5. Consider the Solow growth model with no population growth and no tech- nology growth, i.e., n = x = 0. Output is created by a Cobb-Douglas pro- duction function combining Labor, Lt, and capital, Kt, such that output Yt is given by Y₁ = A+ KL-a. Recall that, without population growth, Lt = Lo and assume that Lo = 2. Furthermore, recall that, without technology growth, At = Ao and assume = == that Ao 1. Assume that the savings rate is s = 0.4, the depreciation rate is : 0.15, and that the capital share is a = 0.3. A lower case letter denotes a variable in per capita. For example, kt = Kt/Lt. In the following questions, choose the closest number. What is the value of kss? (a) 40.6 = (b) 4.1 (c) 2.8 (d) 28 6. What is the value of Yss for the economy described in Question 5 (a) 30.5 (b) 1.03 (c) 3.05 (d) 10.3

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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5. Consider the Solow growth model with no population growth and no tech-
nology growth, i.e., n = x = 0. Output is created by a Cobb-Douglas pro-
duction function combining Labor, Lt, and capital, Kt, such that output
Yt is given by
Y₁ = A+ KL-a.
Recall that, without population growth, Lt = Lo and assume that Lo = 2.
Furthermore, recall that, without technology growth, At = Ao and assume
=
==
that Ao 1. Assume that the savings rate is s = 0.4, the depreciation
rate is :
0.15, and that the capital share is a = 0.3. A lower case
letter denotes a variable in per capita. For example, kt = Kt/Lt. In the
following questions, choose the closest number. What is the value of kss?
(a) 40.6
=
(b) 4.1
(c) 2.8
(d) 28
6. What is the value of Yss for the economy described in Question 5
(a) 30.5
(b) 1.03
(c) 3.05
(d) 10.3
Transcribed Image Text:5. Consider the Solow growth model with no population growth and no tech- nology growth, i.e., n = x = 0. Output is created by a Cobb-Douglas pro- duction function combining Labor, Lt, and capital, Kt, such that output Yt is given by Y₁ = A+ KL-a. Recall that, without population growth, Lt = Lo and assume that Lo = 2. Furthermore, recall that, without technology growth, At = Ao and assume = == that Ao 1. Assume that the savings rate is s = 0.4, the depreciation rate is : 0.15, and that the capital share is a = 0.3. A lower case letter denotes a variable in per capita. For example, kt = Kt/Lt. In the following questions, choose the closest number. What is the value of kss? (a) 40.6 = (b) 4.1 (c) 2.8 (d) 28 6. What is the value of Yss for the economy described in Question 5 (a) 30.5 (b) 1.03 (c) 3.05 (d) 10.3
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