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- discuss simplest assumption of Solow model?Assume that a production function is given by Y AK/³L2/³. IfĀ = 2 and [ = 1, = and if the steady-state capital stock is 8.0, the steady-state level of output is about: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a с d e 8.0. 4.0. 45.4. 2.0. 22.6.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.
- In the Solow growth model, if investment exceeds depreciation, the capital stock will and output will until the steady state is attained. O increase; increase increase; decrease decrease; decrease decrease; increaseDo not type in dollar signs or round any of your answers. Solow Model. Suppose a country's production function is Y = K/2L1/2, If capital depreciates at %3D the rate of 4 percent each year and the population grows at the rate of 1 percent each year, calculate the savings rate that would lead to a steady-state equilibrium value for aggregate output (Y) equal to 1200 assuming the labor force is equal to 150 workers: savings rate = percent %3D Given the savings rate calculated above, steady-state capital per worker (k*) is equal to , output per worker (y*) is equal to and consumption per worker (c*) is equal toSuppose 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).
- 3. In the Solow model, ________ is assumed to be constant. capital accumulation investment rates depreciation consumptionConsider the Solow model (Y-AK1/4L3/4). Suppose that the productivity parameter is A=500, the depreciation rate is d=1/10, the savings (investment) rate is s=0.30, and the labor force is constant and equal to 2 million. ÊÊWhat is the steady state capital stock (K)? Please choose the closest answer." a. b. 48200 million C. 34341 million d. 15930 million 18340 millionQ5 Suppose in a Solow model, we have the following parameter values: n = 0, s = 0.5, a = 0.3. There is no growth in the total factor productivity so that A, = A = 1. Moreover, we know that at time 0, the economy is at a steady state so that k = k, =1. Now imagine that a foreign power invaded this %3D country. 1% of the population was killed and another 14% of the population fleeded the country to avoid violence. Moreover, 15% of capital stocks were destroyed. All of this happens in period t=1. After that, the war ended and there was no more destruction of capital or loss of population (but the refugee permanently settled outside of the country and will never return0. What is the growth rate of per-capita output in period t =4?
- Question 3 Suppose that the production function is given by: Y = 0.5 K0.3 N0.7 where Y is aggregate output, K is aggregate capital and N is the number of workers (labour). a) In the context of the Solow model, derive the steady-state levels of capital per worker, output per worker and consumption per worker in terms of the saving rate, s, and the depreciation rate, 6. Show clearly your calculations and workings. b) Graphically show and explain the effect of a fall of the saving rate on steady state output, capital and consumption per worker.Draw a graph with the following elements: A Solow growth (Y) function where Y= square root of K An investment (I) function where I = % * Y A depreciation (D) function where D = % * KProblem 4 Consider a Solow-Swan economy with a Cobb-Douglas production function. Imagine that the savings rate "s" is an increasing function of capital and it has the following functional form: for low values of k the savings rate is constant at some low level. For intermediate levels of k, the savings rate increases rapidly. For high values of k the savings rate is constant again. In other words, the savings rate looks like: Does a steady state necessarily exist? Will the steady state be necessarily unique? Will the steady state(s) be stable? Will there be a "poverty trap"? (define poverty trap) a. b. С. d. How can this model be used (and how has this model been used) to justify large increases in foreign development aid? Discuss THREE potential flaws of the "savings poverty trap" model. е. f.