Consider the Solow growth model with no population growth and no tech- nology growth, i.e., n = x = 0. Output is created by a Cobb-Douglas pro- duction function combining Labor, Lt, and capital, Kt, such that output Yt is given by Y₁ = A+ KL₁-a = = Ao and Recall that, without population growth, Lt Lo and assume that Lo = 10. Furthermore, recall that, without technology growth, At assume that A0 = 2. Assume that the savings rate is s = 0.2, the depre- ciation rate is 8 = 0.1, and that the capital share is a = 0.3. A lower case letter denotes a variable in per capita. For example, kt= Kt/Lt. In the following questions, choose the closest number. What is the value of kss? (a) 72 (b) 27 (c) 7.2 (d) 2.7 What is the value of Yss for the Economy described in Question 7 (a) 36 (b) 3.6 (c) 2.7 (d) 27 Suppose that the economy described in Question 7 economy starts with Ко = 10. Choose the correct one for the change in capital over time. (a) fall (b) grow (c) Once dropped, it grows (d) unchange Suppose that the economy described in Question 7 was at its steady state level of capital Kss when it is hit by a war, such as the one in Ukraine. Af- ter the end of the war the economy must start a new with Ko = 0.8 × Kss- Compute K₁ for one year after. (a) 53 (b) 9 (c) 101 (d) 59 Now consider growth, Suppose that x = 0.1 and that n = 0.02, i.e., A₁ = (1+0.1) At-1, and L₁ = (1+0.02) Lt-1. The other parameters should be the same as in Question 7. What is cap- ital per efficiency units in steady state? (a) 0.65 (b) 6.5 (c) 1.3 (d) 50
Consider the Solow growth model with no population growth and no tech- nology growth, i.e., n = x = 0. Output is created by a Cobb-Douglas pro- duction function combining Labor, Lt, and capital, Kt, such that output Yt is given by Y₁ = A+ KL₁-a = = Ao and Recall that, without population growth, Lt Lo and assume that Lo = 10. Furthermore, recall that, without technology growth, At assume that A0 = 2. Assume that the savings rate is s = 0.2, the depre- ciation rate is 8 = 0.1, and that the capital share is a = 0.3. A lower case letter denotes a variable in per capita. For example, kt= Kt/Lt. In the following questions, choose the closest number. What is the value of kss? (a) 72 (b) 27 (c) 7.2 (d) 2.7 What is the value of Yss for the Economy described in Question 7 (a) 36 (b) 3.6 (c) 2.7 (d) 27 Suppose that the economy described in Question 7 economy starts with Ко = 10. Choose the correct one for the change in capital over time. (a) fall (b) grow (c) Once dropped, it grows (d) unchange Suppose that the economy described in Question 7 was at its steady state level of capital Kss when it is hit by a war, such as the one in Ukraine. Af- ter the end of the war the economy must start a new with Ko = 0.8 × Kss- Compute K₁ for one year after. (a) 53 (b) 9 (c) 101 (d) 59 Now consider growth, Suppose that x = 0.1 and that n = 0.02, i.e., A₁ = (1+0.1) At-1, and L₁ = (1+0.02) Lt-1. The other parameters should be the same as in Question 7. What is cap- ital per efficiency units in steady state? (a) 0.65 (b) 6.5 (c) 1.3 (d) 50
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:Consider the Solow growth model with no population growth and no tech-
nology growth, i.e., n = x = 0. Output is created by a Cobb-Douglas pro-
duction function combining Labor, Lt, and capital, Kt, such that output
Yt is given by
Y₁ = A+ KL₁-a
=
=
Ao and
Recall that, without population growth, Lt Lo and assume that Lo =
10. Furthermore, recall that, without technology growth, At
assume that A0 = 2. Assume that the savings rate is s = 0.2, the depre-
ciation rate is 8 = 0.1, and that the capital share is a = 0.3. A lower case
letter denotes a variable in per capita. For example, kt=
Kt/Lt. In the
following questions, choose the closest number. What is the value of kss?
(a) 72 (b) 27 (c) 7.2 (d) 2.7
What is the value of Yss for the Economy described in Question 7
(a) 36 (b) 3.6 (c) 2.7 (d) 27
Suppose that the economy described in Question 7 economy starts with
Ко = 10. Choose the correct one for the change in capital over time.
(a) fall (b) grow (c) Once dropped, it grows (d) unchange
Suppose that the economy described in Question 7 was at its steady state
level of capital Kss when it is hit by a war, such as the one in Ukraine. Af-
ter the end of the war the economy must start a new with Ko = 0.8 × Kss-
Compute K₁ for one year after.
(a) 53 (b) 9 (c) 101 (d) 59
Now consider growth, Suppose that x = 0.1 and that n = 0.02, i.e.,
A₁ = (1+0.1) At-1, and L₁ = (1+0.02) Lt-1.
The other parameters should be the same as in Question 7. What is cap-
ital per efficiency units in steady state?
(a) 0.65 (b) 6.5 (c) 1.3 (d) 50
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