1Euler Equat ionConsider the following (almost identical) two-period econ omies (t = 1,2)Есoпoту 1 Ecoпоту 2K110.30.311zF(K)zKa0.90.90.51u(c)log(c)log(c)Suppose that at the end of t = 2 the depreciated stock of capital (1 – 8)K2 issold. Which economy experiences higher consumption growth between period 1and period 2? Show why!• Hint: Combine Euler Equation with Resource Constraint at t = 1 andt = 2 to solve for K2; plug back into euler equation

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1 Euler Equation Consider the following (almost identical) two-period economies (t = 1,2) K₁ a 2 zF(K) B 8 u(c) Economy 1 Economy 2 1 0.3 1 zkº 0.9 0.5 log(c) log(c) 1 0.3 1 zKa 0.9 1 Suppose that at the end of t = 2 the depreciated stock of capital (1-8) K₂ is sold. Which economy experiences higher consumption growth between period 1 and period 2? Show why! Hint: Combine Euler Equation with Resource Constraint at t = 1 and t=2 to solve for K2; plug back into euler equation

1 Euler Equation Consider the following (almost identical) two-period economies (t = 1,2) K₁ a 2 zF(K) B 8 u(c) Economy 1 Economy 2 1 0.3 1 zkº 0.9 0.5 log(c) log(c) 1 0.3 1 zKa 0.9 1 Suppose that at the end of t = 2 the depreciated stock of capital (1-8) K₂ is sold. Which economy experiences higher consumption growth between period 1 and period 2? Show why! Hint: Combine Euler Equation with Resource Constraint at t = 1 and t=2 to solve for K2; plug back into euler equation

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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12. Consider an economy without technological progress and population growth. The production function is given as Y = K²/³N\/3. Both the saving rate and the capital depreciation rate are assumed to be 0.1. Which of the following saving rate delivers the highest consumption per worker in the steady-state: (a) 1/3 (Ь) 1/2 (c) 2/3 (d) none of above is correct
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The economy grows 3.59 percent per year over a 20 year period. 0.67 percent per year is attributed to labor and 1.49 percent per year is attributed to capital. Therefore, enter your response here percent per year must be due to technological progress. (Enter your response rounded to two decimal places.)
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Hand written solutions are strictly prohibited.
2. C = 50 + .8YD = 50 + .8(Y – T) %3D | = 150 %3D G = 200 T = 200 a) Calculate AY if AG = 100 (assuming that G could change all by itself). b) Calculate AY if AT = 100 (assuming that T could change all by itself). c) Calculate AY for AG = AT = 100.
2) Consider an economy with depreciation 6=.2, saving rate s = .1. Worker productivity grows at rate g = .1. The economy starts with 5 units of capital per worker. The productivity function is given by: 2tnioq S) m6x9 grit no bazzim 23 0 2 2 19 0 f(k) = 3* k1/3 (1916978 zi 19verlɔirlw how to two lapiolandotdwong noitsluqoq TUOHTIW lebom wolo2011 ( The Marginal Product of capital is therefore 100037950 1 ritwong ytivitoub 1910 190 stign .6 MPK = 3* know 19q gniv brs (19) a. Using the above parameters, what is the golden rule steady state capital per (effective) worker? Please show your work below.