Question 5 Consider the fictional countries of Atlantis and Xanadu. Both countries share the same technology and have identical rates of depreciation. Both countries also have the same saving rate, s, and have reached their steady-state capital stock per worker Atlantis has a higher rate of population growth. Answer the following (a) With a carefully drawn diagram with output per worker, investment per worker, consumption per worker, and depreciation per worker, clearly indicate the steady- state capital per worker for both countries. Briefly explain why you have drawn capital at the level you have for both countries (b) Which country has the higher level of steady-state consumption per worker? Explain (c) Suppose that Xanadu's population growth rate suddenly increases to that of Atlantis at time to. If Xanadu maintains its saving rate at the initial level, how does consumption per worker immediately after the population growth rate increase compare to the level of consumption per worker in the previous steady state? How does consumption per worker change over time to reach the new steady state? Carefully justify your answer.

Question 5 Consider the fictional countries of Atlantis and Xanadu. Both countries share the same technology and have identical rates of depreciation. Both countries also have the same saving rate, s, and have reached their steady-state capital stock per worker Atlantis has a higher rate of population growth. Answer the following (a) With a carefully drawn diagram with output per worker, investment per worker, consumption per worker, and depreciation per worker, clearly indicate the steady- state capital per worker for both countries. Briefly explain why you have drawn capital at the level you have for both countries (b) Which country has the higher level of steady-state consumption per worker? Explain (c) Suppose that Xanadu's population growth rate suddenly increases to that of Atlantis at time to. If Xanadu maintains its saving rate at the initial level, how does consumption per worker immediately after the population growth rate increase compare to the level of consumption per worker in the previous steady state? How does consumption per worker change over time to reach the new steady state? Carefully justify your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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