Consider the Solow growth model with labor growth and no technology growth, i.e., n ‡ 0,x = 0. Output is created by a Cobb-Douglas produc- tion function combining Labor, Lt, and capital, Kt, such that output, Yis given by α Y₁ = A₁KL-a For a given time t, Given a level of Capital, and Investment, It, and a depreciation rate of capital, 8, the level of capital at time t+1 is given by the following law of motion of capital Kt+1 = K − 8Kt + It t The labor growth rate in this economy is n = 2%, depreciation is 8 = 4%, the savings rate is s = 25%, and a = 0.3. and technology are Ko = 10, Lo = 5, Ao = Initial levels of capital, labor 1 respectively. The economy is assumed to be closed with no government spending. What is the value for capital per worker at time t = 1? (a) 2.22 (b) 2.57 (c)1.78 (d) 1.82
Consider the Solow growth model with labor growth and no technology growth, i.e., n ‡ 0,x = 0. Output is created by a Cobb-Douglas produc- tion function combining Labor, Lt, and capital, Kt, such that output, Yis given by α Y₁ = A₁KL-a For a given time t, Given a level of Capital, and Investment, It, and a depreciation rate of capital, 8, the level of capital at time t+1 is given by the following law of motion of capital Kt+1 = K − 8Kt + It t The labor growth rate in this economy is n = 2%, depreciation is 8 = 4%, the savings rate is s = 25%, and a = 0.3. and technology are Ko = 10, Lo = 5, Ao = Initial levels of capital, labor 1 respectively. The economy is assumed to be closed with no government spending. What is the value for capital per worker at time t = 1? (a) 2.22 (b) 2.57 (c)1.78 (d) 1.82
Linear Algebra: A Modern Introduction
4th Edition
ISBN:9781285463247
Author:David Poole
Publisher:David Poole
Chapter6: Vector Spaces
Section6.7: Applications
Problem 16EQ
Related questions
Question
Transcribed Image Text:Consider the Solow growth model with labor growth and no technology
growth, i.e., n ‡ 0,x = 0. Output is created by a Cobb-Douglas produc-
tion function combining Labor, Lt, and capital, Kt, such that output, Yis
given by
α
Y₁ = A₁KL-a
For a given time t, Given a level of Capital, and Investment, It, and a
depreciation rate of capital, 8, the level of capital at time t+1 is given by
the following law of motion of capital
Kt+1 = K − 8Kt + It
t
The labor growth rate in this economy is n = 2%, depreciation is 8 = 4%,
the savings rate is s = 25%, and a = 0.3.
and technology are Ko
=
10, Lo = 5, Ao
=
Initial levels of capital, labor
1 respectively. The economy
is assumed to be closed with no government spending. What is the value
for capital per worker at time t = 1?
(a) 2.22 (b) 2.57 (c)1.78 (d) 1.82
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Linear Algebra: A Modern Introduction
Algebra
ISBN:
9781285463247
Author:
David Poole
Publisher:
Cengage Learning
Algebra & Trigonometry with Analytic Geometry
Algebra
ISBN:
9781133382119
Author:
Swokowski
Publisher:
Cengage
Linear Algebra: A Modern Introduction
Algebra
ISBN:
9781285463247
Author:
David Poole
Publisher:
Cengage Learning
Algebra & Trigonometry with Analytic Geometry
Algebra
ISBN:
9781133382119
Author:
Swokowski
Publisher:
Cengage
Algebra and Trigonometry (MindTap Course List)
Algebra
ISBN:
9781305071742
Author:
James Stewart, Lothar Redlin, Saleem Watson
Publisher:
Cengage Learning