Richland and Poorland have identical production functions, depreciation rates, and labor productivity growth rates. Richland saves at its Golden Rule rate and has a lower population growth rate. Poorland saves at a rate lower than its Golden Rule savings rate (compared to Richland) and has a higher population growth rate (compared to Richland). Both countries are currently at steady states. A. Carefully draw two Solow-type graphs: one for Richland and one for Poorland demonstrating their steady state equilibria. B. Suppose a significant amount of labor migrates from Poorland to Richland. Demonstrate this on your graphs. C. What happens in the short run and in the long run? Show this on your graphs. D. Explain whether mass migration from the poor to the rich countries may solve the problem of poverty in the long run. It is important that you draw the graphs accurately and with correct labels.
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- Richland and Poorland have identical production functions, depreciation rates, and labor productivity growth rates. Richland saves at its Golden Rule rate and has a lower population growth rate. Poorland saves at a rate lower than its Golden Rule savings rate (compared to Richland) and has a higher population growth rate ( compared to Richland). Both countries are currently at steady states. A. Carefully draw two Solow-type graphs: one for Richland and one for Poorland demonstrating their steady state equilibria. B. Suppose a significant amount of labor migrates from Poorland to Richland. Demonstrate this on your graphs. C. What happens in the short run and in the long run? Show this on your graphs. D. Explain whether mass migration from the poor to the rich countries may solve the problem of poverty in the long run. It is important that you draw the graphs accurately and with correct labels. draw the graphsAn economy with a population growth rate of 1.5 percent and a rate of technological growth of 2.5 percent is in the steady state. If the capital- output ratio is 2, depreciation amounts to 10 percent of GDP, and capital income is 25 percent of GDP, then this economy would need to__________ the Golden Rule steady state. O. increase its saving rate to reach O. do nothing to its saving rate because this economy is already at O. decrease its saving rate to reach O. decrease the steady-state stock of capital per effective worker to reachAssume that a leader country has real GDP per capita of $80,000, whereas a follower country has real GDP per capita of $40,000. Next suppose that the growth of real GDP per capita falls to zero percent in the leader country and rises to 5 percent in the follower country. If these rates continue for long periods of time, how many years will it take for the follower country to catch up to the living standard of the leader country? Instructions: Enter your answer as a whole number. years
- The below figure shows the investment rates (or saving rates) for Albania, Botswana, and Turkey from 1970 to 2014. Everything else equal, using the Solow model, which country would you anticipate to have the highest growth rate during the last 10 years? 70% 60% 50% 40% Mamy 30% 20% 10% 0% Albania -Botswana 1970 1973 O Albania O Botswana -----Turkey 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Turkey O Based on the Solow model, they should all have the same growth rate.5. Suppose that the Country of Eldesarrollo has a gross savings rate of 25%, a depreciation rate of 3%, an incremental capital-output ratio of 2.75, a population growth rate of 1.5% per year, and a per capita income of $1500. a. Using the Harrod-Domar (or AK) growth model, calculate the implied rate of growth of total GNI in Eldesarrollo. b. What is the implied rate of growth of GNI per capita? c. How much would the rate of gross savings have to increase to raise the growth rate of total GNI to 9%? d. Suppose that one-quarter of all investment is completely wasted in Eldesarrollo. Returning to the original numbers, what is the resulting effective ICOR, and what is the corresponding new implied growth rate of total GNI?3. An economy described by the Augmented Solow growth model has the following production function with populationgrowth (1+n) and technological growth (1+z):y =p(k)(a) Solve for the steady-state values of capital per capita and output as a function of s, n, z, and δ.(b) A developed country has a saving rate of 28 percent and a population growth rate of 1 percent per year. A lessdeveloped country has a saving rate of 10 percent and a population growth rate of 4 percent per year. In bothcountries, g = 0.02 and d = 0.04. Find the steady-state value of y for each country.(c) What policies might the less developed country pursue to raise its level of income? Graphically demonstrate howyour advised policy would increase income per capita (y).
- Which one of the following statements is correct? a. Slower population growth rate than national income growth results to higher per capita income O b. Higher disposable income means more money available for consumption O c. All of these d. Higher labor productivity increases national income2. You are a manager at a large shampoo company and on the search for future markets. You identified two low income countries that look very dynamic: Country A has a GDP/capita growth rate of -1% and population growth rate of 9%. Country B has a GDP/capita growth rate of 7% and constant population. (a) Discuss which country you should focus on for your expansion. (b) Discuss if your answer would change if the products you are trying to sell are cars.Assume that a leader country has real GDP per capita of $40,000, whereas a follower country has real GDP per capita of $20,000. Next suppose that the growth of real GDP per capita falls to zero percent in the leader country and rises to 2 percent in the follower country. If these rates continue for long periods of time, how many years will it take for the follower country to catch up to the living standard of the leader country?
- Suppose you are given the data for Brazil and Portugal. In Brazil, the saving rate is 0.1 and the depreciation rate is 0.1, while in Portugal the saving rate is 0.2 and the depreciation rate is 0.1. Using the Solow model, you conclude that in the steady state: a. Brazil has a higher capital-output ratio than Portugal b. Portugal has a higher level of output than Brazil c. Portugal has a higher capital-output ratio than Brazil d. Portugal and Brazil have the same capital-output ratio e. Brazil has a higher level of output than PortugalConsider the growth model with labour augmenting technological progress. A decrease in the steady state capital per worker may be a result of O Increase in technological growth rate Decrease in savings rate O Increase in population growth rate All other options are correct,Consider the country of Solow, which is described by the Solow–Swan growth model with constanttotal factor productivity. Let the saving rate θ = 0.75. Per capita output (y) is equal to 100 and the percapita capital stock (k) is 1000. For Solow to be in steady state: a.the depreciation rate is 0.025 and the population growth rate is 0.05 b.the depreciation rate is 0.25 and the population growth rate is 0.5 c.the sum of the depreciation rate and the population growth rate must be less than 0.075 d.the depreciation rate and population growth rate must sum to 0.75