Find steady-state level of capital per effective labor: k* b. Draw a graph and show output function, actual investment and breakeven investment lines. c. Assume that in this economy, people start spending more and therefore marginal propensity to save decline permanently. What will happen to variables in the model (steady-state level capital per effective labor; output growth etc.).
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Parameters |
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Equations |
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s =0,20 |
marginal propensity to save |
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Y=WKr.L1-r
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Production Function |
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u=0,02 |
Population growth rate |
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K.=s.f(k)−aK
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Capital Accumulation
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b=0,04 |
Technological growth rate |
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L./L= ?
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Population Growth |
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a=0,05 |
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W./W=b
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Technological Progress
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S=s.f(k)
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Savings
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a. |
Find steady-state level of capital per effective labor: k*
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b. |
Draw a graph and show output function, actual investment and breakeven investment lines.
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c. |
Assume that in this economy, people start spending more and therefore marginal propensity to save decline permanently. What will happen to variables in the model (steady-state level capital per effective labor; output growth etc.).
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d. |
Instead of reduction in saving assume this time that we face lower fertility rate in the country. What will happen to variables in the model (steady-state level capital per effective labor; output growth etc.).
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