A closed economy (NX = 0) without government(G = T = 0) has a production function13Y = K L. Capital depreciates at a rate of 3percent per year. Workers spend 76 percent oftheir income each year. Investment adds up tothe capital stock which is available forproduction next year. Assume that capital perworker is 5.0625 at the beginning of 2017 andthe number of workers stay the same each year.Find the steady-state capital per worker, outputper worker, consumption per worker,investment per worker, and depreciation perworker.

The Solow model framework helps in understanding the impact of technological progress and capital…

Answered: Find the steady-state capital per…

Find the steady-state capital per worker, output per worker, consumption per worker, per worker, and depreciation per investment worker.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

A country that has the production function below, which depends on capital and labor. Describe per-capita production" y" as a function of the per- capita capital stock "k". Show the level of capital on the steady state (k*). Show that the steady state output per- capita (y*) Y = 100K ^ (1)/(3) L^(2)/(3)
In a Solow economy with technological progress, the production function is given by: Y = KO.5(LE)0.5. Furthermore, the saving rate of this economy is 0.2. The population growth rate is 0.03. The depreciation rate is 0.01. The technological progress is given by g which is equal to 0.01. Define y = Y/LE and k = K/LE. a) Find out the steady state values of k (i.e.: k*) and y (i.e.: y"). 2. Ay Ak AY ΔΚ b) Find out the values of and in the steady state. K y'k'Y
Consider the basic Solow model with production function Y = K0.25 N0.75, saving rate of 20% and depreciation rate of 10%. Which of the following is true? The saving rate is: less than the golden rule' saving rate, hence the economy is saving too much less than the golden rule' saving rate, hence the economy is saving too little greater than the `golden rule' saving rate, hence the economy is saving too much greater than the `golden rule' saving rate, hence the economy is saving too little
Differentiate between steady state stock of capital and golden rule level of capital
3. Y₁ = 3k+0.5 St = 0.3Yt d = 0.1 n = 0.05 What are the steady-state values of the capital-labor ratio k, output per worker y, and consumption per worker?
Consider an economy that exhibits both population growth (L grows at rate n) and technological progress (A grows at rate a) described by the production function, Y = F(K,AL) = Kª(AL)¹-α| Here K is capital and Y is output. (a) Show that this production function exhibits constant returns to scale. What is the per-effective-worker production function? (c) Find expressions for the steady-state capital-output ratio, capital stock per effective worker, and output per effective worker, as a function of the saving rate (s), the depreciation rate (8), the population growth rate (n), the rate of technological progress (a), and the coefficient a. (You may assume the condition that capital per effective worker evolves according to Ak = sf (k) − (a +n+8)k.) (d) Show that at the Golden Rule steady state the saving rate for this economy is equal to the parameter a.
In the steady state, _____ consumption per worker is maximized. investment per worker exceeds depreciation per worker. the growth rate of output per worker equals zero. capital per worker grows.
if real GDP grows at an annual rate of 3.4% and the population grows at an annual rate of 1.6% then at approximately what rate is the real GDP per capital growing?
an economy is described by the Solow-Swan model with the following variables, E(t)=1 The saving rate is 0.41 per year. Labor's share of income is 0.44. The growth rate of labor efficiency is 0.03 per year. The growth rate of the labor force is 0.02 per year Depreciation is 0.09 per year. calculate the steady-state value of the capital-to-labor ratio, K/L Enter your answer to two places after the decimal.
9. Suppose there is no population or technological growth. Define k as the capital-to-labor ratio. If the per worker production function is given by y = ¹/2, the saving ratio is 0.3, and the depreciation rate is 0.1, then the steady state capital per worker ratio is (a) 1 (b) 2 (c) 4 (d) 6 9
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∗.
Don’t need explanation