Is the following statement true, false, or uncertain? According to the Solow growth model, an increase in the saving rate should lead to a decline in consumption per person in the long run.
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A: We are going to discuss Long run growth solow model to answer this question.
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A: Referenceshttps://www.researchgate.net/publication/264840369_REMARKS_ON_VARIABLE_CAPITAL_UTILIZATION
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- Consider the Solow growth model with labor growth and no technology growth, i.e., n = 0, x = 0. Output is created by a Cobb-Douglas produc- n0,x tion function combining Labor, Lt, and capital, Kt, such that output, Y+is given by Y₁ = A+ KL Yt 1-a For a given time t, Given a level of Capital, and Investment, It, and a depreciation rate of capital, 8, the level of capital at time t+1 is given by the following law of motion of capital K++1 = Kt - 8Kt + It The labor growth rate in this economy is n = 2%, depreciation is 8 = 4%, the savings rate is s = 25%, and a = 0.3. Initial levels of capital, labor and technology are Ko = 10, Lo = 5, Ao = 1 respectively. The economy is assumed to be closed with no government spending. What is the value for capital per worker at time t = 1? (a) 2.22 (b) 2.57 (c)1.78 (d) 1.82Which of the following most likely causes a shift of the Solow growth curve to the right? A) an increase in the money supply B) a decrease in tax revenues C) an increase in crop production due to more rainfall D) an increase in oil prices due to a fire in a major oil refinery E) None of the above.Recall the Production function in the Solow Growth model with exogenous technological change is Y = AK [(1 + YA) Ne]¹-8 The following questions require you to download the excel spreadsheet posted on the course web page called Growth_Accounting.xlsx. The spreadsheet contains data for four variables on the US economy from 1960-2007: Real GDP, Capital Stock, total work hours, and working age population. Real GDP, Capital Stock, and total hours are in Billions. Working age population is millions. (Note: you will only use Working Age population in the first question below.) 1960 1961 1962 1963 1964 ARG 1965 * 1966 10x 1967 ** 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 Lore 1979 1980 1981 1982 1983 1964 1005 1985 1986 1997 1987 1988 1989 1990 1991 1992 1002 1993 1994 1994 1995 1996 1997 1998 1556 1999 20 2000 www 2001 MAAA 2003 2004 2005 2006 2007 1. 2. Plot the natural logarithm of GDP per working age population over the 1960-2007 period. Use the data on GDP, work hours, and…
- 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.Long run economic growth a) An economy is in its steady-state. According to the Solow model, what will happen to output per worker if the saving rate were to increase? Draw a diagram to illustrate. b) According to the Solow model, an increase in the saving rate is not always desirable. Why not? c) In the world economy, we see a great disparity of income per person. Yet the Solow model predicts conditional convergence – that poor countries will grow faster than rich countries and eventually converge to the same level of income per person as the rich countries. According to the Solow model, what conditions must be met for convergence to occur?In the steady-state equilibrium with fixed technology, if the population and labor force are both growing at the rate of two percent per year, the Solow model predicts that: the capital stock will be constant each year. aggregate output will grow at the rate of two percent per year. output per worker will grow at the rate of two percent per year. aggregate output will grow at the rate of one percent per year.
- when a country adds ideas what is it doing to its productivity and GDP? Which variable in the Solow Model equation is it changing?Consider the Solow growth model in which population evolves according to: N′ = (1 + n)N where N is the population (labor force) in the current period, N′ is the population (labor force) in the future period, and n is the population growth rate. There are public health expenditures that takes the form of government spending, G = gN, where G is the current period government spending on health care, g is the per-capita health spending in the current period. The production technology is given by Y = zKαN1−α where Y is the output of the consumption good, z is the total factor productivity, K is the current period capital stock, aN is the labour input, and 0 < α < 1 is a parameter. Consumers save a constant fraction, s, of their disposable income, where 0 < s < 1. Suppose that the economic is hit by a pandemic (e.g. Covid-19) which causes a temporary decrease in total factor productivity, z, as certain sectors in the economy (e.g. entertainment, travel etc.) cannot deliver…The government of "Arcadia" is considering various proposals to increase the country's GDP growth rates. Using the predictions of the Solow growth model, please discuss the merits of each of the proposed ideas for generating growth in income. For each proposal does your answer change in the short and long run? That is, would you always give the same advice? a. Information campaign to encourage people to save in an effort to increase national savings rate. o. Investment in building new roads connecting villages to cities (in this case existing road infrastructure is limited in the country)