7.Assume an economy without population growth or technological progress. Their production function is given by ? = 35?0.5. Their currency capital stock is 100, and the depreciation rate is 17.5%. Give a savings rate such that:Income per worker will grow over the current periodIncome per worker stay the same over the current periodIncome per worker will fall over the current period(Hint: First, find how the capital stock will change with the savings rate you choose, then how will this change in capital stock affect income per worker?)

The relationship between capital, savings and population is explained by the Solow growth model

Answered: Assume an economy without population…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter20: Economic Growth

Section: Chapter Questions

Problem 9SCQ: Would the following events usually lead to capital deepening? Why or why not? A weak economy in...

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Assume an economy without population growth or technological progress. Their production function is given by ? = 35?0.5. Their currency capital stock is 100, and the depreciation rate is 17.5%. Give a savings rate such that:

Income per worker will grow over the current period
Income per worker stay the same over the current period
Income per worker will fall over the current period
(Hint: First, find how the capital stock will change with the savings rate you choose, then how will this change in capital stock affect income per worker?)

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