5th Edition by Olivier Blanchard

Exercise 6

Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly.
a. The saving rate is always equal to the investment rate.
b. A higher investment rate can sustain higher growth of output forever.
c. If capital never depreciated, growth could go on forever.
d. The higher the saving rate, the higher consumption in steady state.
e. We should transform Social Security from a pay-as-you-go system to a fully funded system. This would increase consumption both now and in the future.
f. The U.S. capital stock is far below the golden-rule level. The government should give tax breaks for saving because the U.S. capital stock is far below the golden-rule level.
g. Education increases human capital and thus output. It follows that governments should subsidize education.