Which of the following is/are true according to the Solow model (assume g=0 and E is normalized to 1)? I. The Golden Rule of savings gives the highest steady state level of real GDP per capita among all steady states achieved by other savings rates. II. The Golden Rule of savings gives the same steady state growth rate of real GDP per capita as those achieved by other savings rates. Select one: O A Only l is true. O B. Only Il is true. OC. Both of the above are true. O D. None of the above is true.

Which of the following is/are true according to the Solow model (assume g=0 and E is normalized to 1)? I. The Golden Rule of savings gives the highest steady state level of real GDP per capita among all steady states achieved by other savings rates. II. The Golden Rule of savings gives the same steady state growth rate of real GDP per capita as those achieved by other savings rates. Select one: O A Only l is true. O B. Only Il is true. OC. Both of the above are true. O D. None of the above is true.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. It is 1960. China's economy is in its steady state. It is predicted that the Chinese population will expand multi-fold over the next few decades. As an expert in economic growth, you have been called in to provide predictions about the economic effect of such population growth. a. Using the Solow diagram below, illustrate the effect on an increase in population growth on the post-1950 Chinese economy. у, і, б ہے k* Output Investment k Dep + Pop growth b. Explain (briefly) why this policy made sense to the government in 1960.
4.
I have to change the savings rate, but trying to figure out how to start. Let’s work out 5 periods of a Solow model with labor augmenting productivity (Z) growth. In your toy economy, the savings rate is 10%, and the depreciation rate is 50% (the high depreciation rate will get us to steady-state faster--think of each period as a decade). The population is fixed (treat it as one worker, N=1 forever). You always start off with 1 unit of capital, and TFP = Z = 1 during the first period. Since TFP and population never change, output each period is created this way: Yt = Kt(1/3)Zt(2/3) Consider two worlds: One where labor augmenting productivity (Z) grows 20% per period, and one where labor augmenting productivity (Z) grows 10% per period Answer the following questions for each of the two worlds What is capital each year, in years 1-5? What is GDP each year, in years 1-5? What is the marginal product of capital each year (MPK) in years 1-5? What is the wage in each period? In a steady…
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Consider the Solow growth model with no population growth and no tech- nology growth, i.e., n = x = 0. Output is created by a Cobb-Douglas pro- duction function combining Labor, Lt, and capital, Kt, such that output Yt is given by Y₁ = A+ KL-a = = 2. Recall that, without population growth, Lt = Lo and assume that Lo Furthermore, recall that, without technology growth, At Ao and assume that A0 = 1. Assume that the savings rate is s = 0.4, the depreciation rate is = 0.15, and that the capital share is a = 0.3. A lower case letter denotes a variable in per capita. For example, kt = K₁/Lt. In the following questions, choose the closest number. What is the value of kss? (a) 40.6 (b) 4.1 c) 2.8 (d) 28
Consider the Solow growth model with no population growth and no tech- nology growth, i.e., n = x = 0. Output is created by a Cobb-Douglas pro- duction function combining Labor, Lt, and capital, Kt, such that output Yt is given by Y₁ = A+ KL₁-a = = Ao and Recall that, without population growth, Lt Lo and assume that Lo = 10. Furthermore, recall that, without technology growth, At assume that A0 = 2. Assume that the savings rate is s = 0.2, the depre- ciation rate is 8 = 0.1, and that the capital share is a = 0.3. A lower case letter denotes a variable in per capita. For example, kt= Kt/Lt. In the following questions, choose the closest number. What is the value of kss? (a) 72 (b) 27 (c) 7.2 (d) 2.7 What is the value of Yss for the Economy described in Question 7 (a) 36 (b) 3.6 (c) 2.7 (d) 27 Suppose that the economy described in Question 7 economy starts with Ко = 10. Choose the correct one for the change in capital over time. (a) fall (b) grow (c) Once dropped, it grows (d) unchange…
which statement \s are true. use graphs to exlain a. In the Solow growth model, the saving rate is a crucial determinant of the economy's long-run growth rate of output per worker. b. In the endogenous growth model , the representative firm sets the wage so that the demand and supply of efficiency units of labour are equal. c. In the endogenous growth model , there is no steady state of the economy as human capital will always continue to grow forever. d. The assumption of Constant Returns to Scale technology implies that the marginal product of factor imput is always decreasing.
In the steady state in the Solow model, which is NOT one of the uses of new capital? a. To replace depreciating capital b. To replace capital exported to other countries c. To provide capital for wore out capital and new workers d. To provide capital for new workers