Please don't use answers from previous post. They are all wrong. | Problem 2. The Golden Rule ( Consider an economy that behaves according to the Solow model with constant population and no technological progress. The aggregate production function in this economy is given by F(K,L) = KªL¹-a The depreciation rate is 0.1, and the capital share (a) is equal to 0.5. The initial population is L = 1. a. Using a spreadsheet, calculate steady-state consumption, C., and steady-state capital, K., for different saving rates. For instance, you may vary the savings rate from 0 to 1, in intervals of 0.05. Plot C, and K, as a function of s b. What is the savings rate and the associated K, that maximizes C, in your plot? Provide intuition for this result.

Please don't use answers from previous post. They are all wrong. | Problem 2. The Golden Rule ( Consider an economy that behaves according to the Solow model with constant population and no technological progress. The aggregate production function in this economy is given by F(K,L) = KªL¹-a The depreciation rate is 0.1, and the capital share (a) is equal to 0.5. The initial population is L = 1. a. Using a spreadsheet, calculate steady-state consumption, C., and steady-state capital, K., for different saving rates. For instance, you may vary the savings rate from 0 to 1, in intervals of 0.05. Plot C, and K, as a function of s b. What is the savings rate and the associated K, that maximizes C, in your plot? Provide intuition for this result.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a Solow model with a constant returns to scale Cobb - Douglas production function without technological progress. Use standard notation as in the Lecture. a. Construct a Solow graph in (Y/N) - (K/N ) space with capital per worker and output per worker in equilibrium such that the steady state capital stock per worker is in fact the consumption maximising one. Label all curves and equilibrium points.
Consider a standard Solow growth model. Denote capital stock as K, population as N, capital depreciation rate as d, saving rate as s, output as Y. Output is produced by a representative firm according to the production function Y=zF(K, N), where z is current total factor productivity. The law motion for capital is K' = (1 - d)K + I, where K' is the future capital stock. Population grows at a constant rate n, that is N' = (1 + n)N, and household supply labor inelastically, so population equals labor force. (a) In a graph, show the steady state level of capital per worker. Use lower case letters to denote per-capita terms and use * to denote steady state.(b) Suppose a country is initially at a steady state, then a war destroyed some of its capital stock. Determine the long run effects on the quantity of capital per worker and on output per worker in the steady state. Show by a graph. (C)Define golden rule saving rate. What does it maximize? Determine the effects of a decrease in the…
1. Consider an economy that operates under competitive markets and meets the assumptions of the Solow model. The production function is given as follows: Y(t) = K (t) 0.3 (A(t)L(t)) ⁰.7 Assume a saving rate of 15%, labor force growth rate of 2% and depreciation rate of 5% and effectiveness of labor growth rate of 8%. a. Show that the production function exhibit constant return to scale? b. Derive the production function for output per capita. c. Derive the production function for output per effective unit of labor. d. Find equilibrium real wage as a function of capital per unit of effective labor and effectiveness of labor. e. Find equilibrium real rental price of capital as a function of capital per unit of effective labor and effectiveness of labor. f. Solve for steady state level of capital per unit of effective labor. g. Find steady state level of output per unit of effective labor. h. Find growth rate of output and output per worker on the balanced growth path. i. Which one would…
please answer the following, I have attached an image of the question for better format. Thanks! 3. Suppose that the production function of a country is given by Y=KaL1-a, where 0<a<1, Y is output, L is labour, and K is capital, Derive the equation for steady state capital per worker, output per worker, and consumption per worker in terms of the saving rate (s) and depreciation rate (d).
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Consider the Swan-Solow model of economic growth. [Hint: Question (e) below goes beyond the subject matter discussed in the lecture and requires you to think independently.] c) Draw a typical Depreciation curve into the diagram. Briefly explain how you came up with the curve and what you need to know to exactly pin it down.
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Suppose that the economy of Santa Cruz County follows the equations of the Solow model. It has an investment rate of 0.6 and a depreciation rate of 0.2, and an aggregate production function Y=4K(1/4) In the year 2019 the economy is in steady state. But in 2020 the CZU wildfire destroys 50% of the capital stock (so K2020= 0.5 K2019). Assuming the economy returns to its usual growth dynamics after that, what would the growth rate of GDP from 2020 to 2021? Write your answer in percentage points and round to 1 decimal place (e.g. 4.2 would mean 4.2% growth from 2020 to 2021).
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