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for capital is given by: The law-of-motion Kt+1 SYt+ (1-8) Kt where 0 < d < 1 is the depreciation rate of capital, Kt, 0≤s < 1 is the savings rate in the economy. L is the size of the labor force which evolves according Lt+1/Lt= 1 + n. Finally output is given by Y₁ = AKL where 0 < a < 1. 1. Let k denote the long-run "steady state" value of K/L. =

for capital is given by: The law-of-motion Kt+1 SYt+ (1-8) Kt where 0 < d < 1 is the depreciation rate of capital, Kt, 0≤s < 1 is the savings rate in the economy. L is the size of the labor force which evolves according Lt+1/Lt= 1 + n. Finally output is given by Y₁ = AKL where 0 < a < 1. 1. Let k denote the long-run "steady state" value of K/L. =

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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This question is about the Solow-Swan growth model.

for capital is given by: The law-of-motion Kt+1 SYt + (1 - 6) Kt where 0 < d < 1 is the depreciation rate of capital, Kt, 0 < s <1 is the savings rate in the economy. It is the size of the labor force which evolves according Lt+1/Lt = 1 + n. Finally output is given by Y = AKaLa where 0 < a < 1. 1. Let k denote the long-run "steady state" value of K/L. Determine k* and the steady state value of Y/L, as a function of s, 8, A,n and a. What is the GDP growth rate, +1, in this steady state? Yt Suppose the economy is in steady state with n = n₁ > 0 at time t= 0. Then, abruptly, there is a slowdown in population growth (n = n₂ < n₁ for t > 0). What happens to k* and Y/L in steady state?
Transcribed Image Text:for capital is given by: The law-of-motion Kt+1 SYt + (1 - 6) Kt where 0 < d < 1 is the depreciation rate of capital, Kt, 0 < s <1 is the savings rate in the economy. It is the size of the labor force which evolves according Lt+1/Lt = 1 + n. Finally output is given by Y = AKaLa where 0 < a < 1. 1. Let k denote the long-run "steady state" value of K/L. Determine k* and the steady state value of Y/L, as a function of s, 8, A,n and a. What is the GDP growth rate, +1, in this steady state? Yt Suppose the economy is in steady state with n = n₁ > 0 at time t= 0. Then, abruptly, there is a slowdown in population growth (n = n₂ < n₁ for t > 0). What happens to k* and Y/L in steady state?
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