4) Solow Model Golden Rule problem: A country's production function is Y = K²L!2_ the labor force is fixed, and capital depreciates at the rate of 5 percent (8 = 0.05) each year. Calculate the steady-state values of capital per worker (k), output per worker (y), and consumption per worker (c) assuming the savings rate (o) is consistent with the Golden Rule steady state. k** = y** = c** =

4) Solow Model Golden Rule problem: A country's production function is Y = K²L!2_ the labor force is fixed, and capital depreciates at the rate of 5 percent (8 = 0.05) each year. Calculate the steady-state values of capital per worker (k), output per worker (y), and consumption per worker (c) assuming the savings rate (o) is consistent with the Golden Rule steady state. k = y = c** =

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-Swan model with saving rate s - 0.4, labour force growth g, - 0.05. constant productivity A = 1, and depreciation = 0.05. If output per worker is y = Y/L = 200 and capital per worker is k = K/L = 800, which of the following is true? O Efective depreciation per worker is 60, saving per worker is 80 and k will decrease towards the steady state Effective depreciation per worker is 80, saving per worker is 80 and k is at the steady state O Efective depreciation per worker is 60, saving per worker is 80 and k will increase towards the steady state O Effective depreciation per worker is 80, saving per worker is 60 and k will decrease towards the steady state
Consider a basic Solow-Swan model. Suppose the aggregate production function is Y - AKL and that A=1, the depreciation rate is = 0.06 and the saving rate is s = 0.12. In steady state, d which of the following is TRUE? O Output per worker is 2.00 and consumption per worker is 0.24 O Output per worker is 2.00 and consumption per worker is 1.76 O Output per worker is 1.68 and consumption per worker is 1.48 O Qutput per worker is 1.68 and consumption per worker is 1.12
Consider the Solow model with Cobb-Douglas production function with productivity parameter A, exponents on capital equal to 1/4, and exponent on labor equal to 3/4. Derive the MPL funcion as a function of K, L and constant A Note: xa is the same as x power a O (3/4) A(K/L) 0.25 O(1/4) A(L/KY0.76 O (1/4) A(KML)+0.75 O (3/4) A(UK) 0 25
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Let the production function be Q = K0.®L0.2 Solow's assumptions are K = sQ – 6K The symbols s represents a (constant) marginal propensity to save, n, a (constant) rate of growth of labor and 8 constant depreciation rate. (a) Derive the fundamental equation of Solow growth model for given production function. (b) Sketch graph of with k on the vertical axis and k on the horizontal take n = 0.01, s = 0.3, 8 = 0.1.
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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).