Consider a Solow economy with a production function F (K, L) = Kª L¹-ª, where a = 0.5. The labor force is L = 1.The supply of capital at time zero is Ko = 68. The saving rate is s = 0.5. The depreciation rate is d = 0.6. At time t = 1, the stock of capital in the economy will be K₁ Round your answers to 2 decimal places (for example, 3.454 should be rounded down to 3.45, and 3.455 should be rounded up to 3.46). 62.84

Consider a Solow economy with a production function F (K, L) = Kª L¹-ª, where a = 0.5. The labor force is L = 1.The supply of capital at time zero is Ko = 68. The saving rate is s = 0.5. The depreciation rate is d = 0.6. At time t = 1, the stock of capital in the economy will be K₁ Round your answers to 2 decimal places (for example, 3.454 should be rounded down to 3.45, and 3.455 should be rounded up to 3.46). 62.84

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Production And Growth

Section17.1: Economic Growth Around The World

Problem 1QQ

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Problem 2 In class, we argued that if people could accumulate human as well as physical capital, the production function would look like the "AK" production function. (a) If the production function is AK and the savings rate is constant at rate "s", and the rates of depreciation and population growth are 8 and n respectively, what would the growth rate of the economy be? (b) What would be the macroeconomic consequences of increasing the savings rate in this economy? Explain using the model and intuitively. (c) What would be the consequences of an increase in fertility in this economy? Are these consequences good or bad? Is this answer unambiguous? (d) How are human and physical capital different from one another in the way they evolve from period to period? (e) Does human capital have an upper limit? If it does, what is the resulting production function when this is reached and the growth rate of the economy? If it doesn't have a limit, what is the resulting growth rate of output as it…
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