Consider the Solow model with no technological progress. Assume that depreciation equals 0.20, population growth is 0.10, and that the capital-output ratio K/Y equals 0.7. Finally. assume that the savings rate is 30% (i.e. s-0.3). Then, the economy's steady state capital per worker is exactly at the Golden Rule level 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 below the Golden Rule level the economy's steady state capital per worker is above the Golden Rule level

Consider the Solow model with no technological progress. Assume that depreciation equals 0.20, population growth is 0.10, and that the capital-output ratio K/Y equals 0.7. Finally. assume that the savings rate is 30% (i.e. s-0.3). Then, the economy's steady state capital per worker is exactly at the Golden Rule level 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 below the Golden Rule level the economy's steady state capital per worker is above 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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Consider a Solow model with a constant returns to scale Cobb - Douglas production function without technological progress. Use standard notation as in the Lecture. a. Construct a Solow graph in (Y/N) - (K/N ) space with capital per worker and output per worker in equilibrium such that the steady state capital stock per worker is in fact the consumption maximising one. Label all curves and equilibrium points.
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[The following scenario applies to the next two questions.] Countries ABC and XYZ follow the simple Solow growth model, with no changes in the technology level. The savings rate is 31% greater in country ABC than in country XYZ. The depreciation rate is 5.38% and the population growth rate is 2.28% in both countries. In 20XX, capital per worker is 884 and real GDP per worker is 248 in both countries. The growth rate of capital per worker in country XYZ is 1.69% per annum. Question 1.1: Savings rate What is the savings rate in country XYZ? A. 15.41% B. 15.93% C. 16.46% D. 16.98% E. 17.51% Question 1.2: Growth rate of capital per worker What is the growth rate of capital per worker in country ABC? A. 2.92% B. 3.01% C. 3.10% D. 3.18% E. 3.27%
1) The depreciation rate of capital in the US is 8 = 0.043 and the population growth rate is g₁ = 0.007. Moreover, Y/K is around 0.35 on average over the last 60 years in the US (see the graph below). If the saving rate is s = 0.2 in the US, then find the long-run growth rate of average income in the US according to the Solow's model. (Note: To cross-check Compare your theoretical result with the actual growth rate of average income in the US which is 2%.) 0,43 0,41 0,39 0,37 0,35 0,33 0,31 0,29 0,27 0,25 1950 1953 1956 1959 1962 1965 Y/K in the US 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
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a) Consider two countries that have the same parameters and exogenous variables (i.e. they have the same values for s¯, d¯, L¯ etc). Country A starts with a level of capital above the steady state. Country B starts below the steady state. First, plot the Solow diagram, explain why country B will grow but country A will shrink. b) Solve for steady state level of capital per person, k∗.
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
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.)
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Consider the Solow growth model in which population evolves according to: N′ = (1 + n)N where N is the population (labor force) in the current period, N′ is the population (labor force) in the future period, and n is the population growth rate. There are public health expenditures that takes the form of government spending, G = gN, where G is the current period government spending on health care, g is the per-capita health spending in the current period. The production technology is given by Y = zKαN1−α where Y is the output of the consumption good, z is the total factor productivity, K is the current period capital stock, aN is the labour input, and 0 < α < 1 is a parameter. Consumers save a constant fraction, s, of their disposable income, where 0 < s < 1. Suppose that the economic is hit by a pandemic (e.g. Covid-19) which causes a temporary decrease in total factor productivity, z, as certain sectors in the economy (e.g. entertainment, travel etc.) cannot deliver…
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