2. In the Solow growth model, if the steady state capital per worker is greater than its golden rule level, i.e., ( K'/N > Kuna /N). Then in order to achieve the golden rule (rise/ fall/ not level, the saving rate, s, should change) immediately. The consumption per worker (C/N) (rise/ fall/ not change) immediately, (increase/ decrease/ does not change) over time. Once the steady state capital per worker (K/N) reaches its golden rule level, the overall output per worker (Y/N) would be permanently (higher/ lower/ the same) than (as) the initial would and then steady state.

2. In the Solow growth model, if the steady state capital per worker is greater than its golden rule level, i.e., ( K'/N > Kuna /N). Then in order to achieve the golden rule (rise/ fall/ not level, the saving rate, s, should change) immediately. The consumption per worker (C/N) (rise/ fall/ not change) immediately, (increase/ decrease/ does not change) over time. Once the steady state capital per worker (K/N) reaches its golden rule level, the overall output per worker (Y/N) would be permanently (higher/ lower/ the same) than (as) the initial would and then steady state.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1) In the steady state of the Solow model with technological progress, which of the following variables is not constant? (a) capital per effective worker (b) the real rental price of capital (c) the real wage (d) the capital-output ratio
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a) Consider two countries that have the same parameters and exogenous variables (i.e. they have the same values for s¯, d¯, L¯ etc). Country A starts with a level of capital above the steady state. Country B starts below the steady state. First, plot the Solow diagram, explain why country B will grow but country A will shrink. b) Solve for steady state level of capital per person, k∗.
9. Consider a numerical example using the Solow growth model. Suppose that F(K, N) KO.5N0.5, with d = z = 1, and take a period to be a year. (a) Determine capital per worker, income per capita, and consumption per capita in the steady state. 0.1, s = 0.2, n = 0.01, and
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