Consider a countries Am-This question is about the Solow growth model Sbrosia and Burunda. Ambrosia's GDP per worker is 1.96 times that of Burunda. The ratioof investment to output is 0.35 in Ambrosia, and in Burunda it is 0.25. Labour supply isconstant over time in both countries. So is total factor productivity (TFP). Assume bothcountries are in their respective steady states.Suppose output in each country i = A, B is produced according toYt = A,KGLawhere Y; is output for country i at time t, A, is TFP for country i, Ką is capital stock incountry i at time t, and Li is labor in country i. Capital is accumulated according toAKit+1 = 5;Yit – dK#Assume that the depreciation rate and the capital share are same across two countries.(a) Derive an expression for the steady state value of output per worker (Y/L) in eachcountry i in terms of AA, 5A, d and a for country A, and in terms of AB, SB, d and afor country B. (b) Suppose a = 1/3. What must be the ratio of TFP in country A to TFP in countryB (i.e. AA/AB) in order to fit the facts noted at the beginning of the question.i jAssume that the depreciation rate and the capital share are same across twocouïtries.](c) Assume TFP is equal across the two countries. If Burunda increases its savings rateto 0.35, what will be the ratio of output ner worker (Y/L) in Ambrosia relative toBurunda in the new steady state? ( y [Assume that the depreciation rate andthe capital share are same across two countries.]1010(d) Using a Solow diagram, show the effect of an increase in savings rate in country B oncapital per worker. r[Hint: you do not necgr to plot variables for country A in your answer]

Given Information,There are two countries: Ambrosia & BurundaYa/La = 1.96* Yb/Lb…

Consider a countries Am- This question is about the Solow growth model f brosia and Burunda. Ambrosia's GDP per worker is 1.96 times that of Burunda. The ratio of investment to output is 0.35 in Ambrosia, and in Burunda it is 0.25. Labour supply is constant over time in both countries. So is total factor productivity (TFP). Assume both countries are in their respective steady states. Suppose output in each country i = A, B is produced according to Yit = A,KL-a where Y is output for country i at time t, A, is TFP for country i, Kit is capital stock in country i at time t, and L, is labor in country i. Capital is accumulated according to AKit+1=8iYit-dKit Assume that the depreciation rate and the capital share are same across two countries

Consider a countries Am- This question is about the Solow growth model f brosia and Burunda. Ambrosia's GDP per worker is 1.96 times that of Burunda. The ratio of investment to output is 0.35 in Ambrosia, and in Burunda it is 0.25. Labour supply is constant over time in both countries. So is total factor productivity (TFP). Assume both countries are in their respective steady states. Suppose output in each country i = A, B is produced according to Yit = A,KL-a where Y is output for country i at time t, A, is TFP for country i, Kit is capital stock in country i at time t, and L, is labor in country i. Capital is accumulated according to AKit+1=8iYit-dKit Assume that the depreciation rate and the capital share are same across two countries

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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