0.4 In the Solow growth model, suppose that the per-worker production function is given by y=zk with s= 0.15, d =0.1, and n = 0.02. a. Suppose in country A that z = 1. Calculate the steady-state capital per worker and income per capita in country A. The steady-state capital per worker is. (Round to two decimal places as needed.) The steady-state income per capita is (Round to two decimal places as needed.) b. Suppose in country B that z = 2. Calculate the steady-state capital per worker and income per capita in country B. The steady-state capital per worker is (Round to two decimal places as needed.) The steady-state income per capita is (Round to two decimal places as needed.) c. As measured by GDP per capita, how much richer is country B than country A? What does this tell us about the potential differences in total factor productivity to explain differences in standards of living across countries? Country B is times richer than country A, as measured by GDP per capita. This shows that differences in total factor productivity are proportional differences in income per capita since the steady-state income per capita is from country A to country B. (Round to two decimal places as needed.)

0.4 In the Solow growth model, suppose that the per-worker production function is given by y=zk with s= 0.15, d =0.1, and n = 0.02. a. Suppose in country A that z = 1. Calculate the steady-state capital per worker and income per capita in country A. The steady-state capital per worker is. (Round to two decimal places as needed.) The steady-state income per capita is (Round to two decimal places as needed.) b. Suppose in country B that z = 2. Calculate the steady-state capital per worker and income per capita in country B. The steady-state capital per worker is (Round to two decimal places as needed.) The steady-state income per capita is (Round to two decimal places as needed.) c. As measured by GDP per capita, how much richer is country B than country A? What does this tell us about the potential differences in total factor productivity to explain differences in standards of living across countries? Country B is times richer than country A, as measured by GDP per capita. This shows that differences in total factor productivity are proportional differences in income per capita since the steady-state income per capita is from country A to country B. (Round to two decimal places as needed.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: In the Solow growth model, suppose that the per-worker production function is given by y=zk2/3 . The…

A: "Production function demonstrates the relationship between factor inputs involved in the production…

Q: Suppose we started out at the steady state capital stock in the basic Solow growth model. If the…

A: The Solow Growth Model, otherwise called the Solow-Swan Growth Model or the Exogenous Growth Model,…

Q: Consider the following numerical example of the Solow Growth Model: s=0.25 z=1 F(K,N)=K0.3N0.7…

A: Introduction F( K , N) = K0.3 N0.7 We can write it as Y = K0.3 N0.7 It has given that k=capital per…

Q: A country has the per-worker production function: 2/3 Y, = 6k %3D where y, is output per worker and…

A: Per worker production function is yt = 6Kt2/3 yt = Output per worker kt = Capital-labor ratio…

Q: In the Solow growth model with population growth and technological progress, the steady-state growth…

A: The Solow Growth Model is a first-generation growth model that methodically examines how an economy…

Q: In the Solow growth model, with a given production function, depreciation rate, saving rate, and no…

A: The Solow growth model is used to see how changes in capital stock, changes in labor force growth…

Q: Consider a Solow-Swan economy with a Cobb-Douglas production function with a constant savings rate.…

A: In a Solow-Swan economy with a Cobb-Douglas production function, savings rate is an increasing…

Q: 2. Now assume population growth is instead-0.5% approximately the growth rate when every couple has…

A: The total amount depreciated each year, which is represented as a percentage, is called the…

Q: Answer the following questions using the basic Solow growth model, without population growth or…

A: Subpart a: Steady state condition is that . When the investment is equal to depreciation, it reaches…

Q: Faa has Cobb Douglas preferences for Juice (X1) measured on the horizontal axis and pizza (X2). Her…

A: Answer: Given, MRS=2p1=$6p2=? If the good X1 is on the horizontal axis then the equilibrium…

Q: This question refers to the Solow–Swan model with constant technology. Imagine the model is in…

A: The growth models are an economic concept that reflects the relationship between an economy's…

Q: If the population growth rate increases by 5% and the depreciation rate decreases by 5%, what…

A: A rise in the population growth rate and a fall in the depreciation rate by the same percentage will…

Q: Assume that the Indonesian economy can be reflected in the production function: Y = FIK,L) = K 0$L…

Q: er production function is given by y = as = 0.25, d= 0.1, and n = 0.02. ose that in country A, z =…

A: We have, y = zk.3, s = 0.25 d = 0.1 n = 0.02.

Q: the expression for steady-state qutput.

A: Solow model explains economic growth due to increase in productivity, population growth, capital…

Q: Consider the following numerical example using the Solow growth model. Suppose that F (K, N) = ZK2N2…

A: Steady state is reached where breakeven investment is equal to investment, that is rate of change in…

Q: III) Consider a version of the Solow growth model without technological change covered in lecture…

A: Introduction: The Solow growth model is a fundamental framework used in economics to study economic…

Q: If the population growth rate increases, what might happen to the steady-state level of capital per…

A: Answer: (1) Capital per worker will decrease to a lower steady-state. Explanation: If the population…

Q: Consider the Solow growth model seen in lectures. Use n to denote population growth.

A: The Solow growth model is considered to be an exogenous economic growth model. Exogenous growth…

Q: If country A has currently GDP per capita of $65,000 and economic growth rate of 2%, and Country B…

Q: Consider an economy with a Cobb-Douglass production function Y = A1-«KªN1-a Where TFP, A, grows at a…

Q: A country has the per-worker production function: Y; = 6k?/3 where y is output per worker and k, is…

A: Per worker production function is yt = 6Kt23 yt = Output per worker kt = Capital-labor ratio…

Question

In the Solow growth model, suppose that the per-worker production function is given by y = zk
0.4
with s = 0.15, d = 0.1, and n = 0.02.
a. Suppose in country A that z= 1. Calculate the steady-state capital per worker and income per capita in country A.
The steady-state capital per worker is
(Round to two decimal places as needed.)
The steady-state income per capita is.
(Round to two decimal places as needed.)
b. Suppose in country B that z = 2. Calculate the steady-state capital per worker and income per capita in country B.
The steady-state capital per worker is|.
(Round to two decimal places as needed.)
The steady-state income per capita is
(Round to two decimal places as needed.)
c. As measured by GDP per capita, how much richer is country B than country A? What does this tell us about the potential differences in total factor productivity to
explain differences in standards of living across countries?
Country B is
times richer than country A, as measured by GDP per capita. This shows that differences in total factor productivity are
proportional differences in income per capita since the steady-state income per capita is
from country A to country B.
(Round to two decimal places as needed.)

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Define production function and productivity:

VIEW

Step 2: Calculate steady-state outcome in country A:

VIEW

Step 3: Calculate steady-state outcome in country B:

VIEW

Step 4: Compare the GDP of two countries:

VIEW

Solution

VIEW

Step by step

Solved in 5 steps with 7 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

An economy described by the Solow growth model has the following production function: y = Vk A. Solve for the steady-state value of y as a function of s, n, g, and d. B. A developed country has a saving rate of 28 percent and a population growth rate of 1 percent per year. A less developed country has a saving rate of 10 percent and a population growth rate of 4 percent per year. In both countries, g = 0.02 and d= 0.04. Find the steady- state value of y for each country. C. What policies might the less developed country pursue to raise its level of income?
Assume that a closed economy has a production function of the form Y = z.F (K,N) = z.KaN¹-a where Y=output, z is total factor productivity, K is capital, N is employment=population. 13. a) Use the Solow Model, assuming a constant saving rate s, constant population growth rate, n, and depreciation rate d, to show that in steady state capital per worker k=K/N is given by K-( ) k S.Z |1–α n+d b) Contrast the sho term and long-term impacts of a permanent rise in s and a permanent rise in z, on capital per worker, output per worker, consumption per worker and the return on capital (where relevant you may refer to your answer to part a) c) Explain how your answers to parts a) and b) illustrate the role of total factor productivity in i) long-run growth ii) sustained differences in income between countries.
In the Solow growth model:1. What is the equilibrium effect of an increase in the population growth rate?2. What is the equilibrium effect of an increase in TFP?3. Which of these shocks is better able to generate sustained growth: a decrease in thepopulation growth rate, or an increase in TFP? How does this compare with theresults of the Malthusian model of economic growth?
In a Solow model with technological change, if population grows at a 2 percent rate and the efficiency of labor grows at a -3 percent rate, then in the steady state, output per worker grows at a percent rate, and total output grows at a percent rate. (Enter a number for each blank. Please do not include "%")
Please written by computer source
why is this true or false Consider countries A and B, with A having a higher population growth rate than B. According to the Solow–Swan model, output per person in A and output per person in B are the same in steady state.
Suppose that the TFP parameter, As, in the Solow production function is the same across countries. What differs across countries is their savings rate, s. For the 1750 starter its savings rate is .25. Find the savings rate for a country that switches to Solow in 1950. Use the calibrated parameters from class. Also, assume the same population growth function holds in the 1750 starter and the 1950 starter.
Population Growth and Technological Progress – End of Chapter Problem In the Solow model, how does a decrease in the rate of population growth n affect the steady-state value of each of the following variables? Increases Decreases Stays the same Answer Bank f. The growth of output per worker y c. Output per worker y d. The capital-output ratio k/y g. The growth rate of total output Y e. The marginal product of capital MPK b. Capital stock per worker k a. The savings rate s
Please see below. Need asap please.
Consider the basic Solow growth model. Let the aggregate production function be defined as Y = F(K, L) = K0.5 L0.5 where Y is output, K is capital, and L is labor. Furthermore, let the saving rate be 48%, population growth be 2%, and depreciation rate be 10%. a. Find the steady-state levels of capital per worker k and output per worker y.. %. b. Now assume that, because of the proliferation of financial technologies, the saving rate increases suddenly to 54% after one year. The steady-state level of capital will increase by ____%, and the steady-state level of output will increase by_
In the Solow–Swan model, a decrease in the rate of population growth will have what effect on the steady-state level of real GDP per capita? a. Increase b. No change in real GDP per capita because although it does change the rate at which output and population are growing, it will make both growth rates change by the same amount and so the output-population ratio will be unchanged c. Decrease d. No change in real GDP per capita because although it does change the level of labour, the level of capital will change to keep the capital-labour ratio the same as before
,0.30 Consider a numerical example using the Solow growth model. Suppose that F(K, N) = ZK 0 0.70, with d= 0.06, s = 0.10, n=0.02, and z=1, and take a N period to be a year. The steady-state level of income per capita is The steady-state level of consumption per capita is The golden rule level of capital per capita is (Round to two decimal places as needed.) (Round to two decimal places as needed.) (Round to two decimal places as needed.)