Consider the Solow model with no technological progress. Aasume that depreciation equals 020, population growth is 0 10, and that the capital-output ratio K/Y equals 0.7. Finally, assume that the savings rate is 30 (ie. 0.3). Then, it is impossible to know whether the economy is at the Golden Rule level without more information the economy's steady state capital per worker is exactly at the Golden Rule level the economy's steady state capital per worker is above the Golden Rule level the economy's steady state capital per worker is below the Golden Rule level

Consider the Solow model with no technological progress. Aasume that depreciation equals 020, population growth is 0 10, and that the capital-output ratio K/Y equals 0.7. Finally, assume that the savings rate is 30 (ie. 0.3). Then, it is impossible to know whether the economy is at the Golden Rule level without more information the economy's steady state capital per worker is exactly at the Golden Rule level the economy's steady state capital per worker is above the Golden Rule level the economy's steady state capital per worker is below the Golden Rule level

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Let 0 be the saving rate, n the population growth rate and d the depreciation rate. Which of the following conditions is consistent with steady state in the Solow-Swan model? Y = 0K K = (n + d)Y O OY/L = (n+ d)K/L о өК — (п +d)Y
= 2. Consider a Solow growth model in which the production function is Yt AK²N₁¹/2, where A = 1. Moreover, assume that the depreciation rate is d = 0.02, the rate of population growth is n = 0.02, and the saving rate is s = = 0.2. a. Compute the value of the capital stock per worker in steady state. b. Draw a graph that represents the steady-state equilibrium of the model. c. Suppose that the capital-labor ration in year t is 90. What will the level of the capital- labor ratio be in year t+1? Will it increase or decrease in future periods? Explain. d. Compute the rate of change of the capital labor ratio between time t and t + 1. How does it compare to the rate of growth of the capital-labor ratio in steady state?
In the Solow model, suppose the per worker production function is y = 6 kº.5. Suppose s = 0.08, n = 0.04, and d = 0.08. Calculate the steady-state equilibrium capital-labor ratio. k= (Round to two decimal places.)
Part F and G
In the steady-state equilibrium with fixed technology, if the population and labor force are both growing at the rate of two percent per year, the Solow model predicts that: the capital stock will be constant each year. aggregate output will grow at the rate of two percent per year. output per worker will grow at the rate of two percent per year. aggregate output will grow at the rate of one percent per year.
Suppose that the economy of Santa Cruz County follows the equations of the Solow model. It has an investment rate of 0.6 and a depreciation rate of 0.2, and an aggregate production function Y=4K(1/4) In the year 2019 the economy is in steady state. But in 2020 the CZU wildfire destroys 50% of the capital stock (so K2020= 0.5 K2019). Assuming the economy returns to its usual growth dynamics after that, what would the growth rate of GDP from 2020 to 2021? Write your answer in percentage points and round to 1 decimal place (e.g. 4.2 would mean 4.2% growth from 2020 to 2021).
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Consider our graph of the basic Solow growth model. On the graph above: y represents real output (or income) per worker; y=F(k) is the production function; k is the capital stock per worker; s is the savings rate; δ is the rate of depreciation of capital; ‘i’ represents business investment (purchases of capital) per worker); ‘LF’ stands for Loanable Funds. (For purposed of intuition, think of capital as ‘machines.’) If we started out with a capital (per worker) stock lower than the steady-state stock ( , above), we would expect to see which of the following happen over time? Group of answer choices A) Positive growth rates while the capital stock increases. B) Negative growth rates while the capital stock increases. C) Negative growth rates while the capital stock decreases. D) Positive growth rates while the capital stock stays less than the steady-state level. E) Positive growth rates while the capital stock decreases.
Consider a Solow-Swan model with saving rate s - 0.4, labour force growth g, - 0.05. constant productivity A = 1, and depreciation = 0.05. If output per worker is y = Y/L = 200 and capital per worker is k = K/L = 800, which of the following is true? O Efective depreciation per worker is 60, saving per worker is 80 and k will decrease towards the steady state Effective depreciation per worker is 80, saving per worker is 80 and k is at the steady state O Efective depreciation per worker is 60, saving per worker is 80 and k will increase towards the steady state O Effective depreciation per worker is 80, saving per worker is 60 and k will decrease towards the steady state