Assume that the Solow model provides an accurate representation of the two Germanies around the late 80s and early 90s. Although in 1990 both countries re- unified, for this problem we will treat them as two separate economies, and we will model the effects of the reunification as a one-time flow of resources (capital and/or labor) across the common border. Aside from being in steady state initially, assume that before the re-unification both economies had the same saving rate, the same rates of population growth and depreciation, and that capital was equally important for production in both countries, with a common value of a = 1/2. Question: Calculate the ratio of capital per capita between the two countries. Explain your deriva- tions carefully.

Assume that the Solow model provides an accurate representation of the two Germanies around the late 80s and early 90s. Although in 1990 both countries re- unified, for this problem we will treat them as two separate economies, and we will model the effects of the reunification as a one-time flow of resources (capital and/or labor) across the common border. Aside from being in steady state initially, assume that before the re-unification both economies had the same saving rate, the same rates of population growth and depreciation, and that capital was equally important for production in both countries, with a common value of a = 1/2. Question: Calculate the ratio of capital per capita between the two countries. Explain your deriva- tions carefully.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Good Evening My name is Helen here's the problem A country is described by the solow model, with production function of y=k1/2, Suppose that k is equal to 400. The fraction of output invested is 50%. the depreciation is 5%. Is the country at its steady-state level of output per worker, above the steady state, or below the steady state? Show how you reached your conclusion.
how to do all parts?
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