In the Solow Growth Model, a country's production function is defined by the following: Y = F (K/L) = kºs Where K is capital and I. labour; labour grows at a rate (n), and the economy faces depreciation at a rate (8) The initial Capital Stock per worker: k, = 9 units The savings rate: s = 0.20 and the rate of depreciation: a = 0.1 Using equations and identities from the Solow Growth Model, calculate the level of capital k, Output y, Consumption c, depreciation and change in capital from the equation of motion for periods 1, 2 and 3. Comment on the accumulation of capital and output over the three periods.

In the Solow Growth Model, a country's production function is defined by the following: Y = F (K/L) = kºs Where K is capital and I. labour; labour grows at a rate (n), and the economy faces depreciation at a rate (8) The initial Capital Stock per worker: k, = 9 units The savings rate: s = 0.20 and the rate of depreciation: a = 0.1 Using equations and identities from the Solow Growth Model, calculate the level of capital k, Output y, Consumption c, depreciation and change in capital from the equation of motion for periods 1, 2 and 3. Comment on the accumulation of capital and output over the three periods.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that a closed economy has a production function of the form Y = z.F (K,N) = z.KaN¹-a where Y=output, z is total factor productivity, K is capital, N is employment=population. 13. a) Use the Solow Model, assuming a constant saving rate s, constant population growth rate, n, and depreciation rate d, to show that in steady state capital per worker k=K/N is given by K-( ) k S.Z |1–α n+d b) Contrast the sho term and long-term impacts of a permanent rise in s and a permanent rise in z, on capital per worker, output per worker, consumption per worker and the return on capital (where relevant you may refer to your answer to part a) c) Explain how your answers to parts a) and b) illustrate the role of total factor productivity in i) long-run growth ii) sustained differences in income between countries.
not sure how to do part E
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question 5
Assume the per-worker production function is y = k1/2, depreciation is 4 percent of %3D capital, the labor force grows at 2 percent, and the savings rate is 30 percent. Then, the steady-state equilibrium is achieved when capital per worker is equal to: 2.5. 5. 6.25. 25.
only part b solution is needed
The Solow model is an important formal model of economic growth. Assume that the production function is Y = F(K,N) = zK° N¹-a, where 0 < a < 1. Production is constant returns to scale. We use lowercase to denote variables in per capita terms.
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Qutuion 6&7 only