4) Suppose that scientists are unable to reverse climate change such that a nation's physical capital...
4) Suppose that scientists are unable to reverse climate change such that a nation's physical capital depreciates at a faster rate. Use the Solow Model to show the likely outcome of this phenomenon on this nation's long-run steady state level of output. Include an explanation of the transition, if there is one. Is there a growth effect? Is there a level effect? (8 points)
10. Suppose that output per worker is given by yt -kf, where kt is the capital stock per worker at year t and α 1/3. Workers invest 15% of their income. The capital stock depreciates at the rate of 10% per year. The size of the capital stock per worker at year t-0 is ko 10 According to the Solow model, what is the predicted growth rate of output per worker between years 0 and 1. (Assume zero population growth.)...
Question 11 2.5 pts 11. Suppose we started out at the steady state capital stock in the basic Solow growth model If there subsequently were an increase in the supply of loanable funds due to more favorable tax treatment of individual interest income, then (as we move to the new steady state over time) we would expect to see O economic growth rates turn negative in the short run and the nation's capital stock to grow from its current level....
20. If a country's depreciation rate increased from 2 percent to 5 percent of physical capital and it was operating at its steady-state before the change, we would expect to see which of the following? I. a decrease in the steady-state per capita capital stock II. a decrease in the steady-state level of real GDP per capita III. a corresponding decrease in real population growth rate IV. an increase in capital stock A) All the above are correct. B) I,...
1. Suppose that output per worker is given by yt - kf, where kt is the capital stock per worker at year t and 1/3. Workers invest 15% of their income. The capital stock depreciates at the rate of 10% per year. The size of the capital stock per worker at year t 0 is ko 10 According to the Solow model, what is the predicted growth rate of output per worker between years 0 and 1. (Assume zero population...
A and B only
Consider the Solow growth model with the following production function where y is output. K is capital, s is the productivity and is labor. Assume that 0 < α < 1 Further, suppose that labor grows at a constant rate n. That is. 1 + n. Also, assume that capital depreciates at rate d and that gross investment in capital is fraction s of output. a Letting k-N, obtain the law of motion for capital accumulation...
The change of inputs and production function determine the level of output in the long run. Suppose an economy described by the Solow model utilize capital and labour in production process which technology parameter ofa=1/2. Assuming that population has zero growth rate and technology is constant (A=1): a. Write down production function for this country, determine output per worker as function of capital per worker and explain the steady state of capital condition (6 POINTS) b. If 8 and s...
Consider a version of the Solow model where the population growth rate is 0.05. There is no technological progress. Capital depreciates at rate ? each period and a fraction ? of income is invested in physical capital every period. Assume that the production function is given by: ?t = ?t1/2 ?t1/2 where ?t is output, ?t is capital and ?t is labour. a. Derive an expression for the accumulation of capital per worker in this economy, i.e. ∆?t+1 where ?t...
14. One of the following is NOT a feature of the Solow Model a) long-term economic growth rate b) If an economy is far from its steady-state level, it grows faster, so the closer the economy is to the steady-state value the growth rate moves to zero c) capital accumulation cannot serve as the engine of long-run economic growth d) Eventually net investment - subtracting depreciation from investment is zero and the economy stabilizes at the steady state 15. Consider...
9) According to the Solow model, an increase in the capital-labor ratio will A) always reduce steady state consumption per worker. B) always increase steady state consumption per worker. C) reduce steady state consumption per worker if the capital-labor ratio is below the Golden rule capital stock. D) increase steady state consumption per worker if the capital-labor ratio is below the Golden rule capital stock. in the 10) According to the Solow model, in the long run, an increase in...