We are given that Y = 2*K^a*1^(1-a)
Y = 2K^a
At the steady state there is no change in capital so we have
K/Y = s/d
K/2K^a = 10%/5%
K^(1 - a) = 4
At the steady state the value pf capital is K = 4^(1/(1 - a))
5. (4 points) Suppose a production function in the Solow model is given as Y=AK1-a. Suppose...
Given the Solow model, a production function y = Ak1/3; depreciation =δ , and an investment rate=γ. (a) Draw the basic Solow model from class, labeling all lines, axes, and the steady state. (b) Start a new diagram. Assume a country in its steady state is hit by an earthquake that destroys physical capital but does not kill anyone. Draw a Solow model that describes the transition of the country from (1) its original steady state to (2) its immediate...
4. A country is described by the Solow Model, with production function y - Aki where y is Output per Worker (Y/L) and k is Capital per Worker (K/L). Suppose k- 400. The fraction of output invested is 50% (s-05) and the depreciation rate is 5% (6-0.05). A, the overall productivity parameter equals 1. Is the country at its steady state level of output per worker, above the steady state or below the steady state? Show how you reached your...
Consider a country described by the Solow model. The production function is y = 29, where 0 <a < 1. Assume that capital depreciates at a rate 8 € (0,1). a) Write down this production function in levels instead of in per capita terms. Does it display constant returns to scale? Show it. What about if a = 1? b) Find the value of c (per capita consumption) in steady state. c) Find the level of per capita capital that...
2. Consider the Solow growth model. Suppose that the production function is constant returns to scale and it is explicitly given by: Y = K L l-a a. What is the level of output per capita, y, where y = Y/L? b. Individuals in this economy save s fraction of their income. If there is population growth, denoted by n, and capital depreciates at the rate of d over time, write down an equation for the evolution of capital per...
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...
Question 5. (4 points each) Consider the Solow model in Chapter 6. Production function is given by Y = A_KENZ The notations of variables are the same as the slides for Ch.6.The depreciation rate d is 0.1, the population growth rate n is 0.1, and the saving rate s is 0.2. The level of productivity is constant, so At = 2 all the time. (1) Compute the steady-state level of capital per person k*. (2) Compute the steady-state level of...
4) Solow Model problem: depreciates at the rate Model problem: A country's production function is Y = K12L12. If capital at the rate of 6% (8 = 0.06) each year, the population grows at the rate of 2% (n ear, and the residents of this country save 36% of income (o = 0.36), solve for the steady-state value of capital per worker (k*), output per worker (y*), and = 0.02) each year, and the reside consumption per worker (c*): C...
In the Solow model, suppose the per worker production function is y: 4 k . Suppose s : 009, n-o 07, and d-012. Calculate the steady-state equilibrium capital-labor ratio. k(Round to two decimal places.)
In the Solow model, suppose the per worker production function is y = 60. Suppose s + 0.11, n = 0.06, and d = 0.08. Calculate the steady-state equilibrium capital-labor ratio. k = 22.22. (Round to two decimal places.) Calculate the steady-state level of output per worker. y= (Round to two decimal places.)
Consider an economy that is characterized by the Solow Model. The (aggregate) production function is given by: Y = 6K1/3L2/3 In this economy, workers consume 80% of income and save the rest. The labour force is growing at 2% per year while the annual rate of capital depreciation is 5.5%. a) Solve for the steady state capital-labour ratio and consumption per worker. The economy is in its steady state as described in part (a). Suppose both the stock of capital...