Consider the standard Augmented Solow model. a) Write the production function in intensive form and derive the fundamental equation of this Solowian economy. b) Obtain the steady state values k* and ŷ*. c) Carry out the stability analysis of steady state points.

Consider the standard Augmented Solow model. a) Write the production function in intensive form and derive the fundamental equation of this Solowian economy. b) Obtain the steady state values k* and ŷ*. c) Carry out the stability analysis of steady state points.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

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Chapter1: Making Economics Decisions

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Question

Consider the standard Augmented Solow model.
a) Write the production function in intensive form and derive the fundamental equation
of this Solowian economy.
b) Obtain the steady state values k * and ŷ *.
c) Carry out the stability analysis of steady state points.
d) Show the long run equilibrium (steady state) of Solow model on the graph.
e) Derive the steady state growth rate of Y and Y/L in this Solowian economy and
interpret.

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Step 1: Define a production function

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Step 2: Write the production function in intensive form and the fundamental equation of the Solow model

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Step 3: Obtain the steady state values

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Step 4: Carry out the stability analysis

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