Consider the Basic Solow growth model with a Cobb-Douglas production function and no technological change for the economy china. In this island economy, capital’s share α= 0.3, the annual depreciation rate on capital δ = 0.08 and the annual population growth rate n = 0.02. Suppose that this is the year 2017, and the economy is in the steady-state with GDP (Y) = 200 bananas, and capital stock K = 400 bananas. [Feel free to use any form of exponentiation that works best for you] Project the equilibrium level of GDP for 2050. Calculate the market value of fixed capital (K) in 2050 on a gross basis. Using the steady-state conditions, solve for the saving rate (s*) that is consistent with a stable steady-state.

Consider the Basic Solow growth model with a Cobb-Douglas production function and no technological change for the economy china. In this island economy, capital’s share α= 0.3, the annual depreciation rate on capital δ = 0.08 and the annual population growth rate n = 0.02. Suppose that this is the year 2017, and the economy is in the steady-state with GDP (Y) = 200 bananas, and capital stock K = 400 bananas. [Feel free to use any form of exponentiation that works best for you] Project the equilibrium level of GDP for 2050. Calculate the market value of fixed capital (K) in 2050 on a gross basis. Using the steady-state conditions, solve for the saving rate (s*) that is consistent with a stable steady-state.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter7: Economic Growth: Theory And Policy

Section: Chapter Questions

Problem 2DQ

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