2. Start from the income dynamics equation on slide 45:a(4) * (yt) ¹-aYt+1 =(a) Show graphically that the economy converges to a stable steady-statelevel of income per capita.(b) Show mathematically that the steady-state level of income per capitais given by y = p/y.

Steady state condition: Under the Solow model, the steady state refers to the long-run equilibrium…

Answered: 2. Start from the income dynamics…

ENGR.ECONOMIC ANALYSIS

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

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2. Start from the income dynamics equation on slide 45: a () * (v) ²-a Yt+1 = (a) Show graphically that the economy converges to a stable steady-state level of income per capita. (b) Show mathematically that the steady-state level of income per capita is given by y = p/y. (c) Explain why income per capita depends positively on the cost of raising children (p), and negatively on the preference for children (Y). (d) Why is population density, not income per capita, a good measure of technological advancement in Malthusian economies?
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2. Start from the income dynamics equation on slide 45: a (€) ª (yt) ¹-a Yt+1 = (a) Show graphically that the economy converges to a stable steady-state level of income per capita. (b) Show mathematically that the steady-state level of income per capita is given by y = p/y.