2. If the production function is given by Y-A(K¿L)°.5 where Y is the output, A is the technology, L refers to the labor stock, and K is the capital stock. Suppose that the saving rate (s) equals 0.6 and the depreciation rate (8) is 0.3 a. Write the output and capital accumulation equations in terms of the capital per worker? b. Find the steady state capital, output, investment, and consumption? c. What would happen to the steady state capital if the saving rate increased to 0.8 and the depreciation rate increases to 0.4?

2. If the production function is given by Y-A(K¿L)°.5 where Y is the output, A is the technology, L refers to the labor stock, and K is the capital stock. Suppose that the saving rate (s) equals 0.6 and the depreciation rate (8) is 0.3 a. Write the output and capital accumulation equations in terms of the capital per worker? b. Find the steady state capital, output, investment, and consumption? c. What would happen to the steady state capital if the saving rate increased to 0.8 and the depreciation rate increases to 0.4?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter20: Economic Growth

Section: Chapter Questions

Problem 9SCQ: Would the following events usually lead to capital deepening? Why or why not? A weak economy in...

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Ecuador's economy has a production function that is as follows: Y = K2/5L3/5 The men in Ecuador generally stay home performing household chores while women work. Since the Ecuadorian state television stopped airing soap operas, many men decided to join the workforce and thus the labor force increased by 6.5%. However, recent storms have destroyed much of the capital stock of the country and thus the capital stock shrank by 2.5%. A. Assuming there is no change in total factor productivity in Ecuador, how would the output of Ecuador's economy change? B. How would labor productivity (output per worker) be affected by the increase in labor and decrease in capital stock? Explain. C. Assuming instead that Ecuador's economy grew by 4.9%, what would be the change in total factor productivity in the economy?
Consider an economy described by the production function: Y = F(K, L) = K^0,3L^0,7 A. What is the per-worker production function? B. Assuming no population growth or technological progress, find the steady-state capital stock per worker, output per worker, and consumption per worker as a function of the saving rate and the depreciation rate.
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Q7 An economy has a Cobb–Douglas production function: Y = Kα(LE)1−α The economy has a capital share of 1/3, a saving rate of 24 percent, a depreciation rate of 3 percent, a rate of population growth of 2 percent, and a rate of labor-augmenting technological change of 1 percent. It is in a steady state. a. At what rates do total output, output per worker, and output per effective worker grow?b. Solve for capital per effective worker, output per effective worker, and the marginal product of capital. c. Does the economy have more or less capital than at the Golden Rule steady state? How do you know? To reach the Golden Rule steady state, does the saving rate need to increase or decrease?d. Suppose the change in the saving rate you described in part (c) occurs. During the transition to the Golden Rule steady state, will the growth rate of output per worker be higher or lower than the rate you derived in part (a)? After the economy reaches its new steady state, will the growth rate of…