Need help with question 7 and 8 please Q1. State the definition of the Golden Rule kGRQ2. The goods market clearing condition is given byG; + K+1 - (1– 8)K; = Y;(1)whereC; = L¿cit + Lt-1C2t-1-Explain in words what equation (1) means.Q3. From (1), deriveCt + kt+1(1 +n) – (1 – 8)k = Yt.(2)(The small letter stands for per capita terms.)Q4. From (2), derive the steady-state level of per-capita consumption c as a function of k. (Hint:the steady-state level of per-capita income is given by y = Ak".)Q5. Derive the two values of k that sets the steady-state level of per-capita consumption c tozero.Q6. Verify that for k > 0,d2c<0.dk2(Hint: We assume that a E (0,1)).Q7. Derive the Golden Rule k GR08. Draw the steady-state level of per-capita consumption c in (k, c)-space (i.e., k is put on theX-axis, while c is put on the y-axis).

Answered: Q1. State the definition of the Golden…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Need help with question 7 and 8 please

Q1. State the definition of the Golden Rule kGR
Q2. The goods market clearing condition is given by
G; + K+1 - (1– 8)K; = Y;
(1)
where
C; = L¿cit + Lt-1C2t-1-
Explain in words what equation (1) means.
Q3. From (1), derive
Ct + kt+1(1 +n) – (1 – 8)k = Yt.
(2)
(The small letter stands for per capita terms.)
Q4. From (2), derive the steady-state level of per-capita consumption c as a function of k. (Hint:
the steady-state level of per-capita income is given by y = Ak".)
Q5. Derive the two values of k that sets the steady-state level of per-capita consumption c to
zero.
Q6. Verify that for k > 0,
d2c
<0.
dk2
(Hint: We assume that a E (0,1)).
Q7. Derive the Golden Rule k GR
08. Draw the steady-state level of per-capita consumption c in (k, c)-space (i.e., k is put on the
X-axis, while c is put on the y-axis).

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The "Golden Rule" of government spending is a financial strategy expressing that an administration ought to just increment getting to put resources into projects that will take care of from here on out. Under the Rule, existing commitments and uses are to be supported through tax assessment, and not giving new sovereign obligation.

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