3. a. Use the Solow model to determine the a) instantaneous impact on GDP per capita, b) instantaneous impact on consumption per capita, c) impact on long-run GDP per capita, d) impact on long-run consumption per capita, e) impact on long-run GDP per capita growth rate, and f) impact on long-run GDP growth rate of an instantaneous and permanent increase in the population growth rate n, through a permanently higher immigration rate, say. Assume the country begins at its steady state value of k* before this event occurs. Justify your answer by use of graph and/or equation.

3. a. Use the Solow model to determine the a) instantaneous impact on GDP per capita, b) instantaneous impact on consumption per capita, c) impact on long-run GDP per capita, d) impact on long-run consumption per capita, e) impact on long-run GDP per capita growth rate, and f) impact on long-run GDP growth rate of an instantaneous and permanent increase in the population growth rate n, through a permanently higher immigration rate, say. Assume the country begins at its steady state value of k* before this event occurs. Justify your answer by use of graph and/or 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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Question

3. a. Use the Solow model to determine the a) instantaneous impact on GDP per capita, b)
instantaneous impact on consumption per capita, c) impact on long-run GDP per capita, d)
impact on long-run consumption per capita, e) impact on long-run GDP per capita growth rate,
and f) impact on long-run GDP growth rate of an instantaneous and permanent increase in the
population growth rate n, through a permanently higher immigration rate, say. Assume the
country begins at its steady state value of k* before this event occurs. Justify your answer by use
of graph and/or equation.
b. Graph the path of yt and ct against time for the event analyzed in part a.
c. Use the Solow model to determine the a) instantaneous impact on GDP per capita, b)
instantaneous impact on consumption per capita, c) impact on long-run GDP per capita, d)
impact on long-run consumption per capita, e) impact on long-run GDP per capita growth rate,
and f) impact on long-run GDP growth rate of an instantaneous and one-time jump in the
population Nt, through a single episode of wartime refugee immigration, say. Assume the
country begins at its steady state value of k* before this event occurs. Justify your answer by use
of graph and/or equation. [Hint: this should not be considered a change in n, since the
population continues to grow at rate n after the one-time jump; it should be modeled as a one-
time jump in Nt.]
d. Graph the path of y, and ct against time for the event analyzed in part c.

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) The goal is to analyze further the two-sector endogenous growth model. Write down the equation of motion for k, which shows delta k as saving minus break-even investment. (Break-even investment is the amount of investment needed to keep capital per effective worker constant.) Draw a graph that determines the steady-state k. In this economy, what's the steady-state growth rate of output per work? How do the saving rate and fraction of labor force in universities (u) affect this steady-state growth rate?
3). Let's consider the Solow Model without technology advancement. Y(t)=2K(t)^(1/2)*L(t)^(1/2) The population growth rate=0.02 Capital accumulation is s*Y(t)-d*K s=0.2, d=0.03 d is the capital depreciation rate. In the steady state, please calculate the following measurements. (a)Capital per capita A. 16 В. 24 С. 36 D. 48 Е. 64 F. None of the above (b)Marginal product of capital (Hint: The first derivative of Y with respect to K) А. 1 В. 1/2 С. 1/4 D. 1/8 E. 1/16 F. None of the above
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