Consider a Solow-Swan economy with a Cobb-Douglas production function with a constant savings rate. Imagine that the population growth rate "n" is a decreasing function of capital and it has the following functional form: for low values of k it's constant at some high level. For intermediate levels of k, it decreases rapidly. And for high values of k the population growth rate is constant again. In other words, the population growth rate looks like : a. Why may the population growth rate look like this? (make sure you discuss its three components and how each of them may be a function of k in the real world) b. Does a steady state necessarily exist?

Consider a Solow-Swan economy with a Cobb-Douglas production function with a constant savings rate. Imagine that the population growth rate "n" is a decreasing function of capital and it has the following functional form: for low values of k it's constant at some high level. For intermediate levels of k, it decreases rapidly. And for high values of k the population growth rate is constant again. In other words, the population growth rate looks like : a. Why may the population growth rate look like this? (make sure you discuss its three components and how each of them may be a function of k in the real world) b. Does a steady state necessarily exist?

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.
Suppose we started out at the steady state capital stock in the basic Solow growth model (see graph a few questions ago). If there subsequently were an increase in the demand for loanable funds due to more favorable tax treatment of business investment, ceteris paribus (i.e., holding other factors constant, including no shift in the supply of loanable funds), then as we move to the new steady state over time we would expect to see Group of answer choices A) economic growth rates turn negative as we move toward the new steady state and the nation’s capital stock to decrease from its current level. B) economic growth rates turn positive as we move toward the new steady state and the nation’s capital stock to decrease from its current level. C) economic growth rates turn positive as we move toward the new steady state and the nation’s capital stock to grow from its current level. D) economic growth rates turn negative as we move toward the new steady state and the nation’s…
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.
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Derive the equilibrium law of motion for capital per worker in the Solow growth model (equation 7-19). State which equation you start with, and the operation you perform at each step. 2. Graph this equation in the space of capital tomorrow on the y-axis and capital today on the x-axis, and explain how you identify the steady-state level of capital per capita from the graph
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