a. What must the saving rate be in the initial steady state? [Hint: Use the steady-state relationship, sy = (6 + n+ g)k.] b. What is the marginal product of capital in the initial steady state? c. Suppose that public policy alters the saving rate so that the economy reaches the Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state? Compare the marginal product at the Golden Rule steady state to the marginal product in the initial steady state. Explain.

a. What must the saving rate be in the initial steady state? [Hint: Use the steady-state relationship, sy = (6 + n+ g)k.] b. What is the marginal product of capital in the initial steady state? c. Suppose that public policy alters the saving rate so that the economy reaches the Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state? Compare the marginal product at the Golden Rule steady state to the marginal product in the initial steady state. Explain.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter20: Economic Growth In The Global Economy

Section: Chapter Questions

Problem 4P

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Question 1:In Ghana, the capital share of GDP is about 40 percent, the average growth in output is about2 percent per year, the depreciation rate is about 3 percent per year, and the capital–output ratiois about 1.5. Suppose that the production function is Cobb–Douglas and that Ghana has beenin a steady state.a. What must the saving rate be in the initial steady state? [Hint: Use the steady-staterelationship, sy = (δ + n + g)k.]b. What is the marginal product of capital in the initial steady state?c. Suppose that public policy alters the saving rate so that the economy reaches the GoldenRule level of capital. What will the marginal product of capital be at the Golden Rule steadystate? Compare the marginal product at the Golden Rule steady state to the marginal productin the initial steady state. Explain.d. What will the capital–output ratio be at the Golden Rule steady state? (Hint: For the Cobb–Douglas production function, the capital–output ratio is related to the marginal product…
In Ghana, the capital share of GDP is about 40 percent, the average growth in output is about 2 percent per year, the depreciation rate is about 3 percent per year, and the capital–output ratio is about 1.5. Suppose that the production function is Cobb–Douglas and that Ghana has been in a steady state.a. What must the saving rate be in the initial steady state? [Hint: Use the steady-state relationship, sy = (δ + n + g)k.]b. What is the marginal product of capital in the initial steady state?c. Suppose that public policy alters the saving rate so that the economy reaches the Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state? Compare the marginal product at the Golden Rule steady state to the marginal productin the initial steady state. Explain.d. What will the capital–output ratio be at the Golden Rule steady state? (Hint: For the Cobb–Douglas production function, the capital–output ratio is related to the marginal product of…
In Ghana, the capital share of GDP is about 40 percent, the average growth in output is about 2 percent per year, the depreciation rate is about 3 percent per year, and the capital–output ratio is about 1.5. Suppose that the production function is Cobb–Douglas and that Ghana has been in a steady state.a. What must the saving rate be in the initial steady state? [Hint: Use the steady-state relationship, sy = (δ + n + g)k.]b. What is the marginal product of capital in the initial steady state?c. Suppose that public policy alters the saving rate so that the economy reaches the Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state? Compare the marginal product at the Golden Rule steady state to the marginal productin the initial steady state. Explain.d. What will the capital–output ratio be at the Golden Rule steady state? (Hint: For the Cobb–Douglas production function, the capital–output ratio is related to the marginal product of…
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?
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estion 30 A country with neither population growth nor technological progress is nitaly in the golden-rule steady state. Carefuly ilustrate this situation using a graph with output per worker, investment per worker, and depreciation per worker on the vertical axis and capital per worker on the horizontal axis. Now suppose climate change increases the depreciation rate. If the country adjusts its saving rate to reach the new golden- rule steady state, is it possible to determine how output per worker and consumption per worker in the new steady state compare to their levels in the initial steady state? Explain.
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Assuming that the sum of population growth and the depreciation rate is equal tothe saving rate. In this case, are there any steady states? If yes, describe the steady-statelevels of capital per person. If no, explain why not.
Saved The accompanying table shows real GDP from 2010 to 2015 for China, measured in billions of 2009 dollars: Bil1ions of 2009 Year Dollars Growth Rate 2010 5,609 2011 6,140 2012 6,613 2013 7,122 2014 7, 642 2015 8, 169 J Instructions: Enter your response rounded to one decimal place. a) Complete the growth rate column above. % b) By what percentage did the Chinese economy grow between 2010 and 2015? c) Chinese economic growth was the highest in (Click to select)
QUESTION 4 In the Solow model, if a country's saving rate increases, the country: a. Stays at a constant high steady state b. Stays at a constant low steady stateC. Moves from a relatively low steady state to one that is higher d. Moves from a relatively low steady state to one that is lower, e. Moves from a relatively high steady state to one that is lower Clear my choice If the current capital stock per person in South Korea is greater than the current capital stock per person in China and total factor productivity is the same in both countries, according to the Solow model: a. Both South Korea and China initially will grow at the same rate and have the same steady state b. China initially will grow faster than South Korea, but each will have the same steady state c.China initially will grow faster than South Korea and will have a higher steady state d. China initially will grow slower than South Korea, but each will have the same steady state е. China initially will grow faster than…