1) Assume that a country's production function is Y = AK 0.3 L 0.7 (and MPK...
1) Assume that a country's production function is Y = AK 0.3 L 0.7 (and MPK = 0.3 Y/K ) The ratio of capital to output is 3, the growth rate of output is 3 percent, and the depreciation rate is 4 percent. Assume the economy is in a steady state.
a.Write down the steady state condition and calculate the saving rate for this steady state.
b.Write down the Golden Rule for this economy. Is this economy in the Golden Rule steady state?
c.What saving rate would be required to reach the Golden Rule steady state?
Homework Answers
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1) Assume that a country's production function is Y = AK 0.3 L
0.7 (and MPK...
Assume that a country's production function is Y = AKO.3_07 (and MPK = 0.3 YIK) The...
Assume that a country's production function is Y = AKO.3_07 (and MPK = 0.3 YIK) The ratio of capital to output is 3, the growth rate of output is 3 percent, and the depreciation rate is 4 percent. Assume the economy is in a steady state. 21. Write down the steady state condition and calculate the saving rate for this steady state. 22. Write down the Golden Rule for this economy. Is this economy in the Golden Rule steady state?...
Assume that a country's production function is Y = AK0.3L0.7. The ratio of capital to output...
Assume that a country's production function is Y = AK0.3L0.7. The ratio of capital to output is 4, the growth rate of output is 3 percent, and the useful life of capital is 20 years. 'A' is a technology constant that contributes to GDP (Y). A = 1 a) What is the marginal product of capital in this situation? b) If the economy is in a steady state, what must be the saving rate? c) If the economy decides to...
If the U.S. production function is Cobb–Douglas with capital share 0.3, output growth is 3 percent per year, depreciatio...
If the U.S. production function is Cobb–Douglas with capital share 0.3, output growth is 3 percent per year, depreciation is 4 percent per year, and the Golden Rule steady-state capital–output ratio is 4.29, to reach the Golden Rule steady state, the saving rate must be: A) 17.5 percent. B) 25 percent. C) 30 percent. D) 42.9 percent.
Economic Growth II — Work It Out Question 2 In the nation of Wooknam, the capital...
Economic Growth II — Work It Out Question 2 In the nation of Wooknam, the capital share of GDP is 40 percent, the average growth in output is 3.0 percent per year, the depreciation rate is 6.5 percent per year, and the capital output ratio is 4.5. Suppose that the production function is Cobb! Douglas and that Wooknam has been in a steady state. Round answers to two places after the decimal when necessary. c. Suppose that public policy alters...
1. Assume that an economy described by a Solow model has a per-worker production function given...
1. Assume that an economy described by a Solow model has a per-worker production function given by y- k05, where y is output per worker and k is capital stock per worker (capital-labor ratio). Assume also that the depreciation rate δ is 5%. This economy has no technological progress and no population growth (n 0). Both capital and labor are paid for their marginal products and the economy has been in a steady state with capital stock per worker at...
Economic Growth II — Work It Out Question 2 In the nation of Wooknam, the capital...
Economic Growth II — Work It Out Question 2 In the nation of Wooknam, the capital share of GDP is 35 percent, the average growth in output is 3.0 percent per year, the depreciation rate is 5.0 percent per year, and the capital-output ratio is 4.5. Suppose that the production function is Cobb- Douglas and that Wooknam has been in a steady state. Round answers to two places after the decimal when necessary. a. In the initial steady state, what...
a）Assume that country A has the following production function Y=K^0.3 L^0.7 Its saving rate is 20%...
a）Assume that country A has the following production function Y=K^0.3 L^0.7 Its saving rate is 20% per year. The depreciation rate is assumed to be 5% per year. What is the steady state level of capital stock per capital, K*？What is the steady state level of output per capital, Y*? What is the steady state level of c*? Show the results in a suitable diagram. b) At year 1,K=6. Is this a steady state? Find out the values of GDP...
In the nation of Wiknam, the capital share of GDP is 40 percent, the average growth...
In the nation of Wiknam, the capital share of GDP is 40 percent,
the average growth in output is 4 percent per year, the
depreciation rate is 6 percent per year, and the capital–output
ratio is 5. Suppose that the production function is Cobb–Douglas
and that Wiknam has been in a steady state. (For a discussion of
the Cobb–Douglas production function, see Chapter 3.)
c. Suppose that public policy alters the saving rate so
that the economy reaches the Golden...
2. The production function of an economy is y = 2-kas, where y is output per...
2. The production function of an economy is y = 2-kas, where y is output per labor and k is capital per labor. The growth rate of the labor force is 2% and the rate of capital depreciation is 5%. There is no Calculate the steady state capital-labor ratio (k*) if the saving rate is 10%! (3 points) What is the saving rate corresponding to the 'golden rule' growth path? (3 points) technological change a) b) c) Calculate the growth...
Consider an economy in a steady state with population growth rate η, a rate of capital depreciati...
Consider an economy in a steady state with population growth rate η, a rate of capital depreciation δ , and a rate of technological progress g. a) At the steady state Δk = 0, where k equals capital per effective worker. What condition must be met for this to hold? Describe the condition in words as well as mathematical expressions. b) Describe in words what is maximized at the Golden Rule level of k. c) What mathematical condition must be...
Assume that a country's production function is Y = AKO.3_07 (and MPK = 0.3 YIK) The ratio of capital to output is 3, the growth rate of output is 3 percent, and the depreciation rate is 4 percent. Assume the economy is in a steady state. 21. Write down the steady state condition and calculate the saving rate for this steady state. 22. Write down the Golden Rule for this economy. Is this economy in the Golden Rule steady state?...
Economic Growth II — Work It Out Question 2 In the nation of Wooknam, the capital share of GDP is 40 percent, the average growth in output is 3.0 percent per year, the depreciation rate is 6.5 percent per year, and the capital output ratio is 4.5. Suppose that the production function is Cobb! Douglas and that Wooknam has been in a steady state. Round answers to two places after the decimal when necessary. c. Suppose that public policy alters...
1. Assume that an economy described by a Solow model has a per-worker production function given by y- k05, where y is output per worker and k is capital stock per worker (capital-labor ratio). Assume also that the depreciation rate δ is 5%. This economy has no technological progress and no population growth (n 0). Both capital and labor are paid for their marginal products and the economy has been in a steady state with capital stock per worker at...
Economic Growth II — Work It Out Question 2 In the nation of Wooknam, the capital share of GDP is 35 percent, the average growth in output is 3.0 percent per year, the depreciation rate is 5.0 percent per year, and the capital-output ratio is 4.5. Suppose that the production function is Cobb- Douglas and that Wooknam has been in a steady state. Round answers to two places after the decimal when necessary. a. In the initial steady state, what...
In the nation of Wiknam, the capital share of GDP is 40 percent,
the average growth in output is 4 percent per year, the
depreciation rate is 6 percent per year, and the capital–output
ratio is 5. Suppose that the production function is Cobb–Douglas
and that Wiknam has been in a steady state. (For a discussion of
the Cobb–Douglas production function, see Chapter 3.)
c. Suppose that public policy alters the saving rate so
that the economy reaches the Golden...
2. The production function of an economy is y = 2-kas, where y is output per labor and k is capital per labor. The growth rate of the labor force is 2% and the rate of capital depreciation is 5%. There is no Calculate the steady state capital-labor ratio (k*) if the saving rate is 10%! (3 points) What is the saving rate corresponding to the 'golden rule' growth path? (3 points) technological change a) b) c) Calculate the growth...
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