I need help with the questions and please prove justification. 3. Consider the Solow growth model with the production function, Y = F(K,L) = Ã × K + Ē × L where Ā>0 and B > 0. Denote k = K/L. Let à denote the depreciation rate and 5 the saving rate. There exists apositive steady state (with k>0):a. Alwaysb. Neverc. If Ā> B.d. If d > šĀ.e. If d < 511. Consider the Solow growth model with aggregate production function F(K, L) = ĀK¹/² L¹/². Per capita GDPat the steady state is y=Y/L=a. (SÃ/d)².b. (d/sÃ)².c. d/sÃ.20. Consider the Solow growth model where we add government purchases, G. According to the expenditureapproach of GDP, Y=C+I+G. Suppose G = gY, where ģ is a number between 0 and 1. Governmentpurchases are financed with taxes, T = G. Agents invest a fraction 5 of their disposable income, Y-T.Formally, I = 5(Y – T). The steady-state capital per worker, k K/L, solves:s(1 d)f(k)= gkšāƒ(k) = ģk=śģf (k)= dkd.e.a.b.a.b.C.C.d.e.š(1 − ģ)ƒ(k) = dksf (k) = gk21. Consider the Solow growth model where we add government purchases, G. According to the expenditureapproach of GDP, Y=C+I+G. Suppose G = gY, where g is a number between 0 and 1. Governmentpurchases are financed with taxes, T = G. Agents invest a fraction 5 of their disposable income, Y-T.Formally, I = 5(Y – T). A permanent increase in the share of government consumption, ā, leads to:An increase in steady-state GDPd. An increase in private consumption but no effect onGDPA decrease in steady-state GDPA decrease in private consumption but noeffect on GDPSÃ²/d.sÃ/d.e.A decrease in private consumption and an increasein the capital stock

Answered: 3. Consider the Solow growth model with…

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

Section: Chapter Questions

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I need help with the questions and please prove justification.

3. Consider the Solow growth model with the production function, Y = F(K,L) = Ã × K + Ē × L where Ā>
0 and B > 0. Denote k = K/L. Let à denote the depreciation rate and 5 the saving rate. There exists a
positive steady state (with k>0):
a. Always
b. Never
c. If Ā> B.
d. If d > šĀ.
e. If d < 5
11. Consider the Solow growth model with aggregate production function F(K, L) = ĀK¹/² L¹/². Per capita GDP
at the steady state is y=Y/L=
a. (SÃ/d)².
b. (d/sÃ)².
c. d/sÃ.
20. Consider the Solow growth model where we add government purchases, G. According to the expenditure
approach of GDP, Y=C+I+G. Suppose G = gY, where ģ is a number between 0 and 1. Government
purchases are financed with taxes, T = G. Agents invest a fraction 5 of their disposable income, Y-T.
Formally, I = 5(Y – T). The steady-state capital per worker, k K/L, solves:
s(1 d)f(k)= gk
šāƒ(k) = ģk
=
śģf (k)= dk
d.
e.
a.
b.
a.
b.
C.
C.
d.
e.
š(1 − ģ)ƒ(k) = dk
sf (k) = gk
21. Consider the Solow growth model where we add government purchases, G. According to the expenditure
approach of GDP, Y=C+I+G. Suppose G = gY, where g is a number between 0 and 1. Government
purchases are financed with taxes, T = G. Agents invest a fraction 5 of their disposable income, Y-T.
Formally, I = 5(Y – T). A permanent increase in the share of government consumption, ā, leads to:
An increase in steady-state GDP
d. An increase in private consumption but no effect on
GDP
A decrease in steady-state GDP
A decrease in private consumption but no
effect on GDP
SÃ²/d.
sÃ/d.
e.
A decrease in private consumption and an increase
in the capital stock

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The solow model is economic model of long run economic growth.Here long run economic growth is explained by looking at capital accumulation,labor,population growth etc.

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