Consider a version of the Solow growth model in which output is determined by the productionfunction Y = z(¾½³K + ¾½N) where z = 1. The depreciation rate and the savings rate are given byd = 0.13 and s 0.3. Assume that population N grows at a rate of n = 0.02. Calculate the=steady-state output per capita and consumption per capita, y* and c*, respectively.O (y*, c*) = (0.2, 0.06)○ (y*, c*) = (0.5, 0.35)○ (y*, c*) = (0.5, 0.21)○ (y*, c*) = (1.0, 0.70)

To determine the steady-state output per capita (𝑦∗) and consumption per capita (𝑐∗) in the given…

Answered: Consider a version of the Solow growth…

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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Population Growth Population growth in the US has, for a very long time been about 1% per year.Take the production function to be y = k0.5, where y and k are output andcapital per capita. The depreciation rate is about 10% per year and the savingsrate is about 20%. 1. What is the steady state capital per capita rate?2. From one period to the next, at what rate does total capital (not percapita) grow.3. If the population growth rate grew to 1.5%, how much would steady statecapital per capita change? Then how much is total capital changing atthis steady state?
= 2. Consider a Solow growth model in which the production function is Yt AK²N₁¹/2, where A = 1. Moreover, assume that the depreciation rate is d = 0.02, the rate of population growth is n = 0.02, and the saving rate is s = = 0.2. a. Compute the value of the capital stock per worker in steady state. b. Draw a graph that represents the steady-state equilibrium of the model. c. Suppose that the capital-labor ration in year t is 90. What will the level of the capital- labor ratio be in year t+1? Will it increase or decrease in future periods? Explain. d. Compute the rate of change of the capital labor ratio between time t and t + 1. How does it compare to the rate of growth of the capital-labor ratio in steady state?
Let 0 be the saving rate, n the population growth rate and d the depreciation rate. Which of the following conditions is consistent with steady state in the Solow-Swan model? Y = 0K K = (n + d)Y O OY/L = (n+ d)K/L о өК — (п +d)Y
9. Consider a numerical example using the Solow growth model. Suppose that F(K, N) KO.5N0.5, with d = z = 1, and take a period to be a year. (a) Determine capital per worker, income per capita, and consumption per capita in the steady state. 0.1, s = 0.2, n = 0.01, and
Consider an economy as per solow model, with a Cobb-Douglas production function with constant returns to scale with respect to K and L. Moreover, you know that the economy is producing 80 units of total output and the productivity parameter is equal to 1. If the depreciation rate is 10%, the investment rate is 10%, and there are 75 workers, the growth rate of GDP per person ____________. a) is equal to zero because the economy is at its steady state b) is negative because the economy is above its steady state c) is positive because the economy is below its steady state d)cannot be determined
Assume a production function in the Solow model is given by= AK,"L, A-Z– 1, the depreciation rate is 0.05, and the investment rate is 0.1. Then the steady-state level of capital is about: Select one: O a. 2.8 O b. 0.8 1.6 O d. 0.3 O e. 1.3
2. Consider the Solow growth model without population growth or technological change. The savings rate is 20% (s = 0.2) and depreciation rate is 5% (8 = 0.05). Let k denote capital per worker; y output per worker; c consumption per worker; i investment per worker. (a) Rewrite production function Y = K1/3 L²/3 in per-worker term. (b) Find the steady-state level of the capital stock, k*.
Calculate the steady state level of investment in an economy with a savings rate of 15%, population growth of -1%, depreciation of 10%, and a= 2/3
Consider a basic Solow-Swan model. Suppose the aggregate production function is Y - AKL and that A=1, the depreciation rate is = 0.06 and the saving rate is s = 0.12. In steady state, d which of the following is TRUE? O Output per worker is 2.00 and consumption per worker is 0.24 O Output per worker is 2.00 and consumption per worker is 1.76 O Output per worker is 1.68 and consumption per worker is 1.48 O Qutput per worker is 1.68 and consumption per worker is 1.12
Parameters Equations s =0,20 marginal propensity to save Y=WKr.L1-r Production Function u=0,02 Population growth rate K.=s.f(k)−aK Capital Accumulation b=0,04 Technological growth rate L./L= ? Population Growth a=0,05 Depreciation rate W./W=b Technological Progress S=s.f(k) Savings a. Find steady-state level of capital per effective labor: k* b. Draw a graph and show output function, actual investment and breakeven investment lines. c. Assume that in this economy, people start spending more and therefore marginal propensity to save decline permanently. What will happen to variables in the model (steady-state level capital per effective labor; output growth etc.). d. Instead of reduction in saving assume this time that we face lower fertility rate in the country. What will happen to variables in…
In a Solow growth model with population growth but no technological change, show graphically that an increase in the rate of depreciation will reduce the steady-state value of capital per worker and output per worker. It is reasonable to expect that depreciation rates differ across countries? Why or why not? Please be specific.
Growth rates of per capita GDP: Compute the average annual growth rate ofper capita GDP in each of the cases below. Te levels are provided for 1980and 2014, measured in constant 2011 dollars.11

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