5. Consider the Solow growth model learnt in the class where output is given by Cobb-Douglas production function as Y, = A, K; L; and capital accumulation is given by: AK, = 5 Y; – d K,where s is the constant savings rate and d is the depreciation rate. a) Mathematically solve for the steady state level of capital. How does the steady state level related to the savings rate (s) and the depreciation rate (d). b) What is the steady state level of capital, if saving rate (s) = 10%, depreciation rate (d) = 5%, A̟ = 2 and ī = 1.5?

5. Consider the Solow growth model learnt in the class where output is given by Cobb-Douglas production function as Y, = A, K; L; and capital accumulation is given by: AK, = 5 Y; – d K,where s is the constant savings rate and d is the depreciation rate. a) Mathematically solve for the steady state level of capital. How does the steady state level related to the savings rate (s) and the depreciation rate (d). b) What is the steady state level of capital, if saving rate (s) = 10%, depreciation rate (d) = 5%, A̟ = 2 and ī = 1.5?

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

5. Consider the Solow growth model learnt in the class where output is given by Cobb-Douglas
production function as Y, = A, K, L; and capital accumulation is given by: AK, = 5 Y, -
d K,where s is the constant savings rate and d is the depreciation rate.
a) Mathematically solve for the steady state level of capital. How does the steady state level
related to the savings rate (s) and the depreciation rate (d).
b) What is the steady state level of capital, if saving rate (s) = 10%, depreciation rate (d) =
5%, A, = 2 and L = 1.5?

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2. a. List the Kaldor Growth Facts. b. Take the Solow Growth model but assume that technology is capital augmenting. Namely, the aggregate production function is Y, = A[(1+r)K,J°N,". Is the Balanced Growth Path of the Solow Model consistent with the Kaldor facts? Note: full credit requires that you solve for the balanced growth rate(s) of variables.
4.
i need Question 6 solution
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Consider our graph of the basic Solow growth model. On the graph above: y represents real output (or income) per worker; y=F(k) is the production function; k is the capital stock per worker; s is the savings rate; δ is the rate of depreciation of capital; ‘i’ represents business investment (purchases of capital) per worker); ‘LF’ stands for Loanable Funds. (For purposed of intuition, think of capital as ‘machines.’) If we started out with a capital (per worker) stock lower than the steady-state stock ( , above), we would expect to see which of the following happen over time? Group of answer choices A) Positive growth rates while the capital stock increases. B) Negative growth rates while the capital stock increases. C) Negative growth rates while the capital stock decreases. D) Positive growth rates while the capital stock stays less than the steady-state level. E) Positive growth rates while the capital stock decreases.
Problem 5 A “miraculous" Asian economy has an aggregate wage bill of 300 billion dollars and an aggregate GDP of 500 billion. The annual growth rate of aggregate GDP for this economy over the last 10 years was 7 percent (that is AY/Y=0.07) and the growth rate of labor was 6 percent (AL/L=0.06). Imagine that the production function is given by the standard Cobb-Douglas AK“L“. ,а, 1-а Y What are the "capital share (a)" and the "labor share (1 – a)"? b. Imagine that the government controls the national accounts. In its quest to improve its reputation, the government mistakenly thinks that having "a lot of investment" will make it look good so it "inflates" its growth of capital number to 12% (AK/K=0.12). When researchers estimate the rate of productivity growth (AA/A), what will they find? Is the growth rate of technology positive or negative? Does your result in (b) make sense? d. The actual truth is that the growth rate of capital was one half of what it announced. That is, instead of…