:This part considers a modified version of the Solow growth model. Suppose the production function is given by F(K,bN) = K°(bN)-a where b is the labour augmenting technology, which grows at a rate f, i.e., b+1 = (1+ f)b. For simplicity, assume that the total factor productivity z = 1, and the population is constant, i.e., N = N for all t. The rest of the model is the same as in the standard Solow model in the textbook. Especially, the aggregate capital stock evolves according to Kt41 = I + (1– d)K1. And assume that the economy is still closed, and there is no government. For any aggregate variable X, let the lower case letter z be the variable per effective unit of worker; that is x=.
:This part considers a modified version of the Solow growth model. Suppose the production function is given by F(K,bN) = K°(bN)-a where b is the labour augmenting technology, which grows at a rate f, i.e., b+1 = (1+ f)b. For simplicity, assume that the total factor productivity z = 1, and the population is constant, i.e., N = N for all t. The rest of the model is the same as in the standard Solow model in the textbook. Especially, the aggregate capital stock evolves according to Kt41 = I + (1– d)K1. And assume that the economy is still closed, and there is no government. For any aggregate variable X, let the lower case letter z be the variable per effective unit of worker; that is x=.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
a.Assume that α(0, 1). Draw a diagram that describes the evolution of kt, and show that there exists a unique steady state, k* > 0. Label properly. also Find the expressions for the steady state variables k*, y*, and c* in terms of the parameters of the model. ,
b.Now, assume that α = 1. Draw a diagram that describes the evolution of kt, and show that income per worker can grow indefinitely in this case. Label properly.
c.Discuss the key difference(s) between the scenario in a and b as much as you want.
![This part considers a modified version of the Solow growth model. Suppose
the production function is given by F(K,bN) = K°(bN)1-a where b is the labour augmenting
technology, which grows at a rate f, i.e., b+1 = (1+f)b. For simplicity, assume that the total
factor productivity z = 1, and the population is constant, i.e., N = N for all t. The rest of the
model is the same as in the standard Solow model in the textbook. Especially, the aggregate
capital stock evolves according to Kt+1 = 4 + (1– d)Kt. And assume that the economy is still
closed, and there is no government.
For any aggregate variable X, let the lower case letter z be the variable per effective unit
of worker; that is a =](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3b986d43-f8e9-4ae1-9954-bc36ba20b8b1%2F30402e1b-17fe-43da-8904-b7ac6c3c803d%2Fhsxyywm_processed.jpeg&w=3840&q=75)
Transcribed Image Text:This part considers a modified version of the Solow growth model. Suppose
the production function is given by F(K,bN) = K°(bN)1-a where b is the labour augmenting
technology, which grows at a rate f, i.e., b+1 = (1+f)b. For simplicity, assume that the total
factor productivity z = 1, and the population is constant, i.e., N = N for all t. The rest of the
model is the same as in the standard Solow model in the textbook. Especially, the aggregate
capital stock evolves according to Kt+1 = 4 + (1– d)Kt. And assume that the economy is still
closed, and there is no government.
For any aggregate variable X, let the lower case letter z be the variable per effective unit
of worker; that is a =
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