i need Question 6 solution 6. Compute the evolution of economic variables over time (capital, output, consumption,investment, depreciation, all in per-capita terms), for 100 periods, assuming that theinitial level of capital is ki = 1 in the first period and that e = 1 for every t.Create a graph that has time in the x-axis and the evolution of the variables output,consumption, investment, depreciation (all in per-capita terms) in the y-axis. Dovariables grow or decline over time? Solow ModelConsider a Solow growth model like the one discussed in class, but incorporating thepossibility of less than full employment. Let t denote a period. The production function isY; = zK; [e,L]*¬,so that given the current TFP z4, the capital input K, and the labor input N = eL, firmsproduce output Y; in period t. Here e € [0, 1] denotes the proportion of the labor force Lthat is employed at each point in time. If e = 1 the economy is at full employment, withe = 0, on the other hand, everyone is unemployed. Total resources satisfyY; = C; + I,where C; denotes aggregate consumption, I aggregate investment, and Y; is GDP. Assumethat people invest a constant proportion s of their income, so that aggregate investmentsatisfiesIt = sY;and capital evolves according toK+1 = K,(1 – 8) + I,%3Dwhere ổ denotes depreciation. This function tells us how capital next period is related tocurrent capital, investment, and depreciation. In the book, you have seen the expressionwritten asAK = I – 8K,note that the two are equivalent.

The Solow model is an essential model in economics that explains long-term economic growth based…

6. Compute the evolution of economic variables over time (capital, output, consumption, investment, depreciation, all in per-capita terms), for 100 periods, assuming that the initial level of capital is k₁ = 1 in the first period and that e = 1 for every t. Create a graph that has time in the x-axis and the evolution of the variables output, consumption, investment, depreciation (all in per-capita terms) in the y-axis. Do variables grow or decline over time?

6. Compute the evolution of economic variables over time (capital, output, consumption, investment, depreciation, all in per-capita terms), for 100 periods, assuming that the initial level of capital is k₁ = 1 in the first period and that e = 1 for every t. Create a graph that has time in the x-axis and the evolution of the variables output, consumption, investment, depreciation (all in per-capita terms) in the y-axis. Do variables grow or decline over time?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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