Homework Answers
Factor income share = total income / factor income
Labor income share = 6/8= 0.75
Capital income share = 2/8= 0.25
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Suppose an economy has total income of $8 trillion, where total labor income equals $6.00 trillion...
Consider the Cobb-Douglas production function: Y= AK04L0.6 Suppose that total output produced is $16 trillion. Of...
Consider the Cobb-Douglas production function: Y= AK04L0.6 Suppose that total output produced is $16 trillion. Of total income, workers will receive receive and capital owners will A. $12.2 trillion; $3.8 trillion B. $6 trillion; $4 trillion C. $8 trillion; $8 trillion D. $9.6 trillion; $6.4 trillion
Consider an economy having a Cobb Douglas production function, where the share of capital income in...
Consider an economy having a Cobb Douglas production function,
where the share of capital income in total income is 1/2. The
depreciation rate is , population growth rate is n = 0.02
A. The golden rule level of capital per worker is .
B. The golden rule level of investment per worker is .
C. The golden rule level of output per worker is .
D. The golden rule savings rate is X% where X equals .
QUESTION 2 20...
Consider a closed (no trade) economy "I" with a fixed labor force equal to 1000 and...
Consider a closed (no trade) economy "I" with a fixed labor force equal to 1000 and a fixed capital stock equal to 100 (L=1000, K=100). There is a representative firm with a Cobb-Douglas production function that rents capital and hires labor to produce. ASsume that TFP parameter equals one (A=1) , we have Y=K^1/3 L^2/3. Markets are competitive. 1. Solve for the equilibrium in this economy using the production function. You should get numbers for (Y,K,L,w,r). 2. Solve for the...
1.) Suppose an economy is initially in equilibrium when GDP equals $16 trillion. Now suppose government...
1.) Suppose an economy is initially in equilibrium when GDP equals $16 trillion. Now suppose government spending increases by $0.3 trillion and that the economy's multiplier is 3. What is the new equilibrium level of GDP? Provide your answer in dollars measured in trillions round to two decimal places. Do not include any symbols, such as "$," "=," "%," or "," in your answer.
1. The economy has 8 million units of capital and 8 million units of labor. The...
1. The economy has 8 million units of capital and 8 million units of labor. The production function is and A = 1. The consumption function is: C = 1.5 million + 0.75 (Y-T) Investment demand is: I = 3 million – 0.2 million x (r%) Taxes (T) are 2 million. Government purchases (G) are 1 million. Given this information, answer the following questions: a. What it total output (Y) in this economy equal to? b. What is disposable income...
1) Consider an economy having a Cobb Douglas production function, where the share of capital income...
1) Consider an economy having a Cobb Douglas production
function, where the share of capital income in total income is 1/2.
The depreciation rate is
, population growth rate is n = 0.02
2) Assume a general savings rate
, depreciation rate
and a production per worker
, where 0< <1.
Suppose the savings rate increases. What happens to the golden rule
level of capital?
3) Consider an economy that is described by the production
function
. The depreciation rate...
The Cobb-Douglas model of production in an economy is P(L, K) = b["Kl-a where • Pis...
The Cobb-Douglas model of production in an economy is P(L, K) = b["Kl-a where • Pis the total production (the monetary value of all goods produced in a year) • L is the amount of labor (the total number of person-hours worked in a year) • K is the amount of capital invested (the monetary worth of all machinery, equipment, and buildings) • band a are constants which characterize the particular economy. Suppose that a manufacturer uses the Cobb-Douglas model...
Suppose a Cobb-Douglas Production function is given by the following: where L is units of labor, ...
Suppose a Cobb-Douglas Production function is given by the following: where L is units of labor, K is units of capital, and P(L, K) is total units that can be produced with this labor/capital combination. Suppose each unit of labor costs $300 and each unit of capital costs $1,200. Further suppose a total of $120,000 is available to be invested in labor and capital (combined). A) How many units of labor and capital should be "purchased" to maximize production subject...
An economy has a Cobb-Douglas production function: Y = K"(LE)!-a The economy has a capital share...
An economy has a Cobb-Douglas production function: Y = K"(LE)!-a The economy has a capital share of 0.25, a saving rate of 40 percent, a depreciation rate of 3.00 percent, a rate of population growth of 0.75 percent, and a rate of labor- augmenting technological change of 2.0 percent. It is in steady state. b. Solve for capital per effective worker (k*), output per effective worker (y*), and the marginal product of capital.
An economy has a Cobb–Douglas production function: Y=Kα(LE)1−αY=Kα(LE)1−α The economy has a capital share of 0.30,...
An economy has a Cobb–Douglas production function: Y=Kα(LE)1−αY=Kα(LE)1−α The economy has a capital share of 0.30, a saving rate of 42 percent, a depreciation rate of 5.00 percent, a rate of population growth of 2.50 percent, and a rate of labor-augmenting technological change of 4.0 percent. It is in steady state. . At what rates do total output and output per worker grow? Total output growth rate: % Output per worker growth rate: %
Consider the Cobb-Douglas production function: Y= AK04L0.6 Suppose that total output produced is $16 trillion. Of total income, workers will receive receive and capital owners will A. $12.2 trillion; $3.8 trillion B. $6 trillion; $4 trillion C. $8 trillion; $8 trillion D. $9.6 trillion; $6.4 trillion
Consider an economy having a Cobb Douglas production function,
where the share of capital income in total income is 1/2. The
depreciation rate is , population growth rate is n = 0.02
A. The golden rule level of capital per worker is .
B. The golden rule level of investment per worker is .
C. The golden rule level of output per worker is .
D. The golden rule savings rate is X% where X equals .
QUESTION 2 20...
1) Consider an economy having a Cobb Douglas production
function, where the share of capital income in total income is 1/2.
The depreciation rate is
, population growth rate is n = 0.02
2) Assume a general savings rate
, depreciation rate
and a production per worker
, where 0< <1.
Suppose the savings rate increases. What happens to the golden rule
level of capital?
3) Consider an economy that is described by the production
function
. The depreciation rate...
The Cobb-Douglas model of production in an economy is P(L, K) = b["Kl-a where • Pis the total production (the monetary value of all goods produced in a year) • L is the amount of labor (the total number of person-hours worked in a year) • K is the amount of capital invested (the monetary worth of all machinery, equipment, and buildings) • band a are constants which characterize the particular economy. Suppose that a manufacturer uses the Cobb-Douglas model...
Suppose a Cobb-Douglas Production function is given by the following: where L is units of labor, K is units of capital, and P(L, K) is total units that can be produced with this labor/capital combination. Suppose each unit of labor costs $300 and each unit of capital costs $1,200. Further suppose a total of $120,000 is available to be invested in labor and capital (combined). A) How many units of labor and capital should be "purchased" to maximize production subject...
An economy has a Cobb-Douglas production function: Y = K"(LE)!-a The economy has a capital share of 0.25, a saving rate of 40 percent, a depreciation rate of 3.00 percent, a rate of population growth of 0.75 percent, and a rate of labor- augmenting technological change of 2.0 percent. It is in steady state. b. Solve for capital per effective worker (k*), output per effective worker (y*), and the marginal product of capital.
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