i need Question 1 solution 1. Assuming that z4 = z and e = e are constant, compute the steady state value ofcapital per capita k* for this economy as a function of all the parameters of themodel. Remember that capital per capita satisfies k = 4, and that you will need totransform all variables into per capita terms.2. Let z4 = 1.3, s = 0.3, a = 0.35, e = 1 and ô = 0.07. What is the value of capital inthe steady state? Denote it by k*.?3. Does this value of s satisfy the golden rule? If yes, explain. If not, compute the valueof s that would. Solow ModelConsider a Solow growth model like the one discussed in class, but incorporating thepossibility of less than full employment. Let t denote a period. The production function isY; = zK; [e,L]*¬,so that given the current TFP z4, the capital input K, and the labor input N = eL, firmsproduce output Y; in period t. Here e € [0, 1] denotes the proportion of the labor force Lthat is employed at each point in time. If e = 1 the economy is at full employment, withe = 0, on the other hand, everyone is unemployed. Total resources satisfyY; = C; + I,where C; denotes aggregate consumption, I aggregate investment, and Y; is GDP. Assumethat people invest a constant proportion s of their income, so that aggregate investmentsatisfiesIt = sY;and capital evolves according toK+1 = K,(1 – 8) + I,%3Dwhere ổ denotes depreciation. This function tells us how capital next period is related tocurrent capital, investment, and depreciation. In the book, you have seen the expressionwritten asAK = I – 8K,note that the two are equivalent.

Given : Production function : Yt=ztKtα[etL]1-α Yt=Ct+ItIt=sYtKt+1=Kt(1-σ)+It∆K=I-σK Note : As per…

1. Assuming that z4 = z and e = e are constant, compute the steady state value of capital per capita k* for this economy as a function of all the parameters of the model. Remember that capital per capita satisfies k = 4, and that you will need to transform all variables into per capita terms.

1. Assuming that z4 = z and e = e are constant, compute the steady state value of capital per capita k* for this economy as a function of all the parameters of the model. Remember that capital per capita satisfies k = 4, and that you will need to transform all variables into per capita terms.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the Solow growth model with concave production function as studied in class. Supposethe economy is initially in the picture below, and currently has the level of capital stock of K0. What wouldhappen to the dynamics of capital accumulations when depreciation rate increases? Graphically denote thedirection and the speed of change/accumulation/decumulation of the capital stock, then verbally explain whythey move like so.
Q1. In the Solow model, suppose s=0.3, delta(depreciation)=0.05, output f(k) = sqrt of k. The economy starts at time t=0 with k=1. Suppose there is expropriation by the government and the entrepreneur only gets to keep 30% out its output. a) What is the capital per worker at time t=1? b) How does this compare with the case of no expropriation?
Suppose a Solow economy is initially at its steady state k∗, and suddenly is hit by a decrease in the depreciation rate δ, from δ to δ1. This change does not alter any of the other exogenous parameters in the model Depict this situation in a graph What happens to steady state level of capital per capita in this situation? What happens to the level of capital per capita over time? Depict this in a graph and explain intuitively.
select the correct one(s) a) Suppose s = 0.15, Y = 4200, K = 6100, n = 0.03, g=0.03 and δ= 0.10. This makes national saving smaller than steady-state investment, so that the amount of capital per effective worker will be falling. b) In the graph of the Solow growth model, at any point to the left of the steady-state intersection we have national saving per effective labour greater than steady-state investment per person, causing (K/AL) to increase. c) In the Solow growth model, an increase in the marginal propensity to consume shifts the steady-state investment line downward with the implied change in the capital stock resulting in a higher standard of living in the long run.
use only equitions and graphs to show correct statement a.The assumption of Constant Returns to Scale technology implies that the marginal product of factor imput is always decreasing. b. In the Solow growth model i the saving rate is a crucial determinant of the economy's long-run growth rate of output per worker. c. In the endogenous growth model , the representative firm sets the wage so that the demand and supply of efficiency units of labour are equal. d. In the endogenous growth model , there is no steady state of the economy as human capital will always continue to grow forever
Carefully discuss why consumption behaviour, as a microeconomic component, isimportant to the Solow Growth Model. (Include graphs and equations where necessary)
which statement \s are true. use graphs to exlain a. In the Solow growth model, the saving rate is a crucial determinant of the economy's long-run growth rate of output per worker. b. In the endogenous growth model , the representative firm sets the wage so that the demand and supply of efficiency units of labour are equal. c. In the endogenous growth model , there is no steady state of the economy as human capital will always continue to grow forever. d. The assumption of Constant Returns to Scale technology implies that the marginal product of factor imput is always decreasing.
Draw the Solow model and fully label your graph. This should includeper-worker production, steady state investment per-worker, and some labelfor consumption. Where is the “golden rule” consumption level? Is it at themaximum sustainable capital level? Explain.
i need part C,D,E,F,G In the Solow growth model, output Y is produced using capital K and labour L.Assume the production function is Y =√K√L, which has total factor productivityconstant over time. The change over time in the capital stock is ∆K = I−δK, whereI is investment and δ is the depreciation rate. The labour force L is constant overtime. Investment I is equal to saving S, which is a fraction s of income.Let k = K/L and y = Y/L denote capital per worker and output per worker. In thisquestion, assume that δ = 1. Capital can be used for production and generates anincome for its owner before it depreciates.(a) Show that y =√k and ∆k = s√k − k, and solve for the steady-statevalues of k and y where ∆k = 0.(b) Using a diagram, explain intuitively why there is a steady statewhere growth in output per worker is zero, and why the economy convergesto this steady state in the long run.Total consumption divided by the number of workers is given by c = (1 − s)y.(c) Using your answer…
Many demographers predict that the UnitedStates will have zero population growth in thetwenty-first century, in contrast to average popu-lation growth of about 1 percent per year in thetwentieth century. Use the Solow model to fore-cast the effect of this slowdown in populationgrowth on the growth of total output and the growth of output per person. Consider theeffects both in the steady state and in the transi-tion between steady states.
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Consider a Solow economy that begins with capital stock equal to $200 billion, and suppose itssteady-state level of capital is $400 billion. Now suppose this economy receives a gift of foreign aidin the form of $100 billion worth of capital.(a) Use the Solow model to explain what happens to capital per worker, output per worker, andconsumption per worker, both immediately and over time in this economy. (b) Suppose instead of starting below its steady state, the economy begins in steady state withcapital equal to $400 billion. Answer part (a) for this case. (c) In this example, does foreign aid have a long-run effect on the welfare of poor countries?