. Consider the Solow growth model where we add government purchases, G. According to the expenditure approach of GDP, Y=C+I+G. Suppose G = gY, where ģ is a number between 0 and 1. Government purchases are financed with taxes, T = G. Agents invest a fraction 5 of their disposable income, Y-T. Formally, I = 5(Y – T). The steady-state capital per worker, k = K/L, solves: sgf(k)= dk d. s(1 − d)ƒ (k) = ģk e. sdf (k)=gk a. b. C. s(1 − ģ)ƒ (k) = dk sf (k)= gk

. Consider the Solow growth model where we add government purchases, G. According to the expenditure approach of GDP, Y=C+I+G. Suppose G = gY, where ģ is a number between 0 and 1. Government purchases are financed with taxes, T = G. Agents invest a fraction 5 of their disposable income, Y-T. Formally, I = 5(Y – T). The steady-state capital per worker, k = K/L, solves: sgf(k)= dk d. s(1 − d)ƒ (k) = ģk e. sdf (k)=gk a. b. C. s(1 − ģ)ƒ (k) = dk sf (k)= gk

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter20: Economic Growth In The Global Economy

Section: Chapter Questions

Problem 5P

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Consider the following Solow diagram, indicating two sep-arate savings rates, 0.2 and 0.4: Suppose the savings rate is 0.2. At the steady state, what is capital per worker? What is output per worker? How much is saved per worker? Suppose the population growth rate is equal to the depreciationrate. Solve for n and d.
Q) Suppose that the depreciation rate increase. In the Solow growth model, determine the effects of this on the quantity of capital per worker (k) and on output per worker (y) in the steady state. Show with graphs Note:- copy paste answer not provided. Give me your own words and correctly explains.
Q) Suppose that the depreciation rate increase. In the Solow growth model, determine the effects of this on the quantity of capital per worker (k) and on output per worker (y) in the steady state. Show with graphs Copy paste answer strictly prohibited . So explain it own words and correctly.
In this problem, we distinguish between labor and population in the Solow growth model. A proportion of the population, a, between zero and one, works. The production function is now written as Y = A(K^1/3)[(aL)^2/3] (a) How does an increase in a from 0.3 to 0.6 change steady state GDP? (b) Does it change the steady-state capital? Explain. (c) Suppose a rises steadily over time. How do you think would affect the growth rate of GDP?
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QUESTION 1 (10 marks) Consider the Solow growth model without population growth or technological change. The parameters of the model are given by s = 0.2 (savings rate) and δ = 0.05 (depreciation rate). Let k denote capital per worker; y output per worker; c consumption per worker; i investment per worker. a. Rewrite production function per-worker terms. b. Find the steady-state level of the capital stock, kss